November 2008

As usual on Fridays, from Raj Nallari and Breda Griffith's lecture notes.

Braunstein and Heintz (2006) report that the costs of inflation in terms of reduced employment are disproportionately borne by women.  They compiled data for 51 “inflation reduction episodes” in 17 low- and middle-income countries for the period 1970-2003.  To assess the employment effects of inflation reduction periods, they looked at actual employment trends during each inflation reduction episode, disaggregated by gender, and compared these to long-run employment trends (estimated by applying a Hodrik-Prescott filter to the employment series).  They also examine indicators that suggest how monetary policy responded during inflation reduction episodes using a similar approach. We compare average short-term real interest rates, growth rates of the real money supply, and indicators of the real exchange rate to their long-run trends to see if these variables deviated from trend during inflation reduction episodes. Their preliminary observations are worth repeating and presented below:

In my last posting, I mentioned the importance of securing new funding to scale up activities. I’ve got some great news to share today and that is that our efforts to secure more financial resources have borne fruit in that we’ve just received news that we’re one of 12 winners of the biennial Dubai Awards.

Amid all the news of the slowing global economy, I’m not sure anyone was too surprised that the World Bank’s latest China economic projections estimate the country’s economic growth, despite remaining relatively strong, will continue to slow in 2009. The latest edition of the China Quarterly Update, released Monday, also says that to continue growth, China needs to utilize already announced stimulus policies to rebalance its economy and improve standard of living and support long-term development.

Have questions about the report? Do you wonder what the future holds for China? Our own bloggers David Dollar and Louis Kuijs, who authored the report, will answer questions Monday in a live online chat. You can join them on Dec. 1 at 8 a.m. EST (13:00 GMT/UTC and 9pm in Beijing), or submit your questions now. Check it out here.

We cannot be too optimistic on China’s exports, even though we think the country’s competitiveness is still strong. Image credit: scobleizer at Flickr under a Creative Commons license.

As we were looking at recent developments as background for our China Quarterly Update, which was released yesterday, we had to make up our minds about how well China’s exports are doing. This was necessary because there are conflicting answers to this question. On the one hand, we are reading many reports from the coastal provinces, Guangdong in particular, about how bad things are there in the export industries, with factories closing and migrant workers going back to rural areas. On the other hand, the data on overall export developments suggests exports have held up reasonably well so far, with overall exports in real terms still far outgrowing overall world import growth, implying continued gains in global market share for China (see left hand figure below).

An important part of the answer lies in the fact that the export performance differs markedly between sectors. Exports of light manufacturing products, such as textiles and toys, are by now lower than a year ago in real terms (see right hand figure below), while real exports of (higher value added) machinery and equipment are still growing by over 30 percent year-on-year. Exports of light manufactures have been hit by cost increases as well as weak overall foreign demand—which matters a lot because China now produces the bulk of global production in certain sectors, such as toys. On the other hand, China’s exports of machinery and equipment still occupy modest market shares globally, and China’s strong underlying competitiveness means that its exporters can continue to gain market share even in more challenging global circumstances.

Image credit: simonpocock at Flickr under a Creative Commons license.

If you want to know what movies are being shown on flights across the Pacific, ask me or my World Bank colleagues in the East Asia and Pacific region's Disaster Risk Management team. We have been passing one another by plane for the past month and a half. Responsible for coordinating disaster risk management efforts and activities for the region, we are a busy group, no doubt about it.

I have been in China for the past few weeks supporting the country team to appraise a package of support to China for recovery efforts following the May 12, 2008 Wenchuan Earthquake. One colleague participated in the recent Global Facility for Disaster Reduction and Recovery Consultative Group meetings in Copenhagen, Denmark and is now in Jakarta, Indonesia working with field staff, the country’s government, and partners on mainstreaming risk reduction into development programs. Another colleague of mine just returned from the Philippines and Vietnam, where she was stranded by flooding in Hanoi. In fact, she had to wade through knee-deep water when leaving a meeting at the Ministry of Finance. Of course, this represents just part of the team, since we work with a broader network of staff based in country offices who manage country-level programs and projects.

