Carneiro, Francisco G.

Person:
Carneiro, Francisco G.

Caribbean Country Management Unit, World Bank, Latin America & Caribbean

Fields of Specialization

Macroeconomics

Departments

Caribbean Country Management Unit, World Bank
Latin America & Caribbean

Last updated: January 31, 2023

Biography

Francisco Carneiro is the Lead Economist and Program Leader for the Caribbean at the World Bank. Since joining the World Bank in 2003, he has worked in multiple regions of the world. Before 2003, Mr. Carneiro was professor of Economics at the University of Brasilia and at the Catholic University of Brasilia, and served as Economic Adviser in the Ministry of External Relations in Brazil. He has authored and co-authored a number of academic papers and World Bank reports on a range of topics that include macroeconomics and growth, natural resource revenue management, trade, labor market institutions, poverty, and inequality. Born in Brazil, he received his PhD in Economics from the University of Kent in the United Kingdom in 1996.

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Publication Search Results

Now showing 1 - 10 of 18

When Growth Is Not Enough: Explaining the Rigidity of Poverty in the Dominican Republic
(Washington, D.C.: World Bank, 2017-05-23) Carneiro, Francisco Galrao; Sirtaine, Sophie; Galrao Carneiro, Francisco; Sirtaine, Sophie; Aristy-Escuder, Jaime; Hakobyan, Shushanik; Lederman, Daniel; Baez, Javier E.; García-Suaza, Andrés; Sousa, Liliana D.; Sanchez, Diana; Kone, Zovanga L.; Ozden, Caglar
The Dominican Republic stands out as a fast growing economy that has not been able to generate a commensurate reduction in poverty. Three reasons have been raised before to explain this conundrum: (i) a labor market that does not translate productivity gains into salary increases; (ii) a domestic economy with weak inter-sectoral linkages; (iii) and a public sector that does not spend enough nor particularly well to reduce poverty. In addition, the country remains largely exposed to natural disasters and exogenous shocks that, if not mitigated properly, may affect the sustainability of growth in the medium and longer terms. This book assembles a collection of empirical analyses that explore three complementary hypotheses that could help understand why the Dominican Republic continues, to this date, experiencing high economic growth rates with limited poverty reduction. The first hypothesis is concerned with testing whether the observed pattern of fast economic growth cum persistent poverty in the DR is partly driven by a poverty methodology that does not account for price variation that affects distinctly the consumption patterns of low-income and better-off households. If that hypothesis holds, the DR may face a situation in which household income for households at the bottom of the distribution is underestimated. The second hypothesis tests whether the pattern of specialization in the DR might be such that it does not favor unskilled labor. If that hypothesis holds, then returns to capital are probably much higher than returns to labor which would be an indication that the DR has had a comparative advantage in products that are capital intensive instead of labor-intensive. The third hypothesis investigates whether poverty and wage inequality in the DR are affected not only by immigration but also by emigration. The contribution of the volume, therefore, lies in precisely offering a more careful exploration of specific issues around common explanations for the shortcomings of the DR in reducing poverty on a faster basis.
Inflation Targeting and Exchange Rate Volatility in Emerging Markets
(World Bank, Washington, DC, 2016-06) Cabral, Rene; Carneiro, Francisco G.; Varella Mollick, Andre
The paper investigates the relevance of the exchange rate on the reaction function of the central banks of 24 emerging market economies for the period 2000Q1 to 2015Q2. This is done by first employing fixed-effects ordinary least squares and then system generalized method of the moments techniques. Under fixed effects, the exchange rate is found to be an important determinant in the reaction function of emerging market economies. Allowing for the endogeneity of inflation, output gap, and exchange rate, the exchange rate remains a positive and significant determinant, but less quantitatively relevant across inflation-targeting countries. When the sample is partitioned into targeting and nontargeting countries, the exchange rate remains relevant in the reaction function of the latter group. The results remain robust to splitting the sample at the time of the financial crisis of 2007–09 and suggest that, after the crisis, the central banks of emerging market economies responded only to inflation movements in the interest rate reaction function.
Taming Volatility: Fiscal Policy and Financial Development for Growth in the Eastern Caribbean
(World Bank, Washington, DC, 2016-06) Odawara, Rei; Carneiro, Francisco Galrao
