How financial markets affect long run growth : a cross country study

Empirical studies on new growth theory have tended to ignore financial policy's role in development. The author provides evidence that the initial level of financial development is positively associated with a country's later GDP growth rate, after controlling for the effect of the starting value of human capital and the investment rate. A country that starts with a more developed financial system tends to grow faster because it can make more efficient use of resources. It can do so through several channels, including better evaluation and monitoring of firms, lower transaction costs for financial intermediation, and externalities generated from information collected and processed in financial markets. Policy reform that fosters financial development also has a significant positive effect on the growth rate of real GDP. The empirical evidence presented for 50 developing countries tends to reinforce a classical theme of development economics: the importance of human capital and financial markets.Inequality,Economic Theory&Research,Macroeconomic Management,Achieving Shared Growth,Financial Economics

The Wheat Pricing Policies in Pakistan: Some Alternative Options

The purpose of this paper is to evaluate the impact on wheat production, consumption, and trade of changing the input subsidy and output price subsidy policies. A model of the wheat market in Pakistan is developed to examine the likely effects of alternative wheat pricing policies in Pakistan. A recursive econometric simulation model was used to project production, consumption, and trade under the baseline and two other scenarios. The baseline scenario is designed to predict the evolution of production, consumption, and trade if agricultural policies are maintained until the year 2000. In scenario one, the effects of complete subsidy removal are assessed while in scenario two the subsidies are assumed to be phased out gradually. The results of the study indicate that there will be a greater decline in wheat production if the government eliminates the input subsidies at once than if there is a gradual phasing out of these. The results suggest that there will be a little impact on the consumption of wheat due to the increase in consumer price of wheat. However, the lower-income household with the higher number of family members will be affected more with the increase in the price of staple wheat. Imports of wheat are greater if the subsidies are eliminated at once, as compared to phasing them out gradually.

How will changes in globalization impact growth in south Asia ?

The current global crisis may change globalization itself, as both developed and developing countries adjust to global imbalances that contributed to the crisis. Will these changes help or hinder economic recovery and growth in South Asia? This is the focus of this paper. The three models of globalization--trade, capital, and economic management--may not be the same in the future. Changes in globalization could change the composition of trade flows, capital flows, and economic management, which in turn, could accelerate or restrain growth. South Asia is somewhat peculiar and different from other regions in how it has globalized, although there is a lot of diversity within the region. Its trade characteristics are different. India's growth has been spearheaded by exports of modern services and less by goods exports. Modern service trade tends to be more resilient compared with goods trade. Globalization of services is still at an early stage. So, as consumers pull back in the United States, service trade is likely to be less impacted compared to goods trade. Trade also contributes to growth through knowledge spillovers, externalities, and learning. The global crisis has not reduced the stock of global knowledge. Changes in capital flows are also not likely to have a big impact on growth in South Asia, as South Asia's investments are largely driven by domestic savings. Its dependence on foreign capital is low. South Asia has attracted capital flows that are less volatile. Remittances, which are more resilient, have been the dominant form of capital inflows, exceeding foreign direct investment and other inflows.This global downturn calls for counter-cyclical economic management. But South Asia has limited room for fiscal stimulus, given high debt-to-gross domestic product ratios. Nevertheless, reduced commodity prices have created some fiscal space that can be used for growth enabling infrastructure and safety nets. As South Asia undergoes structural transformation, the region is well positioned to bounce back with global economic recovery.Macroeconomic Management,Capital Flows,Globalization and Financial Integration,Economic Growth,Trade and Services

Conflict and Development—Lessons from South Asia

South Asia is the second most violent place on earth after Iraq. Conflicts in Afghanistan and Pakistan have attracted global attention. Parts of India, Sri Lanka, and Nepal have experienced long-running conflict. Conflicts result in death, misery, social trauma, destruction of infrastructure, and have huge spillover effects. What is conflict? Where is it concentrated? Is conflict a problem for development, or a failure of development? What should policy makers do?Conflict, development, South Asia, violence, Afghanistan, Pakistan, India, Sri Lanka, Nepal, reconstruction, war

Is Ethiopia's debt sustainable?

