|
on Central and Western Asia |
|
Issue of 2010‒09‒25
seventeen papers chosen by Bibhu Prasad Nayak Institute for Social and Economic Change |
| By: | John Gilbert; Nilanjan Banik (Asian Development Bank Institute) |
| Abstract: | Although the overall economic performance of economies in South Asia in recent years has been impressive, there is concern that an aging and increasingly inadequate infrastructure may limit the potential for further growth and economic development. A critical infrastructure component is the transportation network, and there are currently several transportation infrastructure projects in the South Asia Subregional Economic Cooperation (SASEC) region, connecting Nepal, eastern India, Bangladesh, and Bhutan. This paper uses computable general equilibrium (CGE) methods to address how these infrastructure developments might affect the broader economy in SASEC, and in particular impact on income distribution and poverty. The paper describes a new CGE model for South Asia, covering India, Sri Lanka, Bangladesh, Nepal, and Pakistan, which incorporates modifications to household structure in order to capture the implications of reform for changes in intra-household income. The scenarios that are considered reflect proposed investments in land transport infrastructure in the SASEC region. These should result in reductions in the land transport component of international transport margins, which vary bilaterally by commodity. We found that all SASEC economies would benefit from the reductions in terms of aggregate welfare, with the largest gains accruing to India in absolute terms, but the largest relative gains to Nepal, followed by Bangladesh and Sri Lanka when the margin reduction is prorated to intra-South Asian trade rather than just SASEC. In terms of household level distribution, the picture was mixed, with clearly pro-poor outcomes in some countries, such as Nepal, but more ambiguous impacts in others. In terms of potential adjustment costs, examination of the extent of predicted structural changes suggests that these would be minor, although somewhat more significant for the smaller economies in the region. |
| Keywords: | South Asia Subregional Economic Cooperation, SASEC, South Asia, computable general equilibrium, infrastructure, structural changes |
| JEL: | F14 F17 D58 O53 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:eab:develo:2264&r=cwa |
| By: | Rashmi Banga; Pritish Kumar Sahu |
| Abstract: | This study undertakes impact analysis of remittances on poverty in developing countries at two levels. Firstly, it estimates the impact of remittances on poverty in 77 developing countries; Secondly, separate analyses are undertaken for 29 developing countries and 21 Asian developing counties, which have 5 per cent or more share of remittances in GDP. |
| Keywords: | remittances, development,Poverty Headcount ratios, PPP, international migration, political, economic, cultural, GDP, Asian countries, developing, poverty, |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2872&r=cwa |
| By: | Siok Kun, Sek |
| Abstract: | Applying a stochastic dynamic general equilibrium model, the performance of various simple rules is analyzed in a small open economy context. The aspects that are considered in the analysis include the degree of exchange rate pass-through, trade openness, the policy objective and the source and persistency of shocks. The main objective of this analysis is to investigate if the rule reacts to exchange rate performs better than the basic closed economy rule without exchange rate term. Comparison on the performances is also made between the consumer inflation targeting and domestic inflation targeting rules. The results show that adding the exchange rate term to the policy rule enhances improvement especially in the higher pass-through case. The superior rule is the hybrid rule that reacts to the exchange rate term. CPI inflation targeting rules outperform the domestic inflation targeting rules in term of welfare loss. However, more complicated domestic inflation targeting rules generate lower loss in term of relative loss. On the second part of this chapter, comparisons on the performances of different exchange rate regimes are made under different source and persistency of shocks. The floating (pegged) regime is favored under more prominent real (nominal) shocks. The results suggest that emerging countries that experience very large real shocks should float their exchange rate. |
| Keywords: | simple policy rule; exchange rate pass-through; open economy model |
| JEL: | E58 N15 E52 H30 N25 F41 E61 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25065&r=cwa |
| By: | Eduardo Court (Pontificia Universidad Catolica Del Peru, Centrum Catolica); Emre Ozsoz (Fashion Institute of Technology, State University of New York (SUNY), Social Sciences Department, and Fordham University, Center for International Policy Studies (CIPS)); Erick W. Rengifo (Fordham University, Department of Economics and Center for International Policy Studies (CIPS)) |
| Abstract: | One of the main reasons for dollarization is the erosion of money's function as a store of value as the Currency Substitution view suggests. It has not been uncommon for countries with high inflationary processes to have high dollarization ratios and banking system that faces important challenges and risks that significantly affect their ability to provide capital to the overall economy (financial intermediation). In these economies, dollarization played a dual role: in one hand, the role of a hedging instrument protecting the value of money and, in the other hand, contributing to generate the so-called currency mismatch and default risks. This paper investigates the role of dollarization on the development of financial intermediation in developing economies. Our empirical findings suggest that dollarization has a negative impact on financial deepening, except on high-inflation economies. |