The report is structured in four chapters that outline the main sources of volatility in the region and suggest ways to mitigate the impacts of that volatility on growth. Chapter one presents stylized facts associated with the growth performance of the Eastern Caribbean over the last 40 years. It contrasts the growth performance of the OECS with the rest of the Latin America region and shows that the two groups of countries have shown significant heterogeneity over the business cycle. The chapter also highlights some of the factors that might be responsible for the volatility of growth in the OECS, including the region’s exposure to natural disasters, high debt, and adverse developments in the financial sector. Chapter two provides new evidence on output volatility and the cyclicality of fiscal policy in the OECS and discusses why countries are better off avoiding a pro-cyclical fiscal policy stance. Chapter three assesses the level of financial development in the region as well as the relationship between financial development, growth, and volatility. The chapter also explores critical policy options to strengthen financial development in the OECS. Chapter four assesses empirically the combined effects of terms of trade volatility, fiscal policy (pro) cyclicality, and financial development on growth in the OECS and other countries using two complementary modeling approaches. First, through an econometric model using panel data for 175 countries over the period 1980-2010. Second, by using impulse-response analysis based on a structural model of the business cycle in the OECS region.
Revisiting the Evidence on the Cyclicality of Fiscal Policy across the World
(World Bank, Washington, DC, 2016-10) Garrido, Leonardo; Carneiro, Francisco G.
A large and growing literature has argued that industrialized and developing countries behave very differently in relation to their fiscal policy stances over the business cycle. In this paper, the authors provide new evidence on the cyclicality of fiscal policy across industrialized and developing countries. The authors sample includes 180 countries, of which 134 are developing countries and 46 are high income countries over the period 1980-2012. The authors follow the methodology of Frankel et al. (2013) but at the same time introduce three innovations to the empirical approach. This paper is organized as follows : After Introduction, Section two discusses issues associated with the choice of filter to smooth the proxy variable for fiscal cyclicality while Section three estimates our own Graduating Class under different filtering methods and a country-specific approach to split the sample into two sub-periods. Section four presents an analysis of how the countries in our sample behave over the business cycle. Section five discusses our findings on the empirical determinants of fiscal cyclicality while Section six explores endogeneity issues. Section 7 presents concluding remarks confirming earlier findings in the literature on the causal link between institutional quality and a less pro-cyclical fiscal stance and suggesting policy directions that could be useful to countries interested in strengthening their fiscal positions and becoming better equipped to adopt counter-cyclical fiscal policies
The Effects of Volatility, Fiscal Policy Cyclicality and Financial Development on Growth: Evidence for the Eastern Caribbean
(World Bank, Washington, DC, 2015-12) Brüeckner, Markus; Carneiro, Francisco
This paper presents estimates of the effects that terms of trade volatility has on growth of real gross domestic product per capita. Based on five-year non-overlapping panel data comprising 175 countries during 1980–2010, the paper finds that: (i) in model specifications that do not include country fixed effects, terms of trade volatility has a significant negative average effect on economic growth; (ii) once country fixed effects are included in the model, the average effect of terms of trade volatility on economic growth is not significantly different from zero; (iii) robust to the inclusion of country fixed effects, terms of trade volatility has significantly adverse effects on economic growth in countries with pro-cyclical fiscal policy; and (iv) in model specifications that do not include country fixed effects, financial development is a significant mediating factor with regard to the effect that terms of trade volatility has on economic growth, however, the significance of this effect vanishes once country fixed effects are included in the model. The paper also explores these relationships for the Organization of Eastern Caribbean States region. A key conclusion from the research is that countercyclical fiscal policy and deeper financial markets will have particularly high payoffs in reducing the adverse growth effects of terms of trade volatility in the Organization of Eastern Caribbean States region.
Belize, Right Choices Bright Future: Systematic Country Diagnostic
(World Bank, Washington, DC, 2016-01) Carneiro, Francisco
This systematic country diagnostic (SCD) discusses on Belize’s ability to promote faster poverty reduction and greater shared prosperity which will depend on how well the country deals with its main sources of vulnerability. The main areas in need of a big push that could have the highest potential impact on the twin goals are : (i) improving education and skills; (ii) addressing crime and violence; and, (iii) increasing resilience to climate change and natural disasters. Strengthening resilience to natural disasters and climate change along with improvements in the existing infrastructure in Belize are critical to support the twin goals to end extreme poverty, and promote shared prosperity in poorer segments of society. Sustainable progress towards the achievement of the twin goals of reducing poverty and boosting shared prosperity in Belize will also require prioritizing fiscal sustainability. This SCD is structured in six chapters that range from a brief description of the main features of Belize to the discussion of priorities for growth and shared prosperity. Chapter 1 presents the country context, highlighting Belize’s main features as a small upper middle income country that faces high volatility associated with its size and vulnerability to exogenous shocks. Chapter 2 discusses trends in poverty and shared prosperity. Chapters 2 through 5 