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This blog is maintained by the Growth and Crisis (GC ) Program of the World Bank Institute.

We bring you timely news, resources, tools, ideas and commentaries on issues related to the global economic crisis and growth.

August 2009

Private Companies’ Response to the Crisis

Submitted by Raj on Mon, 08/31/2009 - 09:43

Ernst & Young interviewed a large of number of managers and owners of companies around the world, first in January 2009 and again in June 2009 [1]. Companies were surprised by the speed and severity of downturn and the impact was more than expected in January 2009. Many respondents feel that the crisis has permanently changed their operating model (43%), the regulatory framework for their sector (45%) and risk management (56%). The compilation of their responses on the impact of and responses to the crisis is quite revealing. The main companies were surprised by the speed and severity of downturn and the impact was more than expected in January 2009; findings can be tabulated as follows

  1. About 82% of respondents still having difficulty in accessing credit and this is impacting upon their investment strategy
  2. Companies are facing heightened concerns over risks while managing their assets, and over likelihood of more regulations
  3. Almost 9 out of 10 accelerating cost reductions through review of capital investment and employee reduction but only 67% have been in reducing costs, particularly through IT and real estate.
  4. Companies using this crisis to outsource (23%) and for strategic acquisitions (34%). About 32% are disposing of assets to increase cash and liquidity.
  5. Only 19% see growth returning during second half or 2009 and 38% in 2010.
  6. Remaining respondents feel that future is bright later on.
  7. In January 2009, only 20% planned for entering new geographic markets but by June 2009, 33% expect to.

 

Y2Y Global Youth Conference 2009 Essay Competition

Submitted by Ihssane on Fri, 08/28/2009 - 11:54

As part of Youth-to-Youth Community's Global Youth Conference 2009, the Y2Y Group is launching a 2009 Essay Competition on the theme of "Youth Entrepreneurship in times of crisis". There are great prizes to be won!

Further details are below and in the attached document.

Microfoundations of Economic Growth

Submitted by Raj on Mon, 08/24/2009 - 17:22

Most growth analysis has been primarily a macroeconomic subject with particular emphasis on contribution of capital, education adjusted labor, and total factor productivity to output growth (see Collins and Bosworth 1996, Hu and Khan, 1997, Sarel 1997, Sala-i-Martin 2000, Hall and Jones, 1999, Easterly and Levine 2001). Importance of macroeconomic policies as represented by budget deficits, exchange rate premia, inflation, trade openness and inflow of foreign Investment etc are tagged on in the growth analysis at a macroeconomic level. A few studies have invoked ethnic differences and other exogenous factors to understand cross country differences in total productivity growth and per capita incomes. 

In trying to understand the rapid output growth of East Asian ‘miracle’ countries, Krugman (1994), Young (1995), and others were engaged in an interesting debate on whether capital accumulation or total factor productivity growth best explained the high and sustained output growth of these countries. Their conclusion that capital accumulation was most important was based on macroeconomic data analysis in a factors of production approach to sources of growth. Others have found that the growth of output is strongly correlated with productivity growth in developed and developing economies as reported by Kehoe and Prescott (2002) and Solimano and Soto (2004), and this co-movement appears to be stronger the longer is the time period considered.