| Keywords: | Dollarization, Financial Development, Financial Deepening |
| JEL: | F31 G21 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:frd:wpaper:dp2010-08&r=cwa |
| By: | Chauvet, Lisa; Collier, Paul; Duponchel, Marguerite |
| Abstract: | This paper investigates the effectiveness of post-conflict aid at the project level and aims to identify post-conflict situations as a window of opportunity for project success. The Independent Evaluation Group dataset provides extensive information on the characteristics of World Bank projects including an independent rating of their success, supervision and evaluationquality. The paper estimates the probability of success of aid projects depending on the characteristics of the intervention and looks for possible special patterns in post civil war situations. The results suggest that the probability of success of World Bank projects increases as peace lasts. Supervision appears to be a crucial determinant of the success of projects, especially during the first years of peace. Although the results of the sector-level analysis need to be taken with caution, the authors find that projects in the transport sector and in the urban development sector appear more successful in post-conflict environments. On the contrary, education projects seem less successful and therefore need to be highly supervised. Projects in the private sector should wait as they face a higher probability of failure in the first years of peace. |
| Keywords: | Post Conflict Reconstruction,Post Conflict Reintegration,Social Conflict and Violence,Peace&Peacekeeping,Housing&Human Habitats |
| Date: | 2010–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5418&r=cwa |
| By: | Felipe Aldunate; Jaime Casassus |
| Abstract: | We study the consumption and hedging strategy of an oil-importing developing country that faces multiple crude oil shocks. In our model, developing countries have two particular characteristics: their economies are mainly driven by natural resources and their technologies are less e cient in energy usage. The natural resource exports can be correlated with the crude oil shocks. The country can hedge against the crude oil uncertainty by taking long/short positions in existing crude oil futures contracts. We find that both, ine ciencies in energy usage and shocks to the crude oil price, lower the productivity of capital. This generates a negative income e ect and a positive substitution e ect, because today's consumption is relatively cheaper than tomorrow's consumption. Optimal consumption of the country depends on the magnitudes of these e ects and on its risk-aversion degree. Shocks to other crude oil factors, such as the convenience yield, are also studied. We nd that the persistence of the shocks magni es the income and substitution e ects on consumption, thus a ecting also the hedging strategy of the country. The demand for futures contracts is decomposed in a myopic demand, a pure hedging term and productive hedging demands. These hedging demands arise to hedge against changes in the productivity of capital due to changes in crude oil spot prices. We calibrate the model for Chile and study up to what extent the country's copper exports can be used to hedge the crude oil risk. |
| Keywords: | Crude oil prices, convenience yields, risk management, emerging markets, government policy, two-sector economies |
| JEL: | G11 Q43 Q48 D92 O41 C60 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:376&r=cwa |
| By: | Jaime Casassus; Diego Ceballos |
| Abstract: | We use a general equilibrium model of a monetary economy to understand the economics behind the correlation between in nation and oil futures returns. Oil is used as both, an input to the production of capital and as a consumption good. We estimate our model using maximum likelihood with the following datasets: crude oil futures prices, nominal interest rates, in nation rates and money supply growth rates. We nd that some of the positive correlation found in empirical studies is due to the fact that oil is in the consumption basket; however, this accounts only for a minor part of it. There exist other important sources of correlation related to monetary shocks and output shocks. In particular, we nd that the correlation is extremely sensitive to the reaction of the central bank to output shocks, while the reaction to in nation changes is less signi cant. Our estimates suggest that the monetary authority overreacts to output shocks by increasing the money supply in a more than necessary amount, generating a signi cant source of positive correlation. From a practical perspective, We nd that it is a good strategy to use as a hedge, the futures whose maturity is closer to the hedging horizon. This is particularly true for short-term hedging. |
| Keywords: | Correlation structure, inflation, futures, hedging, oil, monetary policy |
| JEL: | E31 G13 Q31 E44 E52 E23 D51 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:373&r=cwa |
| By: | Manabu Fujimura; Ramesh Adhikari (Asian Development Bank Institute) |
| Abstract: | This paper attempts to fill gaps faced by policymakers and practitioners in the evaluation of cross-border infrastructure projects. It first defines what constitutes cross-border infrastructure projects, and then outlines an analytical framework and criteria to evaluate them. The criteria identify additionalities and externalities specific to cross-border infrastructure projects that need to be stressed in covering broader and indirect impacts that are not usually captured in the analysis of national projects. Then the paper examines to what extent the defined criteria are applicable in evaluating recent cross-border infrastructure projects. It also reports on emerging impacts patterns evidenced in relevant studies. The paper draws lessons and implications for design and implementation of cross- border infrastructure projects. |