discuss the main underlying factors that have been found to influence Belize’s growth performance as well as its economic, social and environmental sustainability. Each of these chapters discuss in greater detail the nature of the challenges, dig deeper into exploring the likely causes of these challenges, and identify policy areas that could be critical for boosting growth and inclusion and ensuring sustainability. These chapters also identify knowledge and data gaps on areas where new information could help strengthen a diagnosis and inform specific actions in the priority areas. The sixth and final chapter has three important and distinctive features. First, it provides a synthesis of the analysis and findings of the previous chapters. Second, it provides a discussion of the approach used to identify the priorities for action in Belize. And, third, it concludes with a discussion of the priorities to boost shared prosperity and ensure economic, social and environmental sustainability in Belize.
Business Cycles in the Eastern Caribbean Economies: The Role of Fiscal Policy and Interest Rates
(World Bank, Washington, DC, 2016-01) Hnatkovska, Viktoria; Carneiro, Francisco
This paper analyzes the business cycle characteristics of the economies of the Organization of Eastern Caribbean States using a model of a small open economy subject to interest rate and fiscal expenditure shocks and financial frictions. The paper shows that macroeconomic aggregates in this region are quite volatile, with consumption exhibiting higher volatility than gross domestic product. The analysis also finds that in these economies real interest rates are highly volatile and strongly countercyclical with gross domestic product and other macroeconomic aggregates. Similarly, fiscal expenditures show significant volatility, but are pro-cyclical with gross domestic product. The results suggest two major directions for designing policies to help reduce the volatility experienced by the Organization of Eastern Caribbean States economies. First, Organization of Eastern Caribbean States countries should seek a greater openness to international financial markets, which could help them smooth out the effects of fundamental shocks, such as shocks to technology and terms of trade, and shocks associated with natural hazards. However, this removal of international financial barriers needs to be accompanied by improvements in domestic financial conditions, as this would reduce the vulnerability of these economies to country risk premium shocks. Second, the Organization of Eastern Caribbean States region should try harder to move toward a countercyclical fiscal policy stance, as this could help to stabilize the domestic risk premium and cushion the negative effects of interest rate shocks on economic activity, hence reducing volatility.
New Evidence on the Cyclicality of Fiscal Policy
(World Bank, Washington, DC, 2015-06) Garrido, Leonardo; Carneiro, Francisco G.
This paper presents new evidence on the patterns of cyclicality in the fiscal policy stance of developing and industrialized countries over a period of more than three decades covering 180 countries during 1980–2012. First, the paper considers issues of robustness in the choice of the proxy for fiscal cyclicality by using alternative filtering methods to check whether this influences the results and leads to any differences in a country’s reported within-period average, and across-period changes in fiscal stance. Second, a country-specific approach is used to split the sample into sub-periods based on a test for structural break in the series of real gross domestic product per capita. Third, the paper investigates the extent to which countries behave pro-cyclically or counter-cyclically in different phases of the business cycle. In line with earlier findings in the literature, the analysis confirms that there is a causal link running from stronger institutions to less pro-cyclical fiscal policy, even after controlling for the endogeneity of institutions and other determinants of fiscal policy.
Resilient Growth, Persisting Inequality : Identifying Potential Factors Limiting Shared Prosperity in the Dominican Republic
(World Bank Group, Washington, DC, 2015-01) Iwulska, Aleksandra; Galrão Carneiro, Francisco; Reyes, José-Daniel; Sánchez-Martín, Miguel Eduardo
The Dominican Republic (DR) has recorded exceptional growth over the past twenty years and has closed the gap with the Latin America and Caribbean (LAC) region. While in the early 1990s the DRs per capita income was only about 57 percent that in LAC, it has climbed to around 90 percent nowadays. However, the countrys ability to reduce poverty and improving equity has been less stellar. This note presents some stylized facts of the DR economy that might help understand this phenomenon. In doing so, the note addresses the following three questions: (i) Has growth been inclusive in the DR?; (ii) Why has the DR economy grown so rapidly?; and (iii) Why has growth not led to further improvements in equity? This note tentatively argues that some potential factors explaining the latter are the decline in real wages despite increasing productivity, special economic zones that are relatively isolated from the rest of the economy, and the States limited capacity for fiscal redistribution.
Tajikistan : Reinvigorating Growth in Khatlon Oblast
(World Bank, Washington, DC, 2014-06) Bakanova, Marina; Carneiro, Francisco
This report supports a joint World Bank-IFC initiative to review and evaluate economic growth prospects for Khatlon oblast in order to develop a private sector-driven strategy for accelerating the region's growth over the medium term.