The macroeconomic effects of large exchange rate appreciations

In this paper we study the macroeconomic effects of large exchange rate appreciations. Using a sample of 128 countries from 1960-2008, we identify large nominal and real appreciations shocks and study their macroeconomic effects in a dummy-augmented panel autoregressive model. Our results show that an exchange rate appreciation can have strong effects on current account balances. Within three years after the appreciation event, the current account balance on average deteriorates by three percentage points of GDP. This effect occurs through a reduction of savings without a meaningful reduction in investment. Real export growth slows down substantially, while imports remain by and large unaffected. The output costs of appreciation are small and not statistically significant, indicating a shift towards domestic sources of growth. All these effects appear somewhat more pronounced in developing countries. --current account adjustment,global imbalances,exchange rate changes

The macroeconomic effects of large exchange rate appreciations

In this paper we study the macroeconomic effects of large exchange rate appreciations. Using a sample of 128 countries from 1960-2008, we identify large nominal and real appreciations shocks and study their macroeconomic effects in a dummy-augmented panel autoregressive model. Our results show that an exchange rate appreciation can have strong effects on current account balances. Within three years after the appreciation event, the current account balance on average deteriorates by three percentage points of GDP. This effect occurs through a reduction of savings without a meaningful reduction in investment. Real export growth slows down substantially, while imports remain by and large unaffected. The output costs of appreciation are small and not statistically significant, indicating a shift towards domestic sources of growth. All these effects appear somewhat more pronounced in developing countries. --Current account adjustment,global imbalances,exchange rate changes

The macroeconomic effects of large exchange rate appreciations

In this paper we study the macroeconomic effects of large exchange rate appreciations. Using a sample of 128 countries from 1960-2008, we identify large nominal and real appreciations shocks and study their macroeconomic effects in a dummy-augmented panel autoregressive model. Our results show that an exchange rate appreciation can have strong effects on current account balances. Within three years after the appreciation event, the current account balance on average deteriorates by three percentage points of GDP. This effect occurs through a reduction of savings without a meaningful reduction in investment. Real export growth slows down substantially, while imports remain by and large unaffected. The output costs of appreciation are small and not statistically significant, indicating a shift towards domestic sources of growth. All these effects appear somewhat more pronounced in developing countries

Volume 2. In-depth Analysis and Recommendations

Forthcomin

Volume 1. Initial assessment

Forthcomin

Middle Income Trap Challenges – boosting competitiveness to avoid the trap

Forthcomin

Industrial policies in a changing world

Forthcomin

Sovereign Wealth Funds as Investors in Africa: Opportunities and Barriers

This paper studies the opportunities and barriers for Sovereign Wealth Funds’ (SWFs) investments in Africa. Based on historical databases on SWFs’ transactions, it shows that SWFs can facilitate up to 50% of the investment needs in infrastructure in Africa over the next decade to meet the Millennium Development Goals over the 2010-20 decade, and that African economies can benefit highly from the rising investor interest, which stretches increasingly beyond natural resources. However, there are specific barriers to SWF investments. Some of them are structural (lack of technologies; small size, low liquidity and fragmentation of markets; bad sovereign ratings; weak regulatory framework; lack of capacity building), requiring long-term changes, whereas others require shorter term adjustments (more co-ordinated development strategies, more active actions dedicated to SWFs). The international community and major financial institutions may also play an increasingly active role in channelling SWFs into Africa. Dans ce document, l’auteur étudie les opportunités et barrières pour les investissements des fonds souverains en Afrique. A partir de données historiques sur les transactions des fonds souverains, il montre que leurs investissements peuvent faciliter jusqu’à 50% des investissements en infrastructure nécessaires pour atteindre les objectifs du Millénaire pour le développement pendant la décennie 2010-20, et que les économies africaines peuvent grandement bénéficier de l’intérêt croissant des fonds souverains, au delà des ressources naturelles. Cependant, il y a des barrières spécifiques. Certaines d’entre elles sont structurelles (manque de technologies ; petite taille, faible liquidité et fragmentation des marchés ; mauvaises notations de dettes souveraines ; faible cadre de régulation ; manque de capacité institutionnelle), et requièrent des changements de long terme, tandis que d’autres requièrent des changements de plus court terme (comme la définition d’une stratégie de développement mieux coordonnée et des actions spécifiques envers les fonds souverains). La communauté internationale et des institutions financières peuvent également jouer un rôle de plus en plus actif dans l’attraction de fonds souverains en Afrique.sovereign wealth fund, cross-border investment, developing countries, pays en développement, fonds souverain, investissements transfrontaliers

Economic diversification and Dutch disease in Russia

Despite the impressive economic growth in Russia between 1999 and 2007 there is a fear that Russia may suffer the Dutch disease, which predicts that a country with large natural resource rents may experience de-industrialisation and lower long-term economic growth. This article examines whether there are any symptoms of the Dutch disease in Russia. Using a variety of Rosstat publications and the CHELEM database, we analyse the trends in production, wages and employment in Russian manufacturing industries, and we study the behaviour of Russian imports and exports. We find that, while Russia exhibits some symptoms of the Dutch disease, e.g. the real appreciation of the ruble, the rise in real wages, the decrease in employment in manufacturing industries and the development of the services sector, manufacturing production nonetheless increased, contradicting the theory of the Dutch disease. These trends can be explained by the gains in productivity and the recovery after the disorganisation in the 1990s, by new market opportunities for Russian products in the European Union and in CIS countries, by a growing Chinese demand for some products and by a booming internal market. Finally, investment in many manufacturing industries was largely encouraged, whereas investment in the energy sector was strongly regulated, which contributed to economic diversification.

L’emploi dans le secteur des administrations publiques sous l’angle des coûts de production des biens et des services dans le domaine public

Le Comité de la Gouvernance publique travaille, entre autres, au développement de données comparables et d’indicateurs de bonne gouvernance et de l’efficacité des services publics. Dans le cadre général de ce projet, GOV élabore une nouvelle méthodologie de collecte de données comparables sur l’emploi public. La réalisation d’une classification acceptable et cohérente des données a tout d’abord exigé l’établissement d’une terminologie et d’une nouvelle définition de la dénomination « domaine public ». La portée du projet s’est alors étendue jusqu’à comparer les données sur l’emploi public aux coûts de production des services dans le domaine public (Comparison of Employment in the Public Domain : CEPD). La nouvelle classification est désormais en harmonie avec le système de comptabilité nationale (SCN).