Mr. Mukhisa Kituyi, Secretary-General of UNCTAD starts describing briefly about economic 'recovery' taking hold in developed countries and with it a return to 'normality' for the world economy.
... See More + In reality, that recovery is uneven and timid. Global output growth will barely exceed 2 percent in 2013, measured at constant 2005 dollars, little changed from last year`s weak performance. With a growth rate of around 4.5 percent, developing countries will continue to make the largest contribution, accounting for two thirds of global growth; transition economies will grow at around 2.5 percent, while developed economies will grow slightly above 1 percent. The growth in international trade has also slowed sharply since 2010, to less than 2 percent in volume this year, compared to an average of 7-8 percent in the pre-crisis years. Unemployment performance has fared better in developing countries: among the G-20 emerging economies, only Mexico and South Africa had higher rates of unemployment at the end of 2012 than before the crisis: all the other countries managed to reduce that rate. However, in many developing countries the quality of employment has not improved, with underemployment and informal sector jobs persistent structural challenges. However, and even though the increased weight, in recent years, of developing countries in global output, trade, Foreign Direct Investment (FDI) and capital flows has been concentrated in a small number of them, this shift opens up new possibilities.
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This paper studies how firm-level export performance is affected by Real Exchange Rate (RER) volatility and investigates whether this effect depends on existing financial constraints.
... See More + The empirical analysis relies on export data for more than 100,000 Chinese exporters over the 2000-6 period. The results confirm a trade-deterring effect of RER volatility. Firms' decision to begin exporting and the exported value decrease for destinations with higher exchange rate volatility; besides, this effect is magnified for financially vulnerable firms. As expected, financial development seems to dampen this negative impact, especially on the intensive margin of export. These results provide micro-founded evidence suggesting that the existence of well-developed financial markets allows firms to hedge exchange rate risk. The results also support a key role of financial constraints in determining the macro impact of RER volatility on real outcomes.
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Policy Research Working Paper WPS6638 OCT 01, 2013
This Africa's pulse newsletter includes the following headings: economic prospects for Sub-Saharan Africa remain strong, but growth is vulnerable to a sharp decline in commodity prices; the region's progress on reducing poverty has been slow, hindered by high inequality; and faster reduction in poverty will require growth with equity.
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In recent years, the term "middle-income trap" has entered common parlance in the development policy community. The term itself often has not been precisely defined in the incipient literature.
... See More + This paper discusses in more detail definitional issues on the so-called middle-income trap. The paper presents evidence in terms of both absolute and relative thresholds. To get a better understanding of whether the performance of the middle-income trap has been different from other income categories, the paper examines historical transition phases in the inter-country distribution of income based on previous work in the literature. Transition matrix analysis provides little support for the idea of a middle-income trap. Analysis of cross-country patterns of growth provides additional support for the conclusions in the paper, which closes with a general discussion of potential policy implications.
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Policy Research Working Paper WPS6594 SEP 01, 2013
The need for economic diversification receives a great deal of attention in Russia. This paper looks at a way to improve it that is essential but largely ignored: how to help diversifying firms better survive economic cycles.
... See More + By definition, economic diversification means doing new things in new sectors and/or in new markets. The fate of emerging firms, therefore, should be of great concern to policy makers. This paper indicates that the ups and downs -- the volatility -- of Russian economic growth are key to that fate. Volatility of growth is higher in Russia than in comparable economies because its slumps are both longer and deeper. They go beyond the cleansing effects of eliminating the least efficient firms; relatively efficient ones get swept away as well. In fact, an incumbency advantage improves a firm's chances of weathering the ups and downs of the economy, regardless of a firm's relative efficiency. Finally, firms in sectors where competition is less intense are less likely to exit the market, regardless of their relative efficiency. Two policy conclusions emerge from these findings -- one macroeconomic and one microeconomic. First, the importance of countercyclical policies is heightened to include efficiency elements. Second, strengthening competition and other factors that support the survival of new, emerging and efficient firms will promote economic diversification. Efforts to help small and medium enterprises may be better spent on removing the obstacles that young, infant firms face as they attempt to enter, survive and grow.
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Policy Research Working Paper WPS6605 SEP 01, 2013
Gonzalez, Alvaro S.; Iacovone, Leonardo; Subhash, Hari
World Development Indicators 2013, the World Bank's premier compilation of relevant, high quality, and internationally comparable statistics about global development.
