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on Development |
| By: | Marwan Elkhoury |
| Abstract: | Credit rating agencies (CRAs) play a key role in financial markets by helping to reduce the informative asymmetry between lenders and investors, on one side, and issuers on the other side, about the creditworthiness of companies or countries. CRAs´ role has expanded with financial globalization and has received an additional boost from Basel II which incorporates the ratings of CRAs into the rules for setting weights for credit risk. Ratings tend to be sticky, lagging markets, and overreact when they do change. This overreaction may have aggravated financial crises in the recent past, contributing to financial instability and cross-country contagion. The recent bankruptcies of Enron, WorldCom, and Parmalat have prompted legislative scrutiny of the agencies. Criticism has been especially directed towards the high degree of concentration of the industry. Promotion of competition may require policy action at national and international level to encourage the establishment of new agencies and to channel business generated by new regulatory requirements in their direction. |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:unc:dispap:186&r=dev |
| By: | Ugo Panizza |
| Abstract: | Analysis of public debt in developing countries has traditionally focused on external debt. However, in recent years, several developing countries adopted aggressive policies aimed at retiring public external debt and substituting it with domestically issued debt. This paper discusses alternative definitions of external and domestic debt and then introduces a new dataset on domestic and external public debt. It uses this dataset to describe recent trends in the composition of public debt in developing countries and discusses the reasons for these trends. The paper also identifies possible challenges and opportunities arising from the new debt management strategy adopted by several emerging and developing countries and points out that there are conceptual and practical issues with the traditional external/domestic debt dichotomy. In doing so, the paper discusses possible trade-off between domestic and external borrowing and points out that while the switch towards more domestic borrowing can play a positive role in reducing the risks of sovereign finance, policymakers should not be too complacent. |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:unc:dispap:188&r=dev |
| By: | Hengyun Ma; Les Oxley (University of Canterbury); John Gibson |
| Abstract: | The paper investigates energy market integration in China by employing univariate, and panel-based unit root tests and Granger causality tests applied to a new, energy price data set. We identify price series that converge either to absolute or relative price parity. In addition we estimate the rates (speed) at which relative prices converge to their long-run values, and the direction of causality. The results show that gasoline and diesel markets are very well integrated as a whole; that once some geographically isolated regions are excluded, we can regard the coal market as integrated; however, the electricity markets is not well integrated. The estimated intercept terms are all very small and close to zero, such that most of the relative price series can be regarded as convergent to absolute price parity. The convergence rates vary little and are relatively short when compared internationally. A rich set of causal relationships are established many showing bi-directional causality between regional centres. |
| Keywords: | China; Energy; Market integration; Price convergence; Time series tests |
| JEL: | D24 O33 Q41 |
| Date: | 2008–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:08/12&r=dev |
| By: | Jens Chr. Andvig; Odd-Helge Fjeldstad |
| Abstract: | Crime and the fear of being hit by crime and small-scale violence are key economic and social problems in most developing countries, not least felt strongly by the poor. Extensive corruption in the police, experienced or perceived, contributes seriously to the problem. A key question raised in the paper is: How is police corruption linked to the wider processes of development - including crime, violence and poverty? The paper examines (i) how and why corruption may arise in the daily routines of the police and whether it may have impacts on crime rates; (ii) empirical indications of whether the police may be more corrupt than other groups of public officials; (iii) how and why police corruption may vary across countries; and (iv) the wider impacts of police corruption on development |
| Keywords: | Corruption Crime Police Poverty JEL classification: D73, K42, O17 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:chm:wpaper:wp2008-7&r=dev |
| By: | Dirk Kohnert (GIGA Institute of African Affairs) |
