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282. Globalization and Catching-up in Emerging Market Economies
- Author:
- Grzegorz W. Kolodko
- Publication Date:
- 05-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- The study discusses conditions and prospects for fast and durable growth in emerging market economies. In the course of history less than 30 nations have become rich and still more than 80 per cent of the world population lives in the middle and low-income countries, some of them in extreme poverty. It is true not only for the majority of economies traditionally considered as 'developing countries', but also for the new, post-socialist emerging markets. Thus the questions arise: what is the influence of globalization process on economic growth and how real are the prospects for these emerging markets to catch up with more advanced countries? What factors may contribute to sustained and rapid growth over the long term? The paper examines strategies that can help taking the contemporary wave of globalization to the advantage of fast growth of less advanced countries and hence containing the existing development gaps.
- Topic:
- Economics, Emerging Markets, Globalization, and International Trade and Finance
283. The Benefits and Costs of Group Affiliation: Evidence from East Asia
- Author:
- Stijn Claessens, Joseph P.H. Fan, and Larry H.P. Lang
- Publication Date:
- 05-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper investigates the benefits and associated agency costs of using internal capital markets through affiliating with groups using data of two thousand firms from nine East Asian economies between 1994-6. We find that mature and slow-growing firms with ownership structures more likely to create agency problems gain more from group affiliation, while young and high-growth firms more likely lose. Agency problems are important explanatory factors of firm value in economies outside Japan, but less so in Japan. Consistent with the literature, financially constrained firms benefit from group affiliation. Our results are robust to different time periods and estimation techniques.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- Israel and East Asia
284. The Macroeconomic Repercussions of Agricultural Shocks and their Implications for Insurance
- Author:
- Paul Collier
- Publication Date:
- 04-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- The paper considers the macroeconomic impact of shocks to agricultural output and of negative and positive price shocks. It is shown that negative price shocks have particularly large externalities: it is estimated that the overall impact of these negative shocks on GDP may well be double their direct impact. In terms of policy, the presence of externalities justifies subsidising the provision of insurance. If insurance is not feasible, then foreign aid may be helpful. Turning to other systemic shocks, it is argued that the macroeconomic consequences of negative output shocks are far less important. Positive price shocks also have substantial macroeconomic externalities via their effect on asset demand. Appropriate central bank policy is crucial and requires a detailed understanding of asset demand changes in response to price shocks. Since this may well be unlikely, dollarization may be a better strategy.
- Topic:
- Economics, Government, and International Trade and Finance
285. Financial Regulation and Supervision in Emerging Markets. The Experience of Latin America since the Tequila Crisis
- Author:
- Barbara Stallings and Rogerio Studart
- Publication Date:
- 04-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- The paper deals with changes in the regulation and supervision of the Latin American financial sector in the aftermath of the 'Tequila Crisis' of 1994–95. While it finds that both have improved, regulation and supervision cannot resolve all problems; good macroeconomic policy and performance are essential complements. This is especially true because of the procyclical nature of financial activity. The paper presents both regional data for Latin America, contrasting it with other emerging markets, and four country case studies (Argentina, Brazil, Chile, and Mexico). The latter show how individual country characteristics and experiences affect the operation of the financial systems. We close with some policy recommendations.
- Topic:
- Economics, Emerging Markets, and Government
- Political Geography:
- Brazil, Argentina, South America, Latin America, North America, Mexico, and Chile
286. Debt Relief under the HIPC Initiative. Context and Outlook for Debt Sustainability and Resource Flows
- Author:
- Lisandro Abrego and Doris C. Ross
- Publication Date:
- 04-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper analyses debt relief efforts by creditors to alleviate the debt burden of low- income countries. The Heavily Indebted Poor Countries (HIPC) Initiative builds on traditional debt relief, and for the first time involves relief on multilateral debt. It seeks to reduce debt to sustainable levels and eliminate any debt overhang that might hinder growth and investment. It provides substantial debt relief to eligible countries by reducing their overall debt stocks by about one-half, or, together with traditional relief over time, by some 80 per cent. It lowers debt service payments of HIPCs substantially, provides room for increased social spending, and provides a solid basis for debt sustainability. The latter requires efforts by both debtors and creditors. To find poverty reduction efforts, HIPC relief is important, but much broader international support is needed as external transfers to HIPCs in the past far exceeded debt service paid. Experience has shown that external support can only be effective if it reinforces sound policies implemented by HIPCs themselves. Thus debt relief and ODA are most important not in isolation, but as help for self-help.