... See More + A world development indicator is the result of a collaborative effort of many partners: the United Nations family, the International Monetary Fund (IMF), the International Telecommunication Union (ITU), the organization for economic co-operation and development, the statistical offices of more than 200 economies, and countless others. The indicators used to monitor the millennium development goals have traced the path of the HIV epidemic, the resurgence and retreat of tuberculosis, and the step-by-step efforts to roll back malaria. More people now have access to reliable water supplies and basic sanitation facilities. But forests continue to disappear and with them the habitat for many species of plants and animals, and greenhouse gases continue to accumulate in the atmosphere.
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The magnitude and persistence of growth in gross domestic product are topics of intense scrutiny by economists. Although the existing techniques provide a range of tools to study the nature of growth and volatility time series, these usually come with shortcomings, including the need to arbitrarily define acceleration spells, and focus on a particular frequency at a time.
... See More + This paper explores the application of "wavelet-based" techniques to study the time-varying nature of growth and volatility. These techniques lend themselves to a more robust analysis of short-term and long-term determinants of growth and volatility than the traditional decomposition techniques, as demonstrated on a small sample of countries. In addition to having desirable technical advantages, such as localization in time and frequency and the ability to work with non-stationary series, these techniques also make it possible to accurately decompose the association between growth trajectories of different countries over different time horizons. Such "co-movement" analysis can provide policy makers with important insights on regional integration, growth poles, and how short and long term developments in other countries affect their domestic economy.
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Policy Research Working Paper WPS6578 AUG 01, 2013
The global economy appears to be transitioning toward a period of more stable, but slower growth. Global gross domestic product (GDP), which slowed in mid-2012, is recovering, and a modest acceleration in quarterly GDP is expected during the course of 2013.
... See More + That progress will be masked in the annual data, however, with whole-year growth for 2013 projected at 2.2 percent, a touch slower than in 2012. The strengthening of quarterly growth will show up in whole-year global GDP growth of 3.0 percent for 2014 and 3.3 percent in 2015. Financial conditions in high-income countries have improved and risks are down, but growth remains subdued, especially in Europe. Growth is firming in developing countries, but conditions vary widely across economies. Most developing countries have recovered from the crisis, so room for additional acceleration is limited. Although acute risks in high-income countries are down, more modest downside risks linger as these economies continue to adjust. Importantly, downside risks are now balanced by the possibility of stronger growth should confidence improve more quickly than anticipated in the baseline. Once high-income countries begin to pursue quantitative easing less actively or begin to unwind long-term positions, interest rates are likely to rise. Higher interest rates will increase debt-servicing costs, and can increase default rates on existing loans. In the longer term, higher interest rates will raise the cost of capital in developing countries and can be expected to reduce the level of investment that firms wish to maintain. As investment rates adjust to these higher capital costs, developing-country investment spending and growth can be expected to decline by as much as 0.6 percentage points per annum after three years.
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Economic and financial news in the past six months point to a softening of the formidable tailwinds that facilitated the achievement of high growth with social equity in Latin America and the Caribbean (LAC) over the past decade.
... See More + The developed world seems to have arrived to a much debated new normal of excess liquidity, uninspiring growth (particularly in Europe), and stubbornly high public debt, even as the probability of a systemic event that would dislocate the global financial and economic dynamics has been, if not eliminated, at least postponed, due to the proactive action by major monetary authorities. Using an index that combines the three key exogenous drivers of LAC's growth, the author estimates that whereas the strong winds of the recent past were consistent with average growth rates in LAC of 5 to 6 percent, the now receding tailwinds are, in the absence of growth oriented reforms, consistent with an average growth around of 3.5 percent. This semiannual report examines the short and medium-term challenges for (LAC) as the external factors that were instrumental in the regions recent performance recede. As is customary in this series, chapter one starts by providing an overview of the global economy and its implications for the short and medium-term prospects of the LAC region. Chapter two provides a detailed analysis of the general patterns of domestic demand and supply observed in LAC over the last decade.
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Malaysia's structural transformation from low to middle income is a success story, making it one of the most prominent manufacturing exporters' in the world.
... See More + However, like many other middle income economies, it is squeezed by the competition from low-wage economies on the one hand, and more innovative advanced economies on the other. What can Malaysia do? Does Malaysia need a new growth strategy? This paper emphasizes the need for broad structural transformation; that is, moving to higher productivity production in both goods and services. This paper examines productivity growth for Malaysia at the sectoral level, and constructs several measures of the sophistication of goods and services trade, and puts these comparisons in a global context. The results indicate that Malaysia has further opportunities for growth in the services sector in particular. Modernizing the services sector may provide a way out of the middle income trap, and serve as a source of growth for Malaysia into the future.