| Abstract: | Promising growth rates, increased trade, and competition among major global players for African resources have boosted the development and bargaining power of sub-Saharan Africa (SSA) in relation to the EU. However, Africa's least developed countries remain vulnerable to external shocks. Academic analysis is still too heavily influenced by scholastic controversies. Neither the controversy over “big-push” concepts nor the blaming of African culture as an impediment to growth or good government do justice to the real issues at stake. Even beyond the aftermath of (neo)colonialism, and notwithstanding continuing deficits in good government in many African countries, the EU bears responsibility for the fragile state of many African economies. The self-interested trade policies of the EU and other world powers contribute to poverty and unsatisfactory development in SSA. This threatens to perpetuate asymmetrical power relations in the new Economic Partnership Agreements (EPAs), to the detriment of regional integration and pro-poor growth. However, mounting competition between China and other global players for Africa's resources is resulting in windfall profits for Africa. The latter is leading to a revival of seesaw politics, already known from the times of the Cold War, on the part of African states. This could be profitable for Africa's power elite, but not necessarily for Africa's poor. |
| Keywords: | economic integration, trade policy, aid, international migration, regional integration, EU, Africa, China |
| JEL: | F13 F15 F22 F24 F42 F59 N47 P45 R11 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:gig:wpaper:82&r=dev |
| By: | Andreas Mehler (GIGA Institute of African Affairs) |
| Abstract: | Peace agreements form a crucial element of strategies to bring security from outside: they involve third-party mediators during the negotiation stage and often peacekeeping troops to guarantee the agreement at an implementation stage. Peace roundtables usually involve top politicians and military leaders, who negotiate, sign, and/or benefit from the agreement. What is usually and conspicuously absent from peace negotiations is broad-based participation by those who should benefit in the first place: citizens. More specifically, the local level of security provision and insecurity production is rarely taken into account. This paper reviews parts of the academic debate on power sharing and war termination, touching on some key findings by the main researchers working on the topic. The ambivalent African experience with Arend Lijphart’s four main ingredients of consociational democracy (grand coalition, minority veto, proportional representation, group autonomy) is summarized. Recent major African peace agreements (1999-2007) are analyzed, and their power-sharing content detailed. Most agreements contain some—though varying— power-sharing devices. Most striking is the variation regarding the important question of who is sharing power with whom. Obviously, only those present at the negotiation table can really count on being included in major ways. Finally, three country cases are analyzed over a longer time period: Côte d’Ivoire (2002-2007), Liberia (1994-2003), and Central African Republic (1996-2007). The conclusion focuses on the factors of failure of peace agreements that place a heavy emphasis on power sharing. |
| Keywords: | Power sharing, peace agreements, consociational democracy, Central African Republic, Côte d'Ivoire, Liberia |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:gig:wpaper:83&r=dev |
| By: | Mottaleb, Khondoker Abdul |
| Abstract: | Abstract: By bridging the gap between domestic savings and investment and bringing the latest technology and management know-how from developed countries, foreign direct investment (FDI) can play important role in achieving rapid economic growth in the developing countries. The fact is that FDI mostly flows towards the developed countries and only a small portion of FDI flows to a limited number of developing countries. Thus, most of the developing nations almost fail to attract a handsome amount of FDI. Using panel data from 60 low-income and lower-middle income countries, this paper firstly identifies the influential factors that determine FDI inflow in the developing countries and secondly empirically demonstrates the relationship between economic growth and FDI. It is found that countries with larger GDP and high GDP growth rate and maintain business friendly environment with abundant modern infrastructural facilities, such as internet can successfully attract FDI and FDI on the other hand, significantly affect economic growth of a country. |
| Keywords: | foreign direct investment; determinants; developing countries; economic growth |
| JEL: | O10 |
| Date: | 2007–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:9457&r=dev |
| By: | Herrmann, Michael; Khan, Haider |
| Abstract: | Rapid urbanization is a fact of live even in the least developed countries (LDCs) where the lion’s share of the population presently lives in rural areas and will continue to do so for decades to come. At the turn of the millennium 75% of the LDCs’ population still lived in rural areas and 71% of the LDCs’ labor force was involved in agriculture. But even though the largest share of their population lives in rural areas and directly or indirectly derives their livelihoods from agriculture, a rapidly increasing share of the population migrates to urban centers in search for employment opportunities outside agriculture in industrial enterprises or the services sector. The main purpose of this paper is to examine the causes and consequences -- in particular, the policy implications -- of the ongoing urbanization in the African LDCs. It is found that the employment opportunities in either rural or the urban sector are not growing adequately. This paper attempts to analyze the emerging trends and patterns of urbanization in the African LDCs within a dynamic dual-dual framework with a strong emphasis on rural-urban migration and the informal sectors. The analysis pinpoints, among other things, the need to build up productive capacities in order to create