- Topic:
- Economics, International Organization, and International Trade and Finance
287. Assessing the Impact of Fiscal Policy on Poverty
- Author:
- Andrew McKay
- Publication Date:
- 04-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- Fiscal policy measures are a key means by which governments can influence distribution and poverty, but in fact the relationships between fiscal policy and poverty are not well understood. The most commonly used technique for assessing the distributional impact, benefit incidence analysis, is straightforward, but applied by itself it suffers from a number of serious limitations. Assessment of the impact of fiscal policy needs to be developed in various directions, including allowing for behavioural responses and incorporating a broader range of information. In parallel with this careful attention needs to be paid to more effective monitoring of the poverty impsact of fiscal policy.
- Topic:
- Economics, Government, and International Trade and Finance
288. International Bank Lending. Water Flowing Uphill?
- Author:
- John Hawkins
- Publication Date:
- 04-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- International bank lending is a major component of capital flows between advanced and emerging economies. However, in recent years these flows have been going the wrong way, like water flowing uphill. Even four years after the Asian crisis, there is a net flow of funds from emerging economies to banks in advanced economies. This paper looks at this phenomenon, starting by setting out the relevant data, and then looking at factors influencing these flows. These include both cyclical influences (both 'push' and 'pull') and structural changes within the banking industry. There is some evidence that international lenders are now discriminating more between the various emerging economies.
- Topic:
- Economics, Emerging Markets, and International Trade and Finance
- Political Geography:
- Asia
289. Countercyclical Fiscal Policy. A Review of the Literature, Empirical Evidence and some Policy Proposals
- Author:
- Carlos Budnevich L.
- Publication Date:
- 04-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- For many emerging market economies, over reliance on monetary policy may bring worse macro results, when compared to a more balanced framework of countercyclical fiscal and monetary policy. The use of countercyclical fiscal policy requires as a precondition solvent and sustainable fiscal accounts and the re-engineering of fiscal institutions to increase the timeliness and flexibility of fiscal policy. A higher degree of tax or pension fund and/or unemployment insurance contribution flexibility may help in economies subject to significant external shocks. Automatic indexing rules to terms of trade or country risk spreads for pension contributions and interest payments on public debt may also contribute to the stabilization effort. If fiscal revenues are highly volatile, structural budget rules and commodity stabilization funds may provide the necessary framework to achieve saving (dissaving) during expansions (contractions).
- Topic:
- Economics, Government, and International Trade and Finance
290. Aid, Public Sector Fiscal Behaviour and Developing Country Debt
- Author:
- Mark McGillivray and Simon Feeny
- Publication Date:
- 04-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper looks at public sector debt in developing countries, being concerned specifically with the relationship between aid inflows and the public sector borrowing requirement net of aid loans. After examining the public sector budget constraint and various conditions under which aid might lead to an increase in this borrowing, the paper surveys the empirical results of literature on aid and public sector fiscal behaviour. It finds that the results of a number of studies are consistent with aid leading to increases in this borrowing. Further investigation, in the form of econometric analysis of panel data, also points to this outcome. The paper then looks at a number of theoretical scenarios in which aid leads to increases in borrowing net of aid loans.