| Keywords: | cross-border infrastructure, additionalities, externalities |
| JEL: | H41 O22 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:eab:develo:2262&r=cwa |
| By: | Peter Drysdale; Shiro Armstrong (East Asia Bureau of Economic Research) |
| Abstract: | Asia has emerged from the global financial crisis as an important stabilizing force and engine of global economic growth. The establishment of the G20 gives Asian economies the global forum that they have needed to both represent their interests in global governance and to deliver on responsibilities concomitant with their growing weight in the global economy. The region has a host of cooperation arrangements in APEC, ASEAN+3 and EAS, all with ASEAN as the fulcrum. They are huge assets but they need to be re-positioned to relate effectively to the G20 process and other global arrangements. They also need to comprehend the politics of the changing structure of regional power. This paper discusses the challenges that Asia faces in aligning regional and global objectives in financial, trade and other areas of cooperation, such as on climate change and on foreign investment. It argues that Asia is now a critical player in the global system and has a central contribution to make in strengthening global governance and international policy outcomes. Currently, there is a disconnect between the regional cooperation and the global agenda. The paper sets out ways to address this problem through filling gaps in regional cooperation and linking the agenda for regional cooperation more effectively to Asia's new role globally. That is essential to sustain Asia's superior growth performance, correct imbalances and support the global economic system. |
| Keywords: | economic integration; financial cooperation Asian economic cooperation; Asia Pacific community; global governance; trade policy; foreign investment regime; climate change |
| JEL: | F53 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:eab:wpaper:2188&r=cwa |
| By: | César Calderón; Rodrigo Fuentes. |
| Abstract: | Using the dating algorithm by Harding and Pagan (2002) on a quarterly database for 23 emerging market economies (EMEs) and 12 developed countries over the period 1980.Q1-2006.Q2, we proceed to characterize and compare the business cycle features of these two groups. We first find that recessions are deeper and more frequent among EMEs (especially, among LAC countries) and that expansions are more sizable and longer (especially, among East Asian countries). After this characterization, this paper explores the linkages between the cost of recessions (as measured by the average annual rate of output loss in the peak-to-trough phase of the cycle) and several country-specific factors. Our main findings are: (a) adverse terms of trade shocks raises the cost of recessions in countries with a more open trade regime, deeper financial markets and, surprisingly, a more diversified output structure. (b) U.S. interest rate shocks seem to have a significant impact on the cost of recessions in East Asian countries. (c) Recessions tend to be deeper if they coincide with a sudden stop, but the effect tends to be mitigated in countries with deeper domestic credit markets. (d) Countries with stronger institutions tend to have less costly recessions. |
| Keywords: | Business cycles, peaks and troughs, emerging markets |
| JEL: | E32 F41 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:371&r=cwa |
| By: | Branosa, Boris; Klasen, Stephan; Ziegler, Maria |
| Abstract: | Institutions are a major factor explaining development outcomes. This study focuses on social institutions related to gender inequality understood as long-lasting norms, values and codes of conduct that shape gender roles, and presents evidence on why they matter for development. We derive hypotheses from existing theories and empirically test them at the cross-country level with linear regressions using the newly created Social Institutions and Gender Index (SIGI) and its subindices as measures for social institutions. We find that apart from geography, political system, religion, and the level of economic development, one has to consider social institutions related to gender inequality to better account for differences in development. Our results show that social institutions that deprive women of their autonomy and bargaining power in the household, or that increase the private costs and reduce the private returns to investments into girls, are associated with lower female education, higher fertility rates and higher child mortality. Moreover, social institutions related to gender inequality are negatively associated with governance measured as rule of law and voice and accountability. -- |
| Keywords: | Social institutions,SIGI,Gender inequality,Fertility,Child mortality,Female education,Governance |
| JEL: | D63 I10 I20 H1 J16 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:gdec10:50&r=cwa |
| By: | Francesco Ravazzolo (Norges Bank (Central Bank of Norway)); Philip Rothman (East Carolina University) |
| Abstract: | We study the real-time Granger-causal relationship between crude oil prices and US GDP growth through a simulated out-of-sample (OOS) forecasting exercise; we also provide strong evidence of in-sample predictability from oil prices to GDP. Comparing our benchmark model "without oil" against alternatives "with oil," we strongly reject the null hypothesis of no OOS predictability from oil prices to GDP via our point forecast comparisons from the mid-1980s through the Great Recession. Further analysis shows that these results may be due to our oil price measures serving as proxies for a recently developed measure of global real economic activity omitted from the alternatives to the benchmark forecasting models in which we only use lags of GDP growth. By way of density forecast OOS comparisons, we find evidence of such oil price predictability for GDP for our full 1970-2009 OOS period. Examination of the density forecasts reveals a massive increase in forecast uncertainty following the 1973 post-Yom Kippur War crude oil price increases. |
