03. Journals
2,911 items available
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These are journal articles published in World Bank journals as well as externally by World Bank authors.
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Publication
Locally financed and outside financed regional fiscal multipliers
(Elsevier, 2022-04)The size of regional fiscal multipliers determines the efficacy of fiscal stimulus, the costs of fiscal austerity and whether countercyclical fiscal policy is more effective at the federal or local level. This paper studies fiscal multipliers in regions of a monetary union—US states, Eurozone members, or countries with a hard exchange-rate peg—and how multipliers are affected by the way spending is financed: local deficit financing, local tax financing or outside financing (federal or foreign aid). I present analytical and quantitative government purchase and transfer multipliers using a New Keynesian model consistent with estimated transfer multipliers in Pennings (2021), focusing on the persistence of the fiscal shock. I find that at business-cycle frequencies, financing has little effect on impact multipliers: outside-financed multipliers are only about 0.07–0.16 larger than local deficit-financed multipliers. This suggests efforts to enable local countercyclical fiscal policy may be a partial substitute for greater fiscal centralization or foreign financing. -
Publication
Transfers, Diversification and Household Risk Strategies: Can productive safety nets help households manage climatic variability?
(Oxford University Press, 2022-03-30)Despite increasing climatic variability and frequent weather shocks in many developing countries, there is little evidence on effective policies that help poor agricultural households manage risk. This paper presents experimental evidence on a program in rural Nicaragua aimed at improving households’ risk-management through income diversification. The intervention targeted agricultural households exposed to weather shocks and combined a one-year conditional cash transfer with vocational training or a productive investment grant. We identify the relative impact of each complementary package based on randomized assignment and analyse how impacts vary by exposure to exogenous drought shocks. The results show that both complementary interventions provide protection against weather shocks two years after the programme ended. Households that received the productive investment grant also had higher average consumption levels. The complementary interventions facilitated income smoothing and diversification of economic activities, as such offering better protection from shocks compared to beneficiaries of the basic conditional cash transfer and control households. Relaxing capital constraints induced investments in non-agricultural businesses, while relaxing skills constraints increased wage work and migration in response to shocks. These results show that combining safety nets with productive interventions relaxing skill or capital constraints can help households become more resilient and manage climatic variability. -
Publication
Incentivizing Quantity and Quality of Care: Evidence from an Impact Evaluation of Performance-Based Financing in the Health Sector in Tajikistan
(University of Chicago Press, 2022-02)To improve utilization and quality of health services, a growing number of low- and middle-income countries have been experimenting with financial incentives tied to providers’ performance. Relying on a difference-in-differences approach, we estimate the impacts of the performance-based financing pilot in Tajikistan. Primary care facilities were given financial incentives conditional on the quality and quantity of selected services. Significant improvements are found on quality indicators, including elements of the content of care. While the communities in the pilot districts reported higher satisfaction with the local primary care facilities, and despite the improvements in quality, the impact on utilization was limited. -
Publication
Borrower Leakage from Costly Screening: Evidence from SME Lending in Peru
(Elsevier, 2021-11)We provide evidence that commercial lenders in Peru suffer leakages in their loan approval process. Leveraging a discontinuity in the loan approval process of a large bank, we find that receiving a loan approval from the bank causes loan applicants to receive offers from other financial institutions as well. Competing lenders captured almost three quarters of the new loans to previously financially excluded borrowers. Importantly, many of these borrowers never took a loan from our partner bank, even after our partner bank approved them. Lenders may therefore underinvest in screening new borrowers and expanding financial inclusion, as their competitors reap some of the benefit. Our results highlight that information spillovers between lenders may operate outside of credit registries. -
Publication
Financial Sector Policy Response to COVID-19 in Emerging Markets and Developing Economies
(Elsevier, 2021-05-21)This paper introduces a new global database and a policy classification framework that records the financial sector policy response to the COVID-19 pandemic across 155 jurisdictions and over time. It documents that authorities around the world have taken a diverse array of measures to mitigate financial distress in the markets and for borrowers, and to support the provision of critical financial services to the real economy. Using Cox proportional hazards and Poisson regressions, the paper takes initial steps to analyze the determinants of policy makers’ responsiveness and activity in emerging markets and developing economies, respectively. The results indicate that policy makers in richer and more populous countries have been significantly more responsive and have taken more policy measures. Belonging to a monetary union is also significantly associated with a faster and more frequent intervention. Countries with higher private debt levels tend to respond earlier with banking sector and liquidity and funding measures. The spread of COVID-19, macro-financial fundamentals, pressure on foreign exchange markets, political settings, and fiscal and containment policies appear to play a limited role in determining policy response. In a substantially smaller sample, the paper explores the role of banking sector characteristics and finds that emerging markets and developing economies with higher private bank credit to GDP and that have adopted Basel III reforms have taken fewer policy measures. -