- Topic:
- Economics, Government, and International Trade and Finance
291. Producing an Improved Geographic Profile of Poverty: Methodology and Evidence from Three Developing Countries
- Author:
- Chris Elbers, Peter Lanjouw, Johan Mistiaen, Gabriel Demombynes, Jenny Lanjouw, and Berk Özler
- Publication Date:
- 03-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper implements a methodology for estimating poverty in Ecuador, Madagascar and South Africa, at levels of disaggregation that to date have not generally been available. The methodology is based on a statistical procedure to combine household survey data with population census data, imputing into the latter a measure of per capita consumption from the former. The countries are very unlike each other—with different geographies, stages of development, quality and types of data, and so on. Yet the paper demonstrates that in all three countries the poverty estimates produced from census data are both plausible (in that they match well stratum-level estimates calculated directly from the household surveys) and satisfactorily precise (at a level of disaggregation far below that allowed by household surveys).
- Topic:
- Development, Economics, Government, and International Trade and Finance
- Political Geography:
- South Africa
292. One Third of the World's Growth and Inequality
- Author:
- Danny Quah
- Publication Date:
- 03-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper studies growth and inequality in China and India—two economies that account for a third of the world's population. By modelling growth and inequality as components in a joint stochastic process, the paper calibrates the impact each has on different welfare indicators and on the personal income distribution across the joint population of the two countries. For personal income inequalities in a China-India universe, the forces assuming first-order importance are macroeconomic: Growing average incomes dominate all else. The relation between aggregate economic growth and within-country in- equality is insignificant for inequality dynamics.
- Topic:
- Development and Economics
- Political Geography:
- China, South Asia, India, and Asia
293. (Re)Distribution of Personal Incomes, Education and Economic Performance Across Countries
- Author:
- Günther Rehme
- Publication Date:
- 03-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- In many OECD countries income inequality has risen, but surprisingly redistribution as well. The theory attributes this partly to the redistributive effect of education spending. In the model income inequality and growth depend in an inverted U-shaped way on education. To maintain a given level of human capital it is shown that a less efficient schooling technology requires more resources, which lowers pre-tax and post-tax income inequality as well as growth. Using consistently defined income data from the Luxembourg Income Study suggests that there is a negative relationship between growth and income inequality in rich countries. It is argued that using some unadjusted inequality measures in growth regressions may yield estimates that are biased upwards. The evidence suggests that a rich country would raise growth with lower pre-tax and post-tax inequality if it spent more on education.
- Topic:
- Development, Economics, and Education
294. Non-Financial Corporate Risk Management and Exchange Rate Volatility in Latin America
- Author:
- Graciela Moguillansky
- Publication Date:
- 03-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This article studies the currency risk management of multinational companies with investments in Latin American countries. The analysis is centred on episodes of currency or financial shocks, searching into the behaviour of the financial management of a firm expecting a significant devaluation. This allowed us to explore the interaction and transmission mechanisms between the microeconomic behaviour and the macroeconomic impact on the foreign exchange market. The analysis was carried out interviewing financial managers of multinational companies from different sectors with headquarters in the United Kingdom and Spain, by reviewing literature on business and currency risk management, and by analysing some surveys on financial risk management in developed countries.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- United Kingdom, South America, Latin America, and Spain
295. Does a Switch of Budget Regimes Constrain Managerial Discretion? Evidence for Italian Public Enterprises' Investment
- Author:
- Elisabetta Bertero and Laura Rondi
- Publication Date:
- 03-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This study examines the effect of the hardening of the budget constraint on the investment behaviour of Italian state owned enterprises (SOEs). It carries out a natural experiment that exploits the 1987 shift of budget regimes due to the pressure of European Union economic policies on the Italian government.Drawing from the theory of capital market imperfections, we apply the empirical framework for the analysis of investment-cash flow sensitivity to a panel of state-owned manufacturing firms during the period 1977-93. We parallel state firms to Anglo-Saxon public corporations which, under separation of ownership and control, are afflicted by agency problems, managerial discretion, misallocation of free cash-flow and overinvestment. We argue that, under a soft budget constraint, state firms' managerial discretion and, in particular, collusion between managers and vote-seeking politicians, lead to wasteful investment.
