Person:
Servén, Luis

Macroeconomics and Growth Unit, Development Research Group

Fields of Specialization

Financial and private sector development, Debt, Shocks and Vulnerabilities, Macroeconomics

Departments

Macroeconomics and Growth Unit, Development Research Group

Last updated January 31, 2023

Biography

LUIS SERVEN is Senior Advisor in the World Bank’s Research Department, where he manages the research program on Macroeconomics and Growth. He previously managed the Bank’s regional research program on Latin America and the Caribbean. Prior to joining the Bank he worked as a senior researcher at FEDEA, an economics think tank where he was part of the founding team, and taught at the Universidad Complutense of Madrid, MIT, PUC-Rio and CEMFI. His current research focuses on capital flows and exchange rates, fiscal policy, and productivity and growth. He has published numerous books and articles in professional journals on these and other research topics. He holds a Bachelor in Economics from the Universidad Complutense de Madrid and a Ph.D. in Economics from the Massachusetts Institute of Technology. Currently he is co-editor of The World Bank Economic Review and The World Bank Research Observer.

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Publication Search Results

Now showing 1 - 10 of 67

Partial Consumption Insurance and Financial Openness Across the World

(World Bank, Washington, DC, 2013-06) Hevia, Constantino ; Servén, Luis

This paper examines the extent of international consumption risk sharing for a group of 50 industrial and developing countries. The analysis is based on the empirical implementation of a model of partial consumption insurance whose parameters have the natural interpretation of coefficients of partial risk sharing even when the 0 hypothesis of perfect risk sharing is rejected. Estimation results show that rich countries exhibit higher degrees of risk sharing than developing countries, and that the gap between both country groups appears to have widened over the period of financial globalization. Moreover, the pattern of consumption risk sharing is related to the degree of financial openness: countries with larger stocks of foreign assets or liabilities exhibit larger degrees of risk sharing. Furthermore, countries whose foreign asset stocks are more tilted towards foreign direct investment assets also show higher degrees of consumption risk sharing.
Real Exchange Rate Uncertainty and Private Investment in Developing Countries

(World Bank, Washington, D.C., 2002-04) Servén, Luis

The author examines empirically the link between real exchange rate uncertainty and private investment in developing countries using a large cross country-time series data set. He builds a GARCH-based measure of real exchange rate volatility and finds that it has a strong negative impact on investment, after controlling for other standard investment determinants and taking into account their potential endogeneity. The impact of uncertainty is not uniform, however. There is some evidence of threshold effects, so that uncertainty only matters when it exceeds some critical level. In addition, the negative impact of real exchange rate uncertainty on investment is significantly larger in economies that are highly open and in those with less developed financial systems.
Country Portfolios

(World Bank, Washington, D.C., 2004-04) Kraay, Aart ; Loayza, Norman ; Servén, Luis ; Ventura, Jaume

Capital flows to developing countries are small and take mostly the form of loans rather than direct foreign investment. We build a simple model of North-South capital flows that highlights the interplay between diminishing returns, production risk and sovereign risk. This model generates a set of country portfolios and a world distribution of capital stocks that resemble those in the data.
Greenfield Foreign Direct Investment and Mergers and Acquisitions : Feedback and Macroeconomic Effects

(World Bank, Washington, DC, 2004-01) Calderón, César ; Loayza, Norman ; Servén, Luis

Foreign direct investment (FDI) flows to developing countries surged in the 1990s to become their leading source of external financing. This rise in FDI volume was accompanied by a marked change in its composition: investment taking the form of acquisition of existing assets (mergers and acquisitions) grew much more rapidly than investment in new assets ("greenfield" FDI), particularly in countries undertaking extensive privatization of public enterprises. This raises two issues. First, is the mergers and acquisitions boom a one-time effect of privatization, or is it likely to be followed by a rise in greenfield investment? Second, do these two types of FDI have different macroeconomic causes and consequences in relation to aggregate investment and growth? The authors focus on establishing the stylized facts in terms of time precedence between both types of FDI, investment, and growth, using annual data for the period 1987-2001 and a large sample of industrial and developing countries. The authors find that in all samples, higher mergers and acquisitions is typically followed by higher greenfield investment, while the reverse is true only for developing countries. In industrial and developing countries alike, both types of FDI lead domestic investment, but not the reverse. Finally, neither type of FDI appears to precede economic growth in developing or industrial countries, but FDI does respond positively to increases in the growth rate.
Tango with the Gringo: the Hard Peg and Real Misalignment in Argentina

(World Bank, Washington, D.C., 2004-06) Alberola, Enrique ; López, Humberto ; Servén, Luis

Between 1990 and 2001 the Argentine peso appreciated by 80 percent in real terms, and its overvaluation has been singled out as one of the main suspects in the debate on the causes of the Argentina collapse of late 2001. This paper assesses the degree of real misalignment in Argentina over the Convertibility period using a model in which the equilibrium real exchange rate is defined as the value consistent with (i) a balance of payments position where any current account imbalance is financed by a sustainable flow of international capital (external equilibrium), and (ii) traded/nontraded sector productivity differentials (internal equilibrium). Empirical implementation of the model suggests that the initial real appreciation of the peso, between 1990 and 1993, was consistent with the productivity increases that Argentina enjoyed following the stabilization of the economy after the hyperinflation of the late 1980s. But after 1996 a widening gap opened between the observed real exchange rate and that consistent with a sustainable net foreign asset position. Our estimates indicate that in 2001 the peso was overvalued by over 50 percent. The model allows us to assess how much of the overvaluation resulted from Argentina's inadequate choice of anchor currency and how much from a divergence of fundamentals between the U.S. and Argentina, ultimately due to the maintenance of policies inconsistent with the peg. We find that both factors played a role in the overvaluation accumulated between 1977 and 2001 that preceded the collapse of the Convertibility regime.
Trends in Infrastructure in Latin America, 1980-2001