Publication
Bank Capital Regulation and Risk after the Global Financial Crisis
(Elsevier, 2021-05-17)We explore and summarize the evolution in bank capital regulations and bank risk after the global financial crisis. Using a new survey of bank regulation and supervision covering more than 120 economies, we show that regulatory capital increased, but some elements of capital regulations became laxer. Analyzing bank-level data, we also document the importance of defining bank regulatory capital narrowly as the quality of capital matters in reducing bank risk. This is particularly true for banks that have more discretion in the computation of regulatory capital ratios and are subject to weaker market monitoring. -
Publication
Housing Finance and Inclusive Growth in Africa: Benchmarking, Determinants and Effects
(Taylor and Francis, 2021-04)Using a panel database of 48 Sub-Saharan African countries from 2000 to 2012 that we partially constructed, this paper analyses the structure of housing finance in Africa, its determinants, and its impact on inclusive growth. We find that market capitalization and urbanization are key positive determinants of housing finance, while a post-conflict environment is conducive to greater housing finance development. This result suggests that housing finance is driven by standard market forces of demand and supply. Besides, we find that housing finance development in Africa is not yet an effective tool for reducing economic inequality, at its current, very earlier stage. However, we show that above a given threshold, housing finance could be efficient at reducing inequality. Finally, there is a slightly positive relationship between housing finance and greater economic development in Africa. All these findings suggest that policies to boost housing finance development in Africa would be fruitful in the medium to long terms. -
Publication
Productivity Shocks and Repayment Behavior in Rural Credit Markets: A Framed Field Experiment
(Taylor and Francis, 2020-10)Improving rural credit markets requires a good understanding of the root causes of market failures and taking necessary steps to address them. This paper investigates the role of productivity shocks in borrowers repayment choices. Using a framed field experiment that simulated a repeated interaction in an input credit market, the analysis finds strong evidence that adverse productivity shocks lead to higher default, even when they do not induce negative returns. This relationship is robust to the presence of an information exchange system enforcing dynamic incentives. The findings suggest that recurrent shocks such as those resulting from the harmful effects of climate change could exacerbate failures in rural credit markets, undermining hard-won progress toward rural financial inclusion. -
Publication
Informed Trading in Business Groups
(Published by Oxford University Press on behalf of the World Bank, 2020-06)Business groups, which are collections of legally independent companies with a significant amount of common ownership, dominate private sector activity in developing countries. This paper studies information flows within these groups by examining the trading performance of institutional investors in firms that belong to the same group. Using a novel dataset with complete transaction records in Colombia, this paper estimates the difference in returns between trades of asset managers in group-affiliated companies and trades of non-affiliated managers in the same stocks during the same period. The data show that affiliated managers display superior timing ability and that their trades outperform those of non-affiliated managers by 0.85 percent per month. The evidence suggests that institutional investors with group affiliation access information that is only available to members of the group. In order to limit the use of private information, financial authorities might need to expand their disclosure rules to monitor the trades of group-affiliated investors. -
Publication
Putting Global Governance in Its Place
(Published by Oxford University Press on behalf of the World Bank, 2020-02)Greater interdependence is often taken to require more global governance, but the logic requires scrutiny. Cross-border spillovers do not always call for international rules. The canonical cases for global governance are based on two sets of circumstances: global commons and “beggar-thy-neighbor” (BTN) policies. The world economy is not a global commons (outside of climate change), and much of our current discussions deal with policies that are not true BTNs. Some of these are beggar-thyself policies; others may produce domestic benefits, addressing real market distortions or legitimate social objectives. The case for global governance in such policies, I will argue, is very weak, and possibly outweighed by the risk that global oversight or regulation would backfire. While these policy domains are certainly rife with failures, such failures arise not from weaknesses of global governance, but from failures of national governance and cannot be fixed through international agreements or multilateral cooperation. I advocate a mode of global governance that I call “democracy-enhancing global governance,” to be distinguished from “globalization-enhancing global governance.”