Is Targeting Deprived Areas an Effective Means to Reach Poor People? An assessment of one rationale for area-based funding programmes

Area-based programmes have long been a feature of urban policy in the UK. One rationale is that they are an effective means to target poor people. Area deprivation indices are used to identify areas for targeting. This paper reviews the different results produced by these indices. It then examines the effectiveness of the current Index of Multiple Deprivation in targeting the poor, demonstrating that area targeting using the IMD 2000 is a more complete way of reaching the poor than has been claimed by opponents of area-based targeting in the past. However, it is more effective in reaching some sub-groups, particularly children, than others, and is also relatively inefficient. There is a trade off between efficiency and completeness. The use of area targeting should depend on the type of intervention, the costs and benefits of producing complex targeting mechanisms, and the particular balance between completeness and efficiency in each case.area targeting, deprivation, area-based initiatives, neighbourhoods

Monetary Policy Rules for Convergence to the Euro

This paper aims to devise a monetary policy instrument rule that is suitable for open economies undergoing monetary convergence to a common currency area. The open-economy convergence-consistent Taylor rule is forward-looking, consistent with monetary framework based on inflation targeting, containing input variables that are relative to the corresponding variables in the common currency area. The policy rule is tested empirically for three inflation targeting countries converging to the euro, i.e. the Czech Republic, Poland and Hungary. Stability tests of the input variables affirm prudent inclusion of these variables in the suggested policy rule. Empirical tests of the proposed instrument rule point to systemic differences in monetary policies among these euro-candidates. The Czech inflation targeting is forwardlooking relying on a sensible balance between inflation and output growth objectives. Poland's policy focuses on backward-looking inflation, while the Hungarian policy on exchange rate stability. Forecasts of policy instruments based on the prescribed rule are more accurate and reliable for the Czech Republic and Hungary, but less for Poland.monetary convergence, Taylor rules, inflation targeting

Mapping poverty in rural China: how much does the environment matter?

A recently developed small area estimation technique is used to geographically derive detailed estimates of consumption-based poverty and inequality in rural Shaanxi, China. These estimates may be helpful for targeting since there is wide variability in poverty rates within Shaanxi but low levels of inequality within most counties and townships. We also investigate whether including environmental variables in the equation used to predict consumption and poverty improves upon typical approaches that only use household survey and census data. Ignoring environmental variables appears likely to produce targeting errors

Exchange Rate Risk and Convergence to the Euro

This paper proposes a new monetary policy framework for effectively navigating the path to adopting the euro. The proposed policy is based on relative inflation forecast targeting and incorporates an ancillary target of declining exchange rate risk, which is suggested as a key criterion for evaluating the currency stability. A model linking exchange rate volatility to differentials over the euro zone in both inflation (target variable) and interest rate (instrument variable) is proposed. The model is empirically tested for the Czech Republic, Poland and Hungary, the selected new Member States of the EU that use direct inflation targeting to guide their monetary policies. The empirical methodology is based on the TARCH(p,q,r)-M model.exchange rate risk, inflation targeting, monetary convergence, euro area, new EU Member States

Targeting Relative Inflation Forecast as Monetary Policy Framework for Adopting the Euro

This study proposes relative inflation forecast targeting as an operational framework of monetary policy for adopting the euro by the EU new Member States. This strategy assumes containing differentials between the domestic and the eurozone inflation forecasts as an operational target. A model prescribing the RIFT framework is presented along with a set of appropriate policy indicator variables and instrument rules. The proposed framework advances the strategy based on relatively strict inflation targeting that is currently pursued by some NMS. Several ARCHclass tests in various functional forms are employed for providing preliminary empirical evidence on convergence of inflation differentials relative to the euro area for Poland, Czech Republic and Hungary.http://deepblue.lib.umich.edu/bitstream/2027.42/40140/3/wp754.pd