(World Bank, Washington, D.C., 2004-09) Calderón, César ; Servén, Luis

There is widespread concern across Latin America that the provision of infrastructure services has suffered as a consequence of the retrenchment of the public sector and the insufficient response of the private sector to the opening up of infrastructure industries to private participation in most countries. The authors document the recent trends in infrastructure stocks and infrastructure investment in major Latin American economies. Using an updated dataset constructed for this task, the authors describe the evolution of the quantity and quality of infrastructure assets-power, transport, and telecommunications-as well as the investment expenditures of the public and private sectors. They find that Latin America lags behind the international norm in terms of infrastructure quantity and quality, and there is little evidence that the gap may be closing-except in the telecommunications sector. Furthermore, overall infrastructure investment has fallen, as a combined result of the retrenchment of public investment and the limited response of the private sector, which has been mostly confined to the telecommunications industry. However, there is considerable disparity across countries. On the whole the data show that the countries most successful in attracting large volumes of private investment (Bolivia, Chile, and Colombia) are precisely those where public investment has remained high.
The Effects of Infrastructure Development on Growth and Income Distribution

(World Bank, Washington, D.C., 2004-09) Calderón, César ; Servén, Luis

The authors provide an empirical evaluation of the impact of infrastructure development on economic growth and income distribution using a large panel data set encompassing over 100 countries and spanning the years 1960-2000. The empirical strategy involves the estimation of simple equations for GDP growth and conventional inequality measures, augmented to include, among the regressors, infrastructure quantity and quality indicators, in addition to standard controls. To account for the potential endogeneity of infrastructure (as well as that of other regressors), the authors use a variety of generalized-method-of-moments (GMM) estimators based on both internal and external instruments and report results using both disaggregated and synthetic measures of infrastructure quantity and quality. The two robust results are: (1) growth is positively affected by the stock of infrastructure assets, and (2) income inequality declines with higher infrastructure quantity and quality. A variety of specification tests suggests that these results do capture the causal impact of the exogenous component of infrastructure quantity and quality on growth and inequality. These two results combined suggest that infrastructure development can be highly effective to combat poverty. Furthermore, illustrative simulations for Latin American countries suggest that these impacts are economically quite significant, and highlight the growth acceleration and inequality reduction that would result from increased availability, and quality of infrastructure.
Pricing Currency Risk: Facts and Puzzles from Currency Boards

(World Bank, Washington, D.C., 2002-03) Schmukler, Sergio L. ; Servén, Luis

The authors investigate the patterns and determinants of the currency risk premium in two currency boards-Argentina and Hong Kong. Despite the presumed rigidity of currency boards, currency premium is almost always positive and at times very large. Its term structure is usually upward sloping, but flattens out or even becomes inverted at times of turbulence. Currency premia differ across markets. The forward discount typically exceeds the currency premium derived from interbank rates, particularly during times of crisis. The large magnitude of these cross-market differences can be the consequence of unexploited arbitrage opportunities, market segmentation, or other risks embedded in typical measures of currency risk. The premium and its term structure depend on domestic and global factors related to devaluation expectations and risk perceptions.
Macroeconomic Stability in Developing Countries:How Much is Enough?

(World Bank, Washington, D.C., 2004-11) Montiel, Peter ; Servén, Luis

In the 1990s macroeconomic policies improved in a majority of developing countries, but the growth dividend from such improvement fell short of expectations, and a policy agenda focused on stability turned out to be associated with a multiplicity of financial crises. The authors take a retrospective look at the content and implementation of the macroeconomic reform agenda of the 1990s. They review the progress achieved with fiscal, monetary, and exchange rate policies across the developing world, and the effectiveness of the changing policy framework in promoting stability and growth. The main lesson is that slow growth and frequent crises resulted, more often than not, from shortcomings in the reform agenda of the 1990s. These shortcomings essentially concern the depth and breadth of the macroeconomic reform agenda, its attention to macroeconomic vulnerabilities, and the complementary reforms outside the macroeconomic sphere.
Tracking NAFTA's Shadow 10 Years On : Introduction to the Symposium

(Published by Oxford University Press on behalf of the World Bank, 2005-12-27) Lederman, Daniel ; Serven, Luis

The North American Free Trade Agreement (NAFTA) is arguably the first case study of what may be expected from the increasing number of preferential trade agreements involving both developed and developing economies. Ten years after the treaty's inception, it is time to assess how its outcomes compare with initial expectations. The articles in this symposium issue provide insights into the effects of NAFTA on economic geography, trade, wages and migration, and foreign investment from Mexico's perspective. The contributions paint a complex post-NAFTA reality characterized by persistent intra-bloc trade barriers, interregional inequality within Mexico, labor market outcomes that seem closely tied to migration patterns and international trade and investment, and foreign investment flows that appear weakly related to trade agreements.