This paper investigates the impact of World Bank development policy operations on the quality of economic policy during the period 1998-2015. A new theoretical framework distinguishes among three effects that have been conflated hitherto: (a) marginal impacts of additional policy actions within the current year; (b) length of the policy engagement with client countries, and (c) changes over time in the marginal impact of policy actions.
... See More + The analysis focuses on policy actions that are particularly relevant for the quality of economic management. Consistent with past research, robust panel estimations indicate that development policy financing has a positive effect on the quality of government economic policy. The econometric work suggests that the nature of the policy dialogue and quality of the engagement with government matter more than the sheer number of policy actions adopted. There is also tentative evidence that although the positive impact is sustained over time, the initial years of an engagement are the most productive for improvement in government economic policy. This may be linked to the fact that over time the reform program changes from 'first-generation' to more complex 'second-generation' policy actions.
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Policy Research Working Paper WPS8645 NOV 13, 2018
Is the variation in bilateral trade flows across countries primarily due to differences in the number of exporting firms (the extensive margin) or in the average size of an exporter (the intensive margin)?
... See More + And how does this affect the estimation and quantitative implications of the Melitz (2003) trade model? The benchmark Melitz model with Pareto-distributed firm productivity and fixed costs of exporting, predicts that, conditional on the fixed costs of exporting, all variation in exports across trading partners should occur on the extensive margin. This paper subjects this theoretical prediction to a reality check drawing upon the World Bank's Exporter Dynamics Database (EDD) which has firm-level exports from 50 developing countries to all destinations. Around 50 percent of the variation in exports across trading partners is shown to be along the intensive margin, contradicting the benchmark Melitz-Pareto model. The paper finds that moving from a Pareto to a lognormal distribution of firm productivity allows the Melitz model to successfully match the role of the intensive margin evident in the EDD. The paper then studies the implications of our findings for quantitative trade theory. Using likelihood methods and the EDD, a generalized Melitz model with a joint lognormal distribution for firm productivity, fixed costs and demand shifters is estimated, and exact hat algebra is used to quantify the counterfactual effects of a decline in trade costs on trade flows and welfare in the estimated model. Finally, these effects are compared to those that would be predicted by the Melitz-Pareto model, with the Pareto shape parameter chosen to match the average trade elasticity implied by the estimated Melitz-lognormal model. The paper shows that the effects on welfare turn out to be quite close to those in the standard Melitz-Pareto model even though the effects on trade flows remain different.
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Policy Research Working Paper WPS8625 OCT 26, 2018
This is a statement by Ignazio Visco, Governor of the Bank of Italy, on behalf of the Constituency of Albania, Greece, Italy, Malta, Portugal, San Marino and Timor-Leste, at the ninety-eighth meeting of the Development Committee on October 13, 2018.
... See More + He discusses with the global economic activity weaker than the year prior as a result of downside risks becoming more prominent, he is seeing great potential with the 2019 World Development Report and the Bali Fintech Agenda that was prepared by the IMF and World Bank.
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This is a statement by H.E. Eduardo Guardia, Minister of Finance of Brazil on behalf of Brazil, Colombia, Dominican Republic, Ecuador, Haiti, Panama, Philippines, Suriname, and Trinidad and Tobago, at the ninety-eighth meeting of the Development Committee on October 13, 2018.
... See More + He discusses the importance of the changing times with fintech, human capital and disruptive technologies.
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It is generally believed that firms in emerging markets rely on shorter-term instruments than firms in advanced economies. In recent years, firms in emerging market economies have substantially increased the amount of debt raised in global bond and syndicated loan markets, triggering concerns about their exposure to rollover risks.
... See More + However, new evidence examined in this policy brief shows that emerging market firms have been using these markets to borrow long term, possibly diminishing the risks associated with higher debt levels and foreign currency financing. Challenging the conventional wisdom, large firms from emerging markets have issued bonds and syndicated loans at maturities similar to those issued by firms from advanced economies. These findings have implications for understanding the sources of short-termism in emerging markets, the actual risks emerging economies face from rising levels of corporate borrowing, and the policy measures that may help firms that cannot borrow long term.
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The African Capacity Building Foundation (ACBF) Regional Capacity Building Project had a satisfactory overall outcome, a moderately satisfactory performance by the Bank and the monitoring and evaluation quality was substantial.
... See More + Some of the lessons learned were: (1) Over-dependence on a single donor can hurt substantially. (2) It will be desirable for the ACBF to not jettison its hard-won core business strengths built up over decades – especially on macroeconomic management, monitoring and think tank-based knowledge-sharing. (3) ACBF’s business model must reflect – and adapt swiftly to – its often – swiftly changing operating environment. (4) It is desirable to avoid disconnects between the regional and the national. (5) Introducing Bank-like processes and controls in bodies where they may not be appropriate may generate adverse consequences.
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Implementation Completion and Results Report ICR4380 AUG 31, 2018
This issue of Indonesia Daily Economic Update for July 27, 2018 contains economic highlights, including: Bank Indonesia (BI) is planning to regularly release four new indicators on job vacancy, property markets, payment systems and economic policy uncertainty index, utilizing the development of big data.