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Policy Research Working Paper WPS6427 APR 01, 2013
This Africa's pulse newsletter includes the following headings: Sub-Saharan African countries continue to grow at a steady pace; the region's decade-long economic expansion appears sustainable; and for newly resource-rich countries, strong governance will be key to harnessing resource wealth for development
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A large literature has argued that different types of capital flows have different consequences for macroeconomic stability. By distinguishing between foreign direct investment and portfolio and other investments, this paper studies the effects of the composition of capital inflows on output volatility.
... See More + The paper develops a simple empirical model which, under certain conditions that hold in the data, yields three key testable implications. First, output volatility should depend positively on the volatilities of both foreign direct investment and portfolio and other inflows. Second, output volatility should be an increasing function of the correlation between both kinds of inflows. Third, output volatility should be a decreasing function of the share of foreign direct investment in total capital inflows, for low values of that share. The data provide strong support for all three implications, even after controlling for other factors that may influence output volatility, and after dealing with potential endogeneity problems. These findings call attention to the importance of taking into account the synchronization and composition of capital flows for output stabilization purposes, as opposed to just focusing on the volatility of each component of capital flows.
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Policy Research Working Paper WPS6386 MAR 01, 2013
Federico, Pablo; Vuletin, Guillermo; Vegh, Carlos A.
The paper develops a concept and a measure of the monetary capacity of a country to reduce its own poverty and shows how these tools can be used to guide budget allocations or the allocation of aid.
... See More + The authors call this concept the income lever. Making use of tax and distributive theory, the paper shows how different redistributive criteria correspond to the different normative criteria of the income lever. It then constructs various income lever indexes based on these criteria and uses such indexes to rank countries according to their own capacity to reduce poverty. As shown in the empirical application, this methodology can provide an equitable tool to rank countries or regions when it comes to budget or aid allocations, whether it is the allocation of social funds within the European Union (North-North transfers) or the allocation of aid from rich to poor countries (North-South transfers). The findings indicate that the allocation of social funds in the European Union follows closely the rank that results from the income lever indexes proposed while the allocation of aid to Sub-Saharan African countries does not.
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Policy Research Working Paper WPS6367 FEB 01, 2013
Total factor productivity (TFP) is an important component of growth for most countries. This paper assesses the role of macroeconomic instability on TFP growth.
... See More + Authors consider volatility in inflation, openness of an economy and financial market deepness as measures of macroeconomic instability. Empirical evidence provided from Turkey suggests that volatility of openness and financial market deepness reduce TFP growth, whereas volatility of inflation increases TFP growth. It is important to note that the volatility measures of the three variables that authors use come from a reduced-form specification. Thus, a caution should be given about interpreting the estimated coefficients of volatility variables for the specifications. The estimated coefficients assess how the volatilities in the three variables as a measure of macroeconomic instability affect TFP growth.
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Journal Article 79424 JAN 01, 2013
Berument, Hakan; Dincer, N. Nergiz; Mustafaoglu, Zafer
The library network of the World Bank Group (WBG) and the International Monetary Fund (IMF) is pleased to support the International Monetary Fund (IMF) program of seminars held during the 2013 annual meetings in Washington, D.C.
... See More + This recommended reading booklet has been customized to meet the information needs of annual meetings attendees and non-attendees alike by highlighting resources from the International Monetary Fund, or IMF, the World Bank Group, and other public sources. The booklet covers the most recent materials written on each of the seminar topics, which have been evaluated for quality, pertinence, and accuracy. When possible, links to the full text of a document have been included. Many of the publications are publicly available and may be accessed electronically from the websites of the World Bank Group (WBG) and the International Monetary Fund (IMF). Due to intellectual property rights requirements, some material is only available commercially or through university or other local libraries.
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The need for economic diversification receives a great deal of attention in Russia. This paper looks at a way to improve it that is essential but largely ignored: how to help diversifying firms better survive economic cycles.