The debt burden facing a number of low-income countries has received considerable international attention. The international development community has begun to recognize that options aimed at providing debt relief to countries where debt is not sustainable needs to be seriously explored. In this paper, the authors build on the Branson model of debt sustainability and apply it to a severly indebted, low-income country, Ethiopia. They provide a simplified framework where debt sustainability (both domestic and external) is an integral element of macroeconomic stability. Interactions between different policy variables (such as debt, fiscal, and interest rate policies), outcome variables (such as GDP and export growth), and international economic conditions (international interest rates) jointly define whether a country is on a sustainable debt path. Equations on debt sustainability can be estimated under this framework, thus providing a good starting point for examining debt sustainability. There are three lessons from the empirical analysis of Ethiopia: 1) a strong reform program is critical in bringing the country back on a sustainable debt path; 2) the issue of debt relief requires serious consideration by the international development community; and 3) growth and resource mobilization need adequate emphasis to ensure that debt is repaid.Payment Systems&Infrastructure,Economic Theory&Research,Banks&Banking Reform,Environmental Economics&Policies,Strategic Debt Management,Banks&Banking Reform,Environmental Economics&Policies,Strategic Debt Management,Public Sector Economics&Finance,Economic Theory&Research

Trade reform, efficiency, and growth

The main objective of trade reform is to make markets more competitive and, by introducing competition among previously protected domestic firms, to change the behavior and performance of firms. Efficiency gains are achieved through increased productivity - more efficient use of resources - and a shift in resources from inefficient toefficient sectors. As a result of increased efficiency, output grows. But the transition from a restrictive to an open trade regime can impose short-term adjustment costs for industries newly exposed to external competition. This can be compounded by efforts to restore macroeconomic stabilization, such as reductions in fiscal deficits that could hurt the country's infrastructure. The authors examine the impact of trade reform on productivity and GDP growth, export growth, the diversification of exports, and the trade balance. They also examine whether trade reform affects different reforming countries differently - whether its outcome is related to such factors as the functioning of markets or the level of diversification in production at the time reform is begun. Their findings confirm the link between trade reform and efficiency gains. Reduced average tariffs and quantitative restrictions on imports are associtaed with increased output growth for a given level of investment and capacity use. But the extent to which trade reform helps a country reflects the initial conditions prevailing in the country. Ghana, Indonesia, and Turkey began their trade reform programs under different conditions. Indonesia and Turkey had a more diversified production structure and a better functioning market than Ghana. All three countries carried out intensive trade reform, but Indonesia and Turkey benefited more than Ghana did. In short, countries with well-functioning markets and a better human resource base benefit more from productivity gains resulting from trade reform than countries with less well-functioning markets do.Environmental Economics&Policies,Economic Theory&Research,Trade Policy,Labor Policies,Payment Systems&Infrastructure,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Environmental Economics&Policies,Trade Policy,Trade and Regional Integration,Economic Theory&Research

The Wheat Pricing Policies in Pakistan: Some Alternative Options

The purpose of this paper is to evaluate the impact on wheat production, consumption, and trade of changing the input subsidy and output price subsidy policies. A model of the wheat market in Pakistan is developed to examine the likely effects of alternative wheat pricing policies in Pakistan. A recursive econometric simulation model was used to project production, consumption, and trade under the baseline and two other scenarios. The baseline scenario is designed to predict the evolution of production, consumption, and trade if agricultural policies are maintained until the year 2000. In scenario one, the effects of complete subsidy removal are assessed while in scenario two the subsidies are assumed to be phased out gradually. The results of the study indicate that there will be a greater decline in wheat production if the government eliminates the input subsidies at once than if there is a gradual phasing out of these. The results suggest that there will be a little impact on the consumption of wheat due to the increase in consumer price of wheat. However, the lower-income household with the higher number of family members will be affected more with the increase in the price of staple wheat. Imports of wheat are greater if the subsidies are eliminated at once, as compared to phasing them out gradually

Tony Weis. The Global Food Economy: The Battle for the Future of Farming. London and New York: Zed Books/Halifax and Winnipeg: Fernwood Publishers, 2007. 217 pages. Paperback. Price not given.

Tony Weis’s book provides a systematic analysis of the dynamics, problems, and inequities of the global food economy. Starting with the current situation regarding hunger and poverty, the author states that despite the fact that food production is more than needed to provide every person on earth with a nutrition diet, hunger still persists. The percentage of world population with food shortages has declined but absolute numbers have grown. Similar is the case with poverty. According to the World Bank estimates, 2.8 billion people are living on less than US$2 a day and 1.2 billion are living in extreme poverty (less than US$1). And a special feature of the hunger and poverty is that these problems are acute in developing countries, especially South Asian and sub- Saharan African countries