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This study investigates empirically the determinants of labor shares focusing on the role of investment and exchange rate volatility. The authors use a system GMM panel approach and consider 34 Organization for Economic Co-operation and Development (OECD) countries along with South Africa for the period 1995-2015.
... See More + The authors results reveal that the level of a country’s investment is a significant factor driving changes in the labor share of income. This evidence is in line with the theoretical mechanism for the role of investment presented by Lawrence (2015). While the authors consider several other factors, suggested by the extant empirical literature, the authors only find evidence for the degree of a country’s exposure to the international financial system, which is inversely related with labor shares. This study is a background note for the South Africa systematic country diagnostic.
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The effect of demographics on poverty measurement based on per capita consumption is well known. The size and composition of the household can affect the well-being of everyone in the household, with respect to total consumption within that household.
... See More + Failure to address this issue may often lead to an underestimation or overestimation of poverty, especially for children. Many studies have tried to address the issue, using the generic approach of equivalence scales. However, the choice of scale is controversial and may lead to comparability problems between countries because of the different demographic structures and choice of the pivot household for establishing the per capita poverty line. Based on the World Bank's African poverty database, this study estimates poverty rates for African children using the new international poverty line of $1.90 a day defined in terms of 2011 purchasing power parity. The equivalence scales approach (Food and Agriculture Organization/World Health Organization) is used with the adjustment suggested by Deaton after the identification of the pivot household, which is defined as the household whose per capita consumption is around the international poverty line. This study shows that taking account of demographics results in downward adjustments of child poverty, adult poverty, and child-adult poverty gaps. Moreover, breakdowns by country show that poverty may vary significantly depending on demographics, which may cause some reranking when comparing poverty between African countries. Finally, sensitivity analyses reveal that child poverty is not sensitive to the child discount factor, unlike adult poverty, but, overall, taking account of demographics is helpful for better identifying poor children.
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Policy Research Working Paper WPS8426 MAY 03, 2018
This note investigates the nature of corporate savings in South Africa. The first part focuses on the empirical impact of uncertainty on investment in the manufacturing sector, while the second part discusses factors influencing corporate cash hoarding and assesses whether South African firms’ behavior is peculiar.
... See More + The results show that sectoral and systemic risks – our measures of uncertainty – consistently impede investment in the South African manufacturing sector, which could explain in part for firms increasing their savings. Further reasons for that behavior include precautionary measures when economic conditions are unfavorable, increasing appetite for investment abroad at the expense of domestic investment, cash provision for amortization purposes and balance sheet management.
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On January 7, 11 and 19, 1993, Pieter P. Bottelier was interviewed on behalf of the World Bank Group Archives oral history program by John P. Lewis, Richard Webb and Devesh Kapur.
... See More + During his tenure at the Bank from 1970 to 1998, Mr. Bottelier worked in the following areas: as an economist in the Eastern Africa department (1970-1972); as a senior economist in East Asia and Pacific department (1972-1975), the Western Africa department (1975-1977) and the East Asia and Pacific department (1977-1979); as a resident chief economist in Jakarta, Indonesia (1979-1983); as a division chief in Mexico, in the Latin America region (1983-1987); as a director in the Latin America region, country department IV (1987-1991); as a director in the Europe, Middle East and North Africa region, country department II (1991-1993); as a chief of resident mission in Beijing, China (1993-1997); and as a senior adviser to the vice president for East Asia region (1997-1998).
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Brazil has traditionally been a country with low savings rates and consequently low rates of investment. Distortions in the allocation of capital are a key factor behind Brazil’s disappointing productivity performance.
... See More + This paper looks at the role of Brazil’s financial markets in determining the allocation of capital and finds that policies that were designed to overcome market imperfections have instead deepened inefficiencies.
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The Iran Economic Monitor provides an update on key economic developments and policies over the past six months. It examines these economic developments and policies in a longer-term and global context, and assesses their implications for the outlook for the country.
... See More + Its coverage has ranged from the macro-economy to financial markets to indicators of human welfare and development. This edition covers the economic growth of Iran for the year 2016. Growth performance in 2016 exceeded expectations based on the bounce back in oil production and exports. The economy registered a record growth rate of 13.4 percent according to the new GDP data published by the Central Bank of Iran. While Iran’s economy is relatively diversified for a resource-rich country, oil proceeds still play a crucial role in public finances and external accounts. Iran’s ability to increase production in 2016, despite the cuts agreed to by the rest of the OPEC members helped bring production near its pre-sanctions levels. The surge in exports led to an improvement in the current account surplus, to 3.9 percent of GDP in 2016, as growth in imports remained stagnant. Increased oil production and exports brought an increase in government revenues, however, the improvement was not enough to offset the widening expenditures; the fiscal deficit grew from 1.7 percent in 2015 to an estimated 2.2 percent in 2016. Creating fiscal space for growth will be important especially in view of the expected burden from securitization of government arrears and growing pension system liabilities. Iran managed to achieve single digit inflation in 2016, but inflationary pressures resurfaced towards the end of the year and in early 2017, as liquidity rose and the Iranian Rial continued to depreciate. Job creation remained limited. In the medium-term, the growth rates are expected to revert to an average of 4 percent, reflecting modest reintegration with the global economy in banking, trade and investment. There are significant downside risks, both domestic and external, to this moderate medium-term outlook.
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