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Food price shocks and low-income countries

Hans Lofgren's picture

The current US drought and its emerging effects on food markets underscore the timeliness and importance of this year’s Global Monitoring Report (GMR), which focused on international food prices, nutrition, and MDGs. One key message of the report, which should be taken on board when the emerging crisis is assessed, is that the effects of changes in international food prices depend on the time frame and on country characteristics, most importantly on shares of domestic supply that are exported or imported and the related issue of the extent to which domestic and international markets are linked. While it is possible for governments to mitigate the effects of international price changes, this can be quite costly, requiring higher taxes, more borrowing, or less spending in other areas, giving rise to difficult trade-offs between various competing development objectives. However, for most countries, given that food trade represents a small share of food supplies and demands, domestic conditions determine to a large extent whether sufficient food is available at prices that are affordable also for the less fortunate – it depends on household incomes and the ability of the agricultural sector to ramp up production. It is important not to exaggerate the role of international markets, especially beyond the short run, when farmers have had the opportunity to respond to international price developments.

Learning from China’s rise to escape the Middle-Income trap

Volker Treichel's picture

Latin America’s economic performance has been improving steadily over the past decade.  Driven by high commodity prices and capital inflows, growth rose above that in the G7 and also helped for the first time to reduce poverty and high income inequality. More than 70 million Latin Americans were lifted out of moderate poverty between 2003 and 2012 and at least 12 countries in the region experienced non-trivial declines in their income Gini coefficients.  In parallel, the middle classes expanded and, as a result, income inequality fell throughout the region. The effectiveness of Latin America's economic reforms since 2000 was evidenced by the resilience of its economies during the recent crisis. In fact, the region's recession was relatively short-lived, and with the exception of Mexico, remarkably mild, partly as a result of effective counter-cyclical monetary, fiscal and credit policies made possible as a result of the sustained macroeconomic stabilization since 2000.  Yet, Latin America remains trapped in a middle income status and has made little progress in converging to the per capita incomes of advanced countries (Figure 1).

Political Intervention in Financial System Development: Its Nature, Causes, and Consequences

Fenghua Song's picture

Political intervention in credit markets, often with telling consequences, seems to be ubiquitous, regardless of the stage of development of the financial system. It has been well documented that in emerging markets, cozy ties between banks and politicians, as well as state ownership of banks, give rise to a great deal of political influence in credit extension and capital allocation. The recent financial crises in U.S. and the Eurozone have demonstrated that even advanced financial systems are not immune to political intervention.

Chart: Progress toward reducing undernourishment

LTD Editors's picture

Excerpt from Global Monitoring Report 2012.

Undernourishment measures the availability of food to meet people’s basic energy needs. The MDGs call for cutting the proportion of undernourished people in half, but few countries will reach that target by 2015. Rising agricultural production has kept ahead of population growth, but rising food prices and the diversion of food crops to fuel production have reversed the declining rate of undernourishment since 2004–06. The FAO estimates that in 2008 there were 739 million people without adequate daily food intake. More

Friday Roundup: Recent Research on HIV/AIDS

LTD Editors's picture

Washington, DC is buzzing this week with the XIX International AIDS Conference. Heavy-hitters and celebrities like US Secretary of State Hilary Clinton, World Bank President Jim Young Kim, philanthropist Bill Gates and singer Elton John are all participating, and the range of topics being covered include the relationship between AIDS treatment and health systems as well as procurement and corruption issues.

The World Bank, USAID, PEPFAR and The Lancet hosted a debate on July 23, with the motion ‘Continued AIDS investment by donors and governments is a sound investment, even in a resource-constrained environment.’  The sparks flew, with none of the distinguished debaters pulling their punches.

Early Warning Weather Systems Have Very Real Benefits

Stéphane Hallegatte's picture

For poor countries, building weather and hydrological services to produce reliable forecasts often does not appear as a priority. Such services are seen as a luxury, rather than a necessity, in low income countries. But is it really the case?

In many countries, human and economic losses caused by weather extremes are on the rise, and they sometimes increase more rapidly than wealth. In some regions, natural disasters now represent a significant obstacle to poverty alleviation at the household level (many studies show that disasters can put households in poverty traps) and at the macro level (some regions are affected by regular events and spend a large fraction of their resources for reconstruction instead of development).

Friday Roundup: Skilled migrants, participatory development, hospital reform, and measuring decentralization

Swati Mishra's picture

This week four new policy research working papers were published covering performance of skilled migrants in US, induced participatory projects, Vietnam’s hospital autonomization policy, and worldwide indicators on localization and decentralization.

Counting Women: Heavy-hitters can help make it happen

Merrell Tuck-Primdahl's picture

With a data revolution upon us and as we strive to keep up in this new age of participation, what counts matters and is acted upon. If advertisers can mine our online behavior, how we use our phones and where we spend to influence our consumer choices, then surely we can design smart social programs based on gender-disaggregated data that will narrow the gaps between men and women in social and economic life, right? These and other questions were posed at an event today on “Evidence and Impact: Closing the Gender Data Gap."

What was inspiring was that two heavy-hitters – World Bank Group President Jim Yong Kim and US Secretary of State Hillary Rodham Clinton – spoke eloquently about the power of data to maximize results and shape policies, whether in terms of higher productivity on farms in Africa, better social safety net programs in Peru, or more effective peace and reconciliation initiatives in post conflict countries.

New Database Reveals Global Pattern of Services Trade Restrictions

Aaditya Mattoo's picture

Some of the fastest-growing countries in Asia and the oil-rich Gulf states have the most restrictive policies in the services trade, while some of the poorest countries in the world, such as Rwanda and Senegal, are remarkably open in the area.  These patterns emerge from a new Services Trade Restrictions Database created by staff in the Trade and International Integration Team of the Development Economics Research Group.

Across sectors, transportation and professional services, such as accounting and law, are among the most protected in developed and developing countries alike. Meanwhile, retail, telecommunications and finance, such as banking and insurance, tend to be more open.

Cutting Trade Costs to Kick-Start Growth

John Wilson's picture

The ongoing turmoil in Europe with the euro and sluggish global economic recovery has important implications for growth and trade in developing countries. A World Bank report released recently suggests that as a result of instability in advanced economies, developing country growth will slow to a relatively weak 5.3 percent in 2012. In a speech recently, WTO Secretary General Pascal Lamy described the rise in trade protection as alarming. Restrictive measures put in place since the global economic crisis in 2008 amounts to 3% of world merchandise trade, and almost 4% of G-20 trade. They have remained unabated over the past seven months.

Given economic slowdown in developing countries and an increase in restrictions on trade, what policy steps can the global community take to ensure trade remains a source of jobs and growth? 

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