Inflation persistence and optimal monetary policy in the euro area

In this paper we present supporting evidence of the existence of heterogeneity in inflation dynamics across euro area countries. Based on the estimation of New Phillips Curves for five major countries of the euro area, we find that there is significant inertial (backward looking) behavior in inflation in four of them, while inflation in Germany has a dominat forward looking component. We then present an optimizing agent model for the area emphasizing the hetergeneity in inflation persistence across regions. Allowing for such a backward looking component will affect the evaluation of the degree of nominal rigidities relevant for the monetary policy design. We explore the welfare implications of this circumstance by comparing the adjustment of the economies and the area as a whole in response to terms-of-trade shocks under four monetary policy rules: fully optimal, optimal inflation targeting, HICP targeting and output gap stabilization. JEL Classification: E52, E58currency areas, Inflation Dynamics, optimal monetary policy

Implications of ERM2 for Poland’s Monetary Policy

This study proposes an extension to the inflation targeting framework for Poland that takes into consideration the exchange rate stability constraints imposed by the obligatory participation in the ERM2 on the path to the euro. The modified policy framework is based on targeting the differential between the domestic and the implicit euro area inflation forecasts. The exchange rate stability objective enters the central bank reaction function and is treated as an indicator variable. Adjustments of interest rates respond to changes in the relative inflation forecast, while foreign exchange market intervention is applied for the purpose of stabilizing the exchange rate. The dynamic market equilibrium exchange rate is ascertained by employing the Johanssen cointegration tests and the threshold generalized autoregressive heteroscedasticity model with the in-mean extension and generalized error distribution (TGARCH-M-GED).http://deepblue.lib.umich.edu/bitstream/2027.42/40188/3/wp802.pd

Optimal population-level infection detection strategies for malaria control and elimination in a spatial model of malaria transmission

Mass campaigns with antimalarial drugs are potentially a powerful tool for local elimination of malaria, yet current diagnostic technologies are insufficiently sensitive to identify all individuals who harbor infections. At the same time, overtreatment of uninfected individuals increases the risk of accelerating emergence of drug resistance and losing community acceptance. Local heterogeneity in transmission intensity may allow campaign strategies that respond to index cases to successfully target subpatent infections while simultaneously limiting overtreatment. While selective targeting of hotspots of transmission has been proposed as a strategy for malaria control, such targeting has not been tested in the context of malaria elimination. Using household locations, demographics, and prevalence data from a survey of four health facility catchment areas in southern Zambia and an agent-based model of malaria transmission and immunity acquisition, a transmission intensity was fit to each household based on neighborhood age-dependent malaria prevalence. A set of individual infection trajectories was constructed for every household in each catchment area, accounting for heterogeneous exposure and immunity. Various campaign strategies (mass drug administration, mass screen and treat, focal mass drug administration, snowball reactive case detection, pooled sampling, and a hypothetical serological diagnostic) were simulated and evaluated for performance at finding infections, minimizing overtreatment, reducing clinical case counts, and interrupting transmission. For malaria control, presumptive treatment leads to substantial overtreatment without additional morbidity reduction under all but the highest transmission conditions. Selective targeting of hotspots with drug campaigns is an ineffective tool for elimination due to limited sensitivity of available field diagnostics

Mapping poverty in rural China: How much does the environment matter?

In this paper, we apply a recently developed small-area estimation technique to derive geographically detailed estimates of consumption-based poverty and inequality in rural Shaanxi, China. We also investigate whether using environmental variables derived mainly from satellite remote sensing improves upon traditional approaches that only use household survey and census data. According to our results, ignoring environmental variables in statistical analyses that predict small-area poverty rates leads to targeting errors. In other words, using environmental variables both helps more accurately identify poor areas (so they should be able to receive more transfers of poor area funds) and identify non-poor areas (which would allow policy makers to reduce poverty funds in these better off areas and redirect them to poor areas). Using area-based targeting may be an efficient way to reach the poor since many counties and townships in rural Shaanxi have low levels of inequality, even though, on average, there is more within-group than between-group inequality. Using information on locations that are, in fact, receiving poverty assistance, our analysis also produces evidence that official poverty policy in Shaanxi targets particular areas which in reality are no poorer than other areas that do not get targeted