adequate employment and incomes for the rapidly growing population---particularly in the urban areas. The development of productive capacities, which is a precondition for the creation of productive employment opportunities, is a central element of viable poverty reduction strategy for Bangladesh as well. Without significant poverty reduction it is impossible to think of viable urbanization on the basis of sustainable development criteria in this group of very African countries. The donors, especially the OECD/ DAC countries, should provide the necessary financial backing for such a sustainable and equitable development strategy for Africa. It is necessary to reverse the trends in aid, and to provide a much larger share of aid for productive sector development, including the development of rural and urban areas, and the development of agricultural and non-agricultural sectors in line with the perspective of the dual-dual model. Although urban centers mostly host non-agricultural industries, sustainable urbanization also strongly depends on what happens in the agricultural sectors. Productive employment opportunities in rural areas are important in order to combat an unsustainable migration from rural areas to urban centers, and productive employment opportunities in urban centers are essential to absorb the rapidly increasing labor force in the non-agricultural sector. |
| Keywords: | Urbanization; Africa; LDCs; Dual-Dual Model; Informal Sector; Poverty; Employment; Capabilities. |
| JEL: | O18 A1 O5 R23 R58 O1 R0 O3 J0 C6 O2 I3 Q1 O55 J60 C3 J3 J4 O4 R11 |
| Date: | 2008–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:9499&r=dev |
| By: | Dhas, Albert Christopher |
| Abstract: | This paper is concerned with the consequences of population growth and its increasing density on land use pattern and its changes. For this purpose, the empirical evidences are drawn from FAO statistics with reference to Southeast Asian Countries. The paper attempted to provide both a regional and comparative perspective in understanding the relationship between population growth and land use changes. The study observed a steady growth in the human population during the last three decades, though the growth rate has declined during the nineties. The unequal distribution of population in terms of its size and growth was observed among the Southeast Asian Countries. The analysis indicated changes in land use pattern towards ‘arable and permanent cropland’ and ‘land not available for cultivation’. However, such a trend varied across Southeast Asian Countries significantly. The effect of population pressure on land use changes are examined both in a broad and narrow sense, which indicated growing population pressure on land, particularly on agricultural land resulting extensification. It is observed that extensification is made possible by shifting land from forest and pastureland, and also by shifting from ‘land not available for cultivation. The variations in the effect of population pressure on land use changes are observed across Southeast Asian countries. |
| Keywords: | Population; population pressure; Land use Changes; Southeast Asian Countries |
| JEL: | O57 J0 J11 |
| Date: | 2008–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:9570&r=dev |
| By: | Hoque, Serajul |
| Abstract: | This paper examines the economic effects of removing tariffs in Bangladesh using a computable general equilibrium (CGE) modelling approach. The results of the simulations indicate that in the short-run a funded tariff cut with fixed real national savings would increase employment slightly and hence would expand GDP. There would be a small economy-wide welfare gain as measured by real consumption. The sectoral results showed that export-oriented industries would experience an expansion in output and employment. There also would be positive effects on the suppliers to these industries. Lightly-protected industries, which rely heavily on imported intermediate inputs, are projected to show robust expansion as they would benefit from a cost reduction. However, highly-protected, import-competing industries would suffer a contraction in output and employment as they would face increased competition from imports due to the removal of tariffs. The simulation results also indicate that there would have some noticeable effects on the distribution of real consumption between different household groups. Overall, urban households would experience an expansion in real consumption and rural households would suffer a contraction as a consequence of the funded tariff cut with fixed real national savings. |
| Keywords: | CGE model; trade liberalisation; income distribution; Bangladesh |
| JEL: | F13 C68 O15 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:9577&r=dev |
| By: | James B. Ang |
| Abstract: | Although theory emphasizes the role of financial market frictions in explaining income inequality, there is little empirical research exploring how financial development and financial sector reforms influence the evolution of income inequality. This paper examines how finance impacts on income inequality in India using annual time series data for over half a century. The results indicate that while financial development helps reduce income inequality, financial liberalization seems to have exacerbated income inequality in India. Our results are robust to the use of different measures for financial development and financial liberalization. |
| JEL: | G28 O16 O53 |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2008-18&r=dev |