Much has been said lately about the prospects for global institutions to promote media democracy and good governance. The jury is still out, however. How can a diversity of trasnational actors, including intergovernment bodies, donors, UN agencies, civic groups and business, be effective? Are all actors equally positioned? If national governments retain power over key decisions shaping media environments, how do global actors manage to influence opportunities for media pluralism and participation?

Latin America offers an interesting petri dish to examine the germination of regional movements promoting media pluralism.

 As usual on Fridays, from Raj Nallari and Breda Griffith's lecture notes.

Gender and Monetary Policy: Introduction

The monetary system in any country comprises of banks and other financial institutions, such as credit unions, micro-credit schemes, and housing societies.  In more developed countries, stock markets, investment banks, insurance companies and other institutions also take deposits and provide financial services.  Monetary policy instruments are mainly money supply and interest rates, while regulations related to facilitating transactions of payments, assets, debts and credit.
 
The broad objective of monetary policy conducted by Central Bank of a country is to maintain low inflation (that will also ensure low real interest rates) and stable and realistic exchange rates by managing money supply and setting interest rates.  Low inflation, low real interest rates, and realistic exchange rates benefit the poor, while high inflation hampers growth, and the poor are unable to protect their consumption levels.  However, moderate inflation in the range of about 20-30% is observed not to have an adverse effect on GDP growth. But, inflation erodes the real incomes and as such, is harmful to the poor, who already have lower incomes. Overvalued exchange rates harm the living standards of the rural poor who are predominantly women who depend upon agricultural exports.

The Commission on Growth and Development has published the paper International Finance and Growth in Developing Countries: What Have We Learned?, by Maurice Obstfeld.

"Despite an abundance of cross?section, panel, and event studies, there is strikingly little convincing documentation of direct positive impacts of financial opening on the economic welfare levels or growth rates of developing countries. The econometric difficulties are similar to those that bedevil the literature on trade openness and growth, though if anything, they are more severe in the context of international finance. There is also little systematic evidence that financial opening raises welfare indirectly by promoting collateral reforms of economic institutions or policies. At the same time, opening the financial account does appear to raise the frequency and severity of economic crises. Nonetheless, developing countries continue to move in the direction of further financial openness. A plausible explanation is that financial development is a concomitant of successful economic growth, and a growing financial sector in an economy open to trade cannot long be insulated from cross?border financial flows. This survey discusses the policy framework in which financial globalization is most likely to prove beneficial for developing countries. The reforms developing countries need to carry out to make their economies safe for international asset trade are the same reforms they need to carry out to curtail the power of entrenched economic interests and liberate the economy’s productive potential."

The first G-20 summit, focused on the financial crisis, just took place this past weekend.  When measured against expectations of such gatherings, there were some accomplishments.  Such as in trade:  the collective pledge to avoid raising any trade and investment barriers, or the promise to ‘strive’ for a deal on the stalled Doha round.  And the  summit's ‘action plan’ holds promise. 

The declaration includes a generic list of a plethora of financial sector  ‘principles’ and many areas of work.  But at least it is comprehensive in scope, touching on most of the right ‘buttons’.  It provides space to work concretely on real issues.

Vienna International Center, Austria -- The third and final day of the CommGAP-United Nations Office on Drugs and Crime (UNODC) communication and anti-corruption learning event featured the following topics: the role of communication in changing social norms and behavior that support corruption; the communicative dimensions of anti-corruption bodies; and a brainstorming session on the ways in which UNODC and CommGAP can support the global anti-corruption community of practice.

This summer I was asked to evaluate Timor-Leste’s Leadership and Communication Capacity for National Renewal Program (LCCNR) and provide strategic recommendations for the future of the program. I did so with great interest and developed a high appreciation for the LCCNR. Its design is built on extensive research and reveals deep insight into Timor’s culture and current governance challenges. I believe it is a program of potentially great value for the future and stability of Timor-Leste.