- Topic:
- Economics and International Trade and Finance
- Political Geography:
- Europe and Italy
296. Why isn't there more Financial Intermediation in Developing Countries?
- Author:
- Jonathan Conning and Michael Kevane
- Publication Date:
- 02-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- This paper proposes to organize thinking about the opportunities for improving and extending financial markets and safety nets for the poor, by focusing on factors that may explain why the linkage of local financial networks and safety nets with the larger economy often fails or is incomplete. Understanding the nature of these impediments is the first step in proposing policies to help promote more effective linkage and intermediation. We propose four explanations for the slowness of adoption of intermediation (high costs of delegated monitoring aggravated by limited intermediary capital; lock-in and crowding out effects from local insurance arrangements, social norms against cooperation with intermediaries; and political resistance to new institutions that shift the balance of power in local polities). Of course, financial repression and weak legal systems remains important as cause of lack of intermediation. We conclude with a review of public policy for more effective intermediation.
- Topic:
- Development, Economics, and Government
297. Insolvency and Debt Recovery Procedures in Economic Development: An Overview of African Law
- Author:
- Clas Wihlborg
- Publication Date:
- 02-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- Insolvency and debt recovery procedures are as crucial to a well-performing financial sector as credit provision itself. They are even more important in Africa, where attempts are underway to create fully-fledged financial markets. For the financial system to be credible, creditors must be ensured that lenders will meet their obligations and that cases against them will be brought to closure. A good legal framework for insolvency also ensures distressed firms a form of orderly exit, thereby enabling their owners to start afresh. However, institutions of this nature take time to take effect, and need to be supported politically and by reforms in other sectors of the economy.
- Topic:
- Development, Economics, and Government
- Political Geography:
- Africa
298. The Gradual Erosion of the Social Security Function of Customary Land Tenure Arrangements in Lineage-Based Societies
- Author:
- Jean-Philippe Platteau
- Publication Date:
- 02-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- Customary rules governing access to land and other natural resources in village societies have characteristics that allow them to fulfil social security functions and achieve equity objectives. This is true of both common-property resources and land parcels held under individualized tenure. However, when land pressure increases under the combined influences of population growth and market integration, a shift occurs from extensive to intensive resource use patterns. As a result, the efficiency costs of erstwhile equity-and insurance-oriented arrangements rise, thus forcing them to evolve significantly. In particular, land tenure arrangements undergo a major transformation towards more individualized forms with the consequence that property rights in land are increasingly defined without regard for equity and insurance concerns.
- Topic:
- Development, Economics, and Government
299. The Growth Elasticity of Poverty
- Author:
- Rasmus Heltberg
- Publication Date:
- 02-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- How much does economic growth contribute to poverty reduction? I discuss analytical and empirical approaches to assess the growth elasticity of poverty, and emphasize that the relationship between growth and poverty change is non-constant. For a given poverty measure, it depends on initial inequality and on the location of the poverty line relative to mean income. In most cases, growth is more important for poverty reduction than changes in inequality, but this does not render inequality unimportant. Reduction in inequality may be triple effective: (1) it will reduce poverty for a given level of income, (2) it will accelerate the poverty reducing impact of economic growth, and (3) according to cross-country growth regressions, it may contribute to a larger rate of growth.
- Topic:
- Development, Economics, and International Trade and Finance
300. Poverty Incidence and Sectoral Growth: Evidence from Southeast Asia
- Author:
- Peter G. Warr
- Publication Date:
- 02-2002
- Content Type:
- Working Paper
- Institution:
- United Nations University
- Abstract:
- In recent decades, absolute poverty incidence declined in most countries of Southeast Asia, even though in some of these countries inequality increased at the same time. This paper examines the relationship between these outcomes and the rate of economic growth in the agricultural, industrial and services sectors. It develops a time series of available data on the headcount measure of poverty incidence for Thailand, Indonesia, Malaysia and the Philippines over the period from the 1960s to 1999, in aggregate and in both rural and urban areas. It then uses this pooled data set to analyze the economic determinants of changes in poverty incidence.
- Topic:
- Development, Economics, and International Trade and Finance
- Political Geography:
- Indonesia, Malaysia, Philippines, Thailand, and Southeast Asia