The impact of farm credit in Pakistan

Both formal, and informal loans matter in agriculture. But formal lenders provide much more in production lending, than do informal lenders, often at a higher cost than what they can recover. The Agricultural Development Bank of Pakistan (ADBP), for example, providing about 90 percent of formal loans in rural areas, incurs high costs on loan defaults. Like other governments, the Government of Pakistan subsidized the formal scheme on the grounds that lending to agriculture is a high-risk activity, because of covariate risk. Because farm credit schemes are subsidized, policymakers must know if these schemes are worth supporting. Using recent data from a large household survey from rural Pakistan, the authors estimate the cost-effectiveness of the ADBP loans. To estimate credit's impact, they use a two-stage method, which takes into account the endogeneity of borrowing. Clearly, formal lenders are biased toward larger farmers with collateral. Large landowners, who tend to represent only four percent of rural households, get 42 percent of formal loans. Landless, and subsistence farmers, who represent more than 69 percent of rural households, receive only 23 percent of formal loans. ADBP loans improve household welfare but, although large farmers receive most of ADBP finance, the impact of credit is greater for small farmers than for large farmers. Large landowners use formal loans unproductively. Because the ADBP scheme is subsidized, it is not cost-effective for delivering rural credit. It would be more cost-effective is small farmers were better targeted instead.Financial Intermediation,Payment Systems&Infrastructure,Banks&Banking Reform,Economic Theory&Research,Environmental Economics&Policies,Strategic Debt Management,Economic Theory&Research,Banks&Banking Reform,Environmental Economics&Policies,Financial Intermediation

Health Care Services and the Elderly: Utilization and Satisfaction in the Aftermath of the Turkish Health Transformation Program

With the implementation of the health transformation program, Turkey has gone through substantial changes in its health system in the last decade. This study relies on two nationally representative data sets to investigate health service utilization and satisfaction of the elderly. In particular, it examines the share of elderly who have an unmet need for medical care and who could not afford a medical examination or treatment over the years 2006 to 2015, using data from the Turkish Survey of Income and Living Conditions. It also examines the utilization of health services and satisfaction from these services by the elderly in years 2004 to 2015 using data from the Turkish Life Satisfaction Survey. This study finds that utilization has increased and, coinciding with the introduction of the family medicine system, the percentage of patients choosing primary care facilities has increased. The share of the elderly with unmet need and those who could not afford health care have declined. Notwithstanding, overall satisfaction increased only until 2011-2012. Understanding the utilization and satisfaction of the elderly is important, because along with many other countries, the population is aging in Turkey. In the near future, health care needs of the elderly will have a higher priority on the agenda of policy makers

The Persistence of Current Account Balances and its Determinants: The Implications for Global Rebalancing

This paper examines the statistical nature of the persistency of current account balances and its determinants. With the assumption that stationary current account series ensures the long-run budget constraint while countries may experience "local non-stationarity" in current account balances, we examine the dynamics of current account balances across a panel of 70 countries. We find that once we allow current account series to take regime shifts by applying a Markovswitching (MS) process, we are able not only to reject the unit root null hypothesis for a much increased number of countries than with standard linear unit root tests, but also to identify notable cross-country differences in the timing and duration of stationary and locally nonstationary regimes. Armed with the structural break dates the MS-ADF testing provides, we investigate the determinants of the different degrees of current account persistence. We find that emerging market countries with fixed exchange rate regime or countries with greater financial openness are more likely to enter a random walk regime, which is more evident among countries with current account deficits. For countries with all levels of income, trade openness decreases the likelihood of entering the random walk regime, presumably reducing the cost of current account adjustments. Also, countries with budget deficits tend to stay in stationary regimes, so do those with current account deficits, implying that markets force these countries to rebalance their current account imbalances. When we examine the determinants of various degrees of current account persistence, the type of exchange rate regimes no longer affects the extent of current account persistence. However, countries with greater trade or financial openness, or those with mounting pressure from real exchange rate misalignment tend to have a smaller degree of current account persistence while international reserves holding seems to contribute to a larger degree of persistence

The Single Currency's Effects on Eurozone Sectoral Trade: Winners and Losers?

In this paper we study the effect of the single currency across industries for euro area members. This analysis may help to shed light on the main factors influencing the euro effect on trade flows. We intend to verify whether these factors are specific to individual sectors and/or countries or common to the entire euro area. We use a dynamic specification of an augmented gravity equation. Following the most recent econometric literature, we apply a ?System GMM? dynamic panel data estimator (Blundell and Bond, 1998) to avoid inconsistency and biases in the estimates, and introduce controls for heterogeneity. Our preliminary results indicate some heterogeneity at country level. Despite statistically pro-trade effects in the majority of the EMU members, at sectoral level there are some countries in which the impact of the euro has been negative. The pro-trade effects are mainly concentrated in scale intensive industries. Industrial specialization and location of these industries, together with other factors (i.e. differences in factor endowments, product regulations across countries), may have determined ?the winners and the losers? in the monetary integration process. These preliminary findings are in line with those of the few other studies on this issue. In particular, this recent literature seems consistent with Baldwin?s (2006) ?new good? hypothesis. However, in our estimates the magnitude of these effects are lower, probably because of our empirical strategy. Moreover, the sector/country analysis points out that other specific factors have been in place in shaping differently the euro effect on trade