| By: | Rod Tyers |
| Abstract: | China’s industrial reforms have left many key industries dominated by single or small numbers of firms, most of which remain state owned. Until recently, these firms have not been required to pay dividends to the state and the recent surge in China’s growth has made them very profitable, with their economic profits adding 20% of GDP to corporate saving. This bolsters the overall saving-investment gap and hence China’s controversial current account surplus. In other countries, oligopolistic industries tend to be taxed more heavily and they are commonly subjected to price regulation. This study offers an economy-wide analysis of approaches to oligopoly rents in China. The results suggest that, while policy changes targeting national saving, including increased corporate taxation, expansionary fiscal policy and SOE privatisation all help to control the external imbalance, they tend also to turn demand inward, inducing higher oligopoly rents and slower growth. Competition policy, embodying both price cap regulation and free entry, proves more effective both in controlling the external imbalance and in fostering continued growth. |
| JEL: | D43 D58 F32 L13 L43 L51 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2008-496&r=dev |
| By: | Andrew Sheng (Tsinghua University); Allen Ng (Bank Negara Malaysia) |
| Abstract: | International financial integration has accelerated at an unprecedented pace in recent years. External holdings of financial assets and liabilities for both industrial and emerging countries have grown rapidly since the mid-1990s, many times exceeding their respective national income, and traditional surveillance methods using flow data are increasingly incapable of satisfactorily explaining the recent major global economic developments. Using Lane and Milesi-Ferretti's (2006) rich data-set of external positions for 145 countries from 1970 to 2004, this paper selects several issues to highlight the usefulness of balance sheet analysis as a tool for historical understanding and to examine how it can help in an analysis of possible future vulnerabilities. Starting from a global overview, the study looks at China from a comparative angle vis-¨¤-vis the world and the rest of Asia, and finally focuses on the evolution of the external position of China. Although the investigations are preliminary in nature, this paper demonstrates how China has emerged as an important net creditor in an increasingly integrated world and suggests that as China becomes more important globally as a net creditor, the balance sheet analysis of trends and a clearer focus on real total rates of return on external assets, and their risk management, have become increasingly more important over time. It is hoped that this paper will stimulate more academic and policy analysis in this growing area of policy importance. |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:012008&r=dev |
| By: | Giovanni Ferri (University of Bari, Italy, Hong Kong Institute for Monetary Research) |
| Abstract: | "New Tigers" (including city commercial banks) outperform state-owned commercial banks burdened with non-performing loans from unprofitable state-owned enterprises. We study whether this is due solely to superior corporate governance (multiple shareholders versus total government ownership) or also to the favorable environment (the New Tigers target affluent China, while state-owned commercial banks operate nationwide). Using a field survey on 20 city commercial banks from three provinces at different levels of economic development, we find better performance at those in the East and worse performance at those controlled by state-owned enterprises. Geography and policy do matter, and reform of state-owned commercial banks is necessary to bring better banking to China. |
| Keywords: | China, State Ownership of Banks, Corporate Governance, Geography and Performance |
| JEL: | G21 G30 G38 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:052008&r=dev |
| By: | Yuko Hashimoto (Toyo University, International Monetary Fund, Hong Kong Institute for Monetary Research) |
| Abstract: | This paper attempts to identify whether the recent foreign reserve accumulation in Asian economies has been too extraordinary to recover the moderate level of reserves which depleted at the time of the currency crisis in 1997-1998. First of all, the level of reserves numerated by various economic fundamentals such as broad money, imports and short-term external debt in Asian economies was examined in order to judge whether the level was high enough to weather speculative pressures at the onset of the crisis in 1997. The analysis is based on a Brownian motion model with an absorbing barrier. Although most Asian economies appeared to have larger reserves (reserve indicators) than the estimated threshold at the time of the crisis of 1997, reserves in terms of short-term external debt were apparently not sufficient to avoid speculative attacks. Then, based on the estimated threshold of reserve indicators, the likelihood of a 25% devaluation within three months ahead is calculated. Probabilities of currency devaluation vary from time to time, among countries, and among reserve indicators. The devaluation likelihood was modest in the mid 1990s, but then it showed a big jump in 1997 in Indonesia, Thailand, Korea, and Philippines. |
| Keywords: | foreign reserves, accumulation, Asia, threshold, currency crisis |
