Journal Issue: World Bank Economic Review, Volume 16, Issue 2
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Volume
16
Number
2
Issue Date
Journal Title
Journal ISSN
1564-698X
Journal
World Bank Economic Review
1564-698X
Journal Volume
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Articles
Impact Evaluation of Social Funds : An Introduction
(Washington, DC: World Bank, 2002-05) Schady, Norbert R.; Rawlings, Laura B.
Despite the importance of knowing
whether development programs achieve their objectives,
impact evaluations remain rare in developing economies. This
is unfortunate. With the growing use of results-based
management by governments, determining whether goals have
been attained and convincingly linking changes to specific
programs has become increasingly critical. Tracking such
outcomes as gains in school enrollment or reductions in
infant mortality is indispensable. But simply gathering good
data on outcomes sheds little light on why objectives have
or have not been met. For this reason, impact evaluations
should be a key instrument in policymakers' monitoring
and evaluation toolbox.
The Impact and Targeting of Social Infrastructure Investments : Lessons from the Nicaraguan Social
(Washington, DC: World Bank, 2002-05) Pradhan, Menno; Rawlings, Laura B.
The benefit incidence and impact of
projects financed by the Nicaraguan Emergency Social
Investment Fund are investigated using a sample of
beneficiaries, a national household survey, and two distinct
comparison groups. The first group is constructed on the
basis of geographic proximity between similar facilities and
their corresponding communities; the second is drawn from
the national living standards measurement study survey
sample using propensity score matching techniques. The
analysis finds that the social fund investments in latrines,
schools, and health posts are targeted to poor communities
and households, whereas those in sewerage are targeted to
the better-off. Investments in water systems are
poverty-neutral. Education investments have a positive,
significant impact on school outcomes regardless of the
comparison group used. The results of health investments are
less clear. Using one comparison group, the analysis finds
that use of health clinics increased as a result of the
investments; using both, it finds higher use of clinics for
children under age six with diarrhea. With neither
comparison group does it find improvements in health
outcomes. Social fund investments in water and sanitation
improve access to services but have no effect on health outcomes.
Emerging Markets Instability : Do Sovereign Ratings Affect Country Risk and Stock Returns?
(World Bank, 2002-05-30) Kaminsky, Graciela; Schmukler, Sergio L.
Financial market instability has been the focus of attention of both
academic and policy circles. Rating agencies have been under particular
scrutiny lately as promoters of financial excesses, upgrading countries in
good times and downgrading them in bad times. Using a panel of
emerging economies, this paper examines whether sovereign ratings affect
financial markets. We find that changes in sovereign ratings have an
impact on country risk and stock returns. We also find that these changes
are transmitted across countries, with neighbor-country effects being more
significant. Rating upgrades (downgrades) tend to occur following market
rallies (downturns). Countries with more vulnerable economies, as
measured by low ratings, are more sensitive to changes in U.S. interest
rates.
Financial Crises, Credit Ratings, and Bank Failures : An Introduction
(Washington, DC: World Bank, 2002-05) Reinhart, Carmen M.
Financial crises of every variety rocked
emerging markets in the second half of the 1990s. Nearly
every region experienced currency crashes, banking crises
were both numerous and severe, and a few countries, facing
extreme duress, defaulted on their sovereign debt. Not
surprisingly, then, there is considerable interest in policy
and academic circles and within the investment community in
gaining a better understanding of financial and economic distress.
Default, Currency Crises, and Sovereign Credit Ratings
(Washington, DC: World Bank, 2002-05) Reinhart, Carmen M.
Sovereign credit ratings play an
important part in determining countries' access to
international capital markets and the terms of that access.
In principle, there is no reason to expect that sovereign
credit ratings should systematically predict currency
crises. In practice, in emerging market economies there is a
strong link between currency crises and default. Hence if
credit ratings are forward-looking and currency crises in
emerging market economies are linked to defaults, it follows
that downgrades in credit ratings should systematically
precede currency crises. This article presents results
suggesting that sovereign credit ratings systematically fail
to predict currency crises but do considerably better in
predicting defaults. Downgrades in credit ratings usually
follow currency crises, possibly suggesting that currency
instability increases the risk of default.
On the Use of Portfolio Risk Models and Capital Requirements in Emerging Markets : The Case of Argentina
(Washington, DC: World Bank, 2002-05) Balzarotti, Veronica; Falkenheim, Michael; Powell, Andrew
A portfolio based model (Credit Risk of
Credit Suisse First Boston) and recent Central Bank of
Argentina credit bureau data are used to estimate whether
current capital and provisioning regulations match actual
risks. Arguing that provisions should cover expected losses
and that capital requirements should cover potential losses
beyond expected losses subject to some statistical level of
tolerance, the article assesses how well actual capital and
provisioning requirements match the estimated requirements
given by the model. Actual provisioning requirements were
found to be close to implied levels of expected losses. The
estimate of potential losses was found to be highly
sensitive to the assumptions of the model, especially the
parameter relating the volatility of a loan's rate of
default to its mean value. This volatility parameter cannot
be estimated accurately with the credit bureau data because
of the short time span covered, so proxy data were used to
estimate it, and two values around that estimate were tried.
The difficulty of estimating this critical parameter implies
that the results should only be regarded as suggestive.
Moreover, the methodology only does not seek to estimate
credit risk and not interest rate risk or exchange rate
risk, nor does it fully take into account the indirect
effects of interest rates and exchange rates on credit risk.
As recent events in Argentina have demonstrated, estimating
credit risk along these lines should be thought of as just
one tool in attempting to assess the appropriate level of
bank provisions and capital.
The Allocation and Impact of Social Funds : Spending on School Infrastructure in Peru
(Washington, DC: World Bank, 2002-05) Paxson, Christina; Schady, Norbert R.
Between 1992 and 1998 the Peruvian
Social Fund (foncodes) spent about US dollar 570 million
funding micro projects throughout the country. Many of these
projects involved constructing and renovating school
facilities. This article uses data from foncodes, the 1993
population census in Peru, and a 1996 household survey
conducted by the Peruvian Statistical Institute to analyze
the targeting and impact of foncodes investments in
education. A number of descriptive and econometric
techniques are employed, including nonparametric
regressions, differences in differences, and instrumental
variables estimators. Results show that foncodes investments
in school infrastructure have reached poor districts and
poor households within those districts. The investments also
appear to have had positive effects on school attendance
rates for young children.
Supporting Communities in Transition : The Impact of the Armenian Social Investment Fund
(Washington, DC: World Bank, 2002-05) Chase, Robert S.
The Armenian Social Investment Fund
supports communities' efforts to improve local
infrastructure during Armenia's economic transition
away from central planning, financing community-designed and
-implemented projects to rehabilitate primary schools, water
systems, and other infrastructure. This article considers
the targeting, household impact, and community effects of
the social fund's activities. It relies on a nationally
representative household survey, oversampled in areas where
the social fund was active. Using propensity and pipeline
matching techniques to control for community self-selection
into the social fund, it evaluates the household effects of
rehabilitating schools and water systems. The results show
that the social fund reached poor households, particularly
in rural areas. Education projects increased
households' spending on education significantly and had
mild effects on school attendance. Potable water projects
increased household access to water and had mild positive
effects on health. Communities that completed a social fund
project were less likely than the comparison group to
complete other local infrastructure projects, suggesting
that social capital was expended in these early projects. By
contrast, communities that joined the social fund later and
had not yet completed their projects took more initiatives
not supported by the social fund.