... See More + By definition, economic diversification means doing new things in new sectors and/or in new markets. The fate of emerging firms, therefore, should be of great concern to policy makers. This paper indicates that the ups and downs-the volatility-of Russian economic growth are a key to that fate. Volatility of growth is higher in Russia than in comparable economies because its slumps are both longer and deeper. They go beyond the cleansing effects of eliminating the least efficient firms; relatively efficient ones get swept away as well. Two policy conclusions emerge from these findings-one macroeconomic and one microeconomic. First, the importance of countercyclical policies is heightened to include efficiency elements. Second, strengthening competition and other factors that support the survival of new, emerging and efficient firms will promote economic diversification. Efforts to help small and medium enterprises may be better spent on removing the obstacles that young, infant firms face as they attempts to enter, survive and grow.
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This book looks at the effect of legal and economic rights on women's economic opportunities. It focuses on entrepreneurship because women in Africa are active entrepreneurs, and the links between property rights and the ability to enter contracts in one's own name affect entrepreneurial activities.
... See More + The laws that are the focus of this book are not business laws and regulations, which are generally gender blind and presuppose that individuals can own property or enter into contracts. Instead, the book examines family, inheritance, and land laws, which oft en restrict these rights in ways that hurt women. This book surveys constitutions and statutes in all 47 countries in Sub-Saharan Africa to document where gender gaps in these laws impinge on women's legal capacity, property rights, or both. The book also looks at some labor law issues, such as restrictions on the types of industries or hours of work in which women may engage and provisions for equal pay for work of equal value. These laws affect women as employees and influence the attractiveness of wage employment versus entrepreneurship. They were also selected because they affect the choice of enterprise women may run. The equal pay for work of equal value provisions are also of interest as an indicator of the recognition of women's broader economic rights. This book provides a series of indicators that show whether a country does or does not provide particular legal provisions. Several points are worth emphasizing in interpreting these indicators. First, the indicators are binary; there is no attempt to differentiate between small and large gender gaps. Second, the indicators are not used to generate an index or otherwise aggregate the indicators; no weights are given to differentiate the relative importance of different sets of laws. Third, the indicators reflect whether certain legal provisions are recognized in a country or not; because the link between the indicator and gender gaps is not always straightforward, care must be taken in making value judgments. Although some indicators reveal that women are treated equally or identify gender differences in treatment, others do not. Although recognition of these sources of law can have implications for women's rights, it does not necessarily imply that women's rights are stronger or weaker. Conversely, the inclusion of some protections for women's rights may reflect not the strong standing of women but rather the fact that gender equality is not seen as axiomatic and needs to be explicitly stated. Second and third chapters focus on formal rights and how they have been upheld in court decisions. Fourth chapter examines the gap between laws on the books and practice on the ground. Fifth chapter looks at how both the substance of law and women's access to justice issues can be improved to expand women's ability to pursue economic opportunities.
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This book is organized as follows: this first chapter examines the pattern of structural transformation in Middle East and North Africa, or MENA and summarizes the role of various factors examined thoroughly in the rest of the volume.
... See More + This second chapter examines the correlates of this overall disappointing performance. At the macro level, MENA countries have been unable to maintain depreciated (undervalued) real exchange rates for long periods, yet such undervaluation has proved important to offset the market failures and poor institutional environment that severely hit the dynamic non-resource-intensive traded sectors. This third chapter shows that services sectors in resource-rich MENA countries have been declining as a share of gross domestic product (GDP) and of non-mining GDP as per capita incomes increase. This fourth chapter explores the presence of systematic differences between the patterns of diversification in MENA and the rest of the world. This fifth chapter shows that from a historical perspective, fiscal policy has not contributed significantly to diversification in MENA, because it has been more oriented toward food and fuel subsidies (consumption) rather than toward public goods such as infrastructure (investment). Finally, in this sixth chapter, the authors emphasize the different characteristics of the regional partners in terms of their resource endowments and consider wealth distribution effects within the region.
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An abundance of natural resources is intuitively expected to be a blessing. Nonetheless, it has been argued for some decades that large endowments of natural resources oil, gas, and minerals in particular may actually become more of a curse, often leading to slow economic growth and redistributive struggles (including armed conflict).
... See More + Over the years, vast empirical literature has addressed this "paradox." The literature has had to rely on proxies for natural resource abundance because of the lack of appropriate data, generating doubt on whether results would be similar if direct measures of natural wealth were available. This gap is now starting to be filled with the data series released by the World Bank (1997, 2006, 2011) on natural capital and other forms of countries' wealth. This note presents an analysis of these data to revisit some of the conclusions reached in the literature on the relationship between natural resource abundance and economic growth. The findings are in alignment with the view that there is no clear deterministic evidence of natural resource abundance as a curse or a blessing; therefore, the effect on a country depends on other determinants.
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