LCR Crisis Briefs

10 items available

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https://hdl.handle.net/10986/9419

This series investigates the impact of the financial crisis on the Latin America and the Caribbean Region (LCR).

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Now showing 1 - 5 of 5

Severity of the Crisis and its Transmission Channels
(World Bank, Washington, DC, 2009-12) Calderon, Cesar; Didier, Tatiana
The current global crisis, although initially circumscribed to the US housing market, spread rapidly across markets and borders. It has affected almost all countries through different reinforcing channels: the contraction in international trade, capital flows, remittances, and international commodity prices. The main goal of this note is to empirically analyze the mechanisms through which the financial crisis of 2007-2009 propagated throughout the world by characterizing the main factors behind the fall in Gross Domestic Product (GDP) growth rates. The findings indicate that a greater decline in the growth rate was registered in countries with higher de facto trade openness, less resilient domestic financial markets, and, to a lesser extent, improved macroeconomic frameworks. To complement this evidence, we construct an aggregate index of the severity of the crisis that captures the real and financial consequences in each country of this unprecedented global financial shock.
Social Consequences of the Global Financial Crisis in Latin America : Some Preliminary, and Surprisingly Optimistic, Conjectures
(World Bank, Washington, DC, 2009-11) Schady, Norbert; Ferreira, Francisco H.G.
Surprisingly, the most severe economic crisis the world has seen since the great depression does not appear to have had as dramatic an impact on poverty in Latin America as might have been expected. The exceptions to this heartening assessment are the countries geographically and economically closest to the United States, chiefly Mexico. Elsewhere, although poverty statistics for 2008-09 are not yet available, the data on output, unemployment and real wages suggest relatively modest changes in poverty. There are two candidate explanations for the smaller-than-expected increases in poverty in Latin America: lower output declines, deriving from enhanced protection against external shocks; and a lower output elasticity of poverty. If the latter is indeed observed when the required data becomes available, the report conjecture that it may reflect both the lower inflation rates now prevalent in the region, and recent reforms in the social protection system. For all their faults, the social protection systems in many Latin America and Caribbean (LAC) countries now reach the poor rather than only the middle-classes. The note concludes arguing against complacency, and pointing to areas where further research; and greater policy reform and experimentation are needed.
Crisis in LAC : Infrastructure Investment and the Potential for Employment Generation
(World Bank, Washington, DC, 2009-05) Tuck, Laura; Schwartz, Jordan; Andres, Luis
Infrastructure investment is a central part of the stimulus plans of the Latin America and Caribbean Region (LAC) as it confronts the growing financial crisis. This paper estimates the potential effects on direct, indirect, and induced employment for different types of infrastructure projects with LAC-specific variables. The analysis finds that the direct and indirect short-term employment generation potential of infrastructure capital investment projects may be considerable-averaging around 40,000 annual jobs per US$1billion in LAC, depending upon such variables as the mix of subsectors in the investment program; the technologies deployed; local wages for skilled and unskilled labor; and the degrees of leakages to imported inputs. While these numbers do not account for substitution effect, they are built around an assumed "basket" of investments that crosses infrastructure sectors most of which are not employment-maximizing. Albeit limited in scope, rural road maintenance projects may employ 200,000 to 500,000 annualized direct jobs for every US$1billion spent. The paper also describes the potential risks to effective infrastructure investment in an environment of crisis including sorting and planning contradictions, delayed implementation and impact, affordability, and corruption.
How Much Room Does Latin America and the Caribbean Have for Implementing Counter-Cyclical Fiscal Policies?
(World Bank, Washington, DC, 2009-04) Calderón, Cesar; Fajnzylber, Pablo
Latin America's government debt has exhibited a clear downward trend since 2003. While this has been partly due to rapidly increasing commodity prices, more sustainable fiscal policies have also been a contributing factor. In effect, in a significant break with the past, cyclically adjusted government balances have raised (fallen) in response to increases (reductions) in debt levels. However, Latin governments have continued to under?save in good times and therefore fiscal policy has remained pro-cyclical, thus weakening the ability to protect the poor and maintain infrastructure investments during bad times. Financing and institutional constraints to more counter?cyclical fiscal policies still remain in most countries. They are lowest in Chile, followed by Brazil and Colombia, and highest in Ecuador and Venezuela. Looking forward, long?term sustainability considerations cannot be ignored as decisions are made regarding the size, composition and targeting of fiscal stimulus packages.
How will Labor Markets Adjust to the Crisis? A Dynamic View
(World Bank, Washington, DC, 2009-03) Maloney, William
Tracking flows of workers among different sectors of employment during economic downturns can shed light on the mechanism of labor market adjustment and inform the design of safety net programs. Though patterns may differ across recessions, the author find that the generally countercyclical rise in unemployment and informality is driven primarily by a reduction in hiring in the formal sector, rather than increased labor shedding. Further, changes in the rate of separations from informality are the largest determinant of changes in unemployment. Both suggest that safety nets should focus less on formal job loss per se and more generally on movements in family incomes, perhaps revealed through self targeting mechanisms.