| Date: | 2008–06 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:062008&r=dev |
| By: | Yin-wong Cheung (University of California, Santa Cruz, USA, Hong Kong Institute for Monetary Research); Hiro Ito (Portland State University, Portland, USA) |
| Abstract: | We examine the empirical determinants of the demand for international reserves and compare the experiences of some Asian and Latin American economies. Our empirical results indicate that different vintages of the model of international reserves give different inferences about the appropriate level of international reserves. The developed and developing economies have equations of the demand for international reserves that are quite different from each other. Further, the Asian economies and the Latin American economies have different empirical determinants of the demand for international reserves. Our results highlight the complexity of evaluating whether an economy is holding an excessive or deficient level of international reserves ¨C the inference can be heavily dependent on the choice of a benchmark model. A direct comparison affirms the perception that the Asian economies tend to hold more international reserves than the Latin American economies. |
| Keywords: | Foreign Exchange Reserves, Macro Determinants, Financial Factors, Institutional Variables, Excessive Hoarding of International Reserves |
| JEL: | F31 F33 F34 F36 |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:072008&r=dev |
| By: | Rabin Hattari (George Mason University); Ramkishen S. Rajan (George Mason University, Hong Kong Institute for Monetary Research) |
| Abstract: | Developing countries are rapidly emerging as new and important sources of foreign direct investment (FDI) to other developing countries. While Asian companies have become significant foreign direct investors abroad, a large share of outward investments from Asia appears to have been recycled intraregionally. However, unlike trade flows, there has been little to no detailed examination of FDI flows between Asian economies at a bilateral level. This paper uses bilateral FDI flows data to investigate trends and patterns of intra-Asian FDI flows over the period 1990 to 2005. It also employs an augmented gravity model framework to examine the main determinants of intra-Asian FDI flows. A range of drivers of FDI flows, including transactional and informational distance (proxied by distance), real sector variables, financial variables and institutional quality are examined. |
| Keywords: | Developing Asia, Distance, Foreign direct investment (FDI), Institutions, Intra-regional, Gravity model |
| JEL: | F21 F23 F36 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:112008&r=dev |
| By: | Shawn A. Cole (Harvard Business School, Finance Unit) |
| Abstract: | This paper integrates theories of political budget cycles with theories of tactical electoral redistribution to test for political capture in a novel way. Studying banks in India, I find that government-owned bank lending tracks the electoral cycle, with agricultural credit increasing by 5-10 percentage points in an election year. There is significant cross-sectional targeting, with large increases in districts in which the election is particularly close. This targeting does not occur in non-election years, or in private bank lending. I show capture is costly: elections affect loan repayment, and election year credit booms do not measurably affect agricultural output. |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:09-001&r=dev |
| By: | Shawn A. Cole (Harvard Business School, Finance Unit) |
| Abstract: | In 1980, India nationalized its large private banks. This induced different bank ownership patterns across different towns, allowing credible identification of the effects of bank ownership on financial development, lending rates, and the quality of intermediation, as well as employment and investment. Credit markets with nationalized banks experienced faster credit growth during a period of financial repression. Nationalization led to lower interest rates and lower quality intermediation, and may have slowed employment gains in trade and services. Development lending goals were met, but these had no impact on the real economy. |
| JEL: | G21 O16 |
| Date: | 2007–11 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:09-002&r=dev |
| By: | Auer, Raphael (Swiss National Bank) |
| Abstract: | While the direct impact of geographic endowments on prosperity is present in all countries, in former colonies, geography has also affected colonization policies and institutional outcomes. Thus, one can disentangle the partial effects of endowments and institutions on income by utilizing the interaction of geography and colonial experience. I first document that climate and disease did affect institutional development in the group of former colonies while this is not the case in the rest of the world. Second, I develop an empirical strategy that identifies the relation between institutions and income but that also accounts for the direct effect of endowments. I find that institutions are the main determinant of development and that endowments also have a sizeable direct impact on development. Third, I highlight the importance of disease environment for both colonization policies and income directly. |
| Keywords: | Growth; Institutions; Geography; Comparative Development; Colonialism |
| JEL: | F54 N50 O11 P16 P51 R11 |
| Date: | 2008–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:ris:snbwpa:2008_008&r=dev |