| Date: | 2010–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:bno:worpap:2010_18&r=cwa |
| By: | Aidt, Toke; Albornoz, Facundo; Gassebner, Martin |
| Abstract: | In this paper we analyze the role of the IMF and the World Bank in triggering changes in the political regime, i.e., democracy and autocracy. We develop a theoretical model which predicts that anticipation of financial flows from international financial institutions may trigger political regime changes which would not take place otherwise. We test the implications of our model empirically and find support both for the role of perfectly foreseen IMF and World Bank programs and of the history of previous World Bank programs. The magnitude of this effects is quite substantial. -- |
| Keywords: | political transitions,democracy,autocracy,political instability |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:gdec10:48&r=cwa |
| By: | Kouni, Mohamed |
| Abstract: | In this paper we study the net effect of high-skilled emigration. Hence, we elaborate a simple theoretical model that studies the net effect of high-skilled emigration. The result showed that the emigration in the case where the fraction of human capital that emigrates is inferior to the critical level (equal to the difference between one and the elasticity of brain gain with respect to emigration), as well as in the case of the strong selectivity adopted, the emigration has the possibility to create a quantitative and qualitative brain gain. Indeed, to determine the net effect of brain drain we propose a new method that decomposes the gross investment of human capital into two components: the net domestic incentive effect and the net quantitative brain drain effect. Through This decomposition we can determine the net quantitative effect that arrives from the interior situation and the one arriving from the prospects effect. Finally, we tempt to define the indicator of the qualitative effect of this phenomenon. The empirical results showed that the emigration has an important effect on the human capital investment. Thus, the majority of countries have the possibility to register a net quantitative gain. Nevertheless, little of countries only have the possibility to record a qualitative brain gain. |
| Keywords: | Brain drain; human capital; development |
| JEL: | O15 |
| Date: | 2010–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25074&r=cwa |
| By: | Nowak-Lehmann D., Felicitas; Martínez-Zarzoso, Inmaculada; Cardozo, Adriana; Klasen, Stephan |
| Abstract: | This paper uses the gravity model of trade to investigate the link between foreign aid and exports in recipient countries and tests for the transmission channels between aid and exports/economic development in developing countries. Most of the theoretical work emphasizes the negative impact of aid on recipient countries exports primarily due to exchange rate appreciation, disregarding the positive impact of aid linked to the income effect. The empirical findings, in contrast, indicate that the net impact of aid on recipient countries exports is positive and that the average return for recipients exports is about 1.50 US$ for every aid dollar spent. The paper also estimates the effect of different types of aid (bilateral aid [from one donor to one specific recipient, and bilateral aid from all the other donors to one specific recipient], as well as multilateral aid flowing to a specific recipient) and finds that at least two types of aid have a positive and significant effect on recipients exports, thus ruling out a major crowding out effect. It is further found that aid is hardly export-enhancing in Africa. -- |
| Keywords: | International Tade,Foreign Aid,Recipient Exports,Real Exchange Rate |
| JEL: | F10 F35 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:gdec10:44&r=cwa |
| By: | Ogg, Clayton W. |
| Keywords: | Demand and Price Analysis, International Development, O13, |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaeapi:93685&r=cwa |
| By: | Masahiro Kawai; Peter A. Petri (Asian Development Bank Institute) |
| Abstract: | The global economic and financial landscape has been transformed over the past decade by the growing economic size and financial power of emerging economies. The new G20 summit process, which includes the largest emerging economies, has established high-level international policy cooperation in this new setting. This paper argues that effective global economic governance will also require changes in key global organizations—such as the International Monetary Fund, World Bank, World Trade Organization, and the Financial Stability Board—and closer collaboration between global and regional organizations. We suggest that federalism be introduced on a global scale by creating hierarchies of global and regional organizations with overlapping ownership structures in various functional areas (as is already the case with the World Bank and regional development banks in the area of development finance). Asia could contribute to this transformation by building effective institutions to promote macroeconomic and financial stability and deepen regional trade and investment integration. |
| Keywords: | financial landscape, G20 summit process, global economic governance, Asia, financial stability |
| JEL: | F02 F13 F33 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:2291&r=cwa |