Kose, M. Ayhan
Prospects Group, The World Bank
Author Name Variants
Fields of Specialization
International macroeconomics, International finance
Prospects Group, The World Bank
Externally Hosted Work
Last updated January 31, 2023
M. Ayhan Kose is Director of the World Bank Group’s Prospects Group. He previously worked in the Research and Western Hemisphere Departments of the International Monetary Fund. He is a Nonresident Senior Fellow at the Brookings Institution, a Research Fellow at the Center for Economic Policy Research, a Dean’s Fellow at University of Virginia’s Darden School of Business, and a Research Associate at the Center for Applied Macroeconomic Analysis.
Publication Search Results
Now showing 1 - 10 of 35
Publication(World Bank, Washington, DC, 2021-11) Islamaj, Ergys ; Kose, M. AyhanCross-border capital flows are expected to lead to increased international risk sharing by facilitating borrowing and lending in global financial markets. This paper examines risk-sharing outcomes of various types of capital flows (foreign direct investment, portfolio equity, debt, remittance, and aid flows) in a large sample of emerging market and developing economies. The results suggest that remittances and aid flows are associated with increased international risk sharing. Other types of capital flows are not consistently correlated with better risk-sharing outcomes. These findings are robust to the use of different econometric specifications, country-specific characteristics, and other controls.
Publication(World Bank, Washington, DC, 2021-10) Kose, M. Ayhan ; Ohnsorge, Franziska ; Sugawara, NaotakaThe COVID-19 pandemic has triggered a massive increase in global debt levels and exacerbated the trade-offs between the benefits and costs of accumulating government debt. This paper examines these trade-offs by putting the recent debt boom into a historical context. It reports three major findings. First, during the 2020 global recession, both global government and private debt levels rose to record highs, and at their fastest single-year pace, in five decades. Second, the debt-financed, massive fiscal support programs implemented during the pandemic supported activity and illustrated the benefits of accumulating debt. However, as the recovery gains traction, the balance of benefits and costs of debt accumulation could increasingly tilt toward costs. Third, more than two-thirds of emerging market and developing economies are currently in government debt booms. On average, the current booms have already lasted three years longer, and are accompanied by a considerably larger fiscal deterioration, than earlier booms. About half of the earlier debt booms were associated with financial crises in emerging market and developing economies.
Publication(World Bank, Washington, DC, 2021-07) Ha, Jongrim ; Kose, M. Ayhan ; Ohnsorge, FranziskaThis paper introduces a global database that contains inflation series: (i) for a wide range of inflation measures (headline, food, energy, and core consumer price inflation; producer price inflation; and gross domestic product deflator changes); (ii) at multiple frequencies (monthly, quarterly and annual) for an extended period (1970–2021); and (iii) for a large number (up to 196) of countries. As it doubles the number of observations over the next-largest publicly available sources, the database constitutes a comprehensive, single source for inflation series. The paper illustrates the potential use of the database with three applications. First, it studies the evolution of inflation since 1970 and document the broad-based disinflation around the world over the past half-century, with global consumer price inflation down from a peak of roughly 17 percent in 1974 to 2.5 percent in 2020. Second, it examines the behavior of inflation during global recessions. Global inflation fell sharply (on average by 0.9 percentage points) in the year to the trough of global recessions and continued to decline even as recoveries got underway. In 2020, inflation declined less, and more briefly, than in any of the previous four global recessions over the past 50 years. Third, the paper analyzes the role of common factors in explaining movements in different measures of inflation. While, across all inflation measures, inflation synchronization has risen since the early 2000s, it has been much higher for inflation measures that involve a larger share of tradable goods.
Publication(Washington, DC: World Bank, 2021-03-18) Kose, M. Ayhan ; Ohnsorge, Franziska ; Kose, M. Ayhan ; Ohnsorge, Franziska ; Arteta, Carlos ; Celik, Sinem Kilic ; Ha, Jongrim ; Kasyanenko, Sergiy ; Koh, Wee Chian ; Lakatos, Csilla ; Ruch, Franz Ulrich ; Sugawara, Naotaka ; Taskin, Temel ; Terrones, Marco E. ; Ye, Lei Sandy ; Yu, ShuThis year marks the tenth anniversary of the 2009 global recession. Most emerging market and developing economies weathered the global recession relatively well. However, following a short-lived initial rebound in activity in 2010, the global economy and, especially, emerging market and developing economies, have suffered a decade of weak growth despite unprecedented monetary policy accommodation and several rounds of fiscal stimulus in major economies. A Decade After the Global Recession provides the first comprehensive stock-taking of the decade since the global recession for emerging market and developing economies. It reviews the experience of emerging market and developing economies during and after the recession. Many of these economies have now become more vulnerable to economic shocks. The study discusses lessons from the global recession and policy options for these economies to strengthen growth and be prepared should another global downturn occur.
Publication(World Bank, Washington, DC, 2021-11) Kose, M. Ayhan ; Nagle, Peter ; Ohnsorge, Franziska ; Sugawara, NaotakaThis paper presents a comprehensive analysis of the impact of COVID-19 on debt, puts recent debt developments and prospects in historical context, and analyzes new policy challenges associated with debt resolution. The paper reports three main results. First, even before the pandemic, a rapid buildup of debt in emerging market and developing economies—dubbed the “fourth wave” of debt—had been underway. Because of the sharp increase in debt during the pandemic-induced global recession of 2020, the fourth wave of debt has turned into a tsunami and become even more dangerous. Second, five years after past global recessions, global government debt continued to increase. In light of this historical record, and given large financing gaps and significant investment needs in many countries, debt levels will likely continue to rise in the near future. Third, debt resolution has become more complicated because of a highly fragmented creditor base, a lack of transparency in debt reporting, and a legacy stock of government debt without collective action clauses. National policy makers and the global community need to act rapidly and forcefully ensure that the fourth wave does not end with a string of debt crises in emerging market and developing economies as earlier debt waves did.
Publication(World Bank, Washington, DC, 2016-08) Arteta, Carlos ; Kose, M. Ayhan ; Stocker, Marc ; Taskin, TemelAgainst the background of continued growth disappointments, depressed inflation expectations, and declining real equilibrium interest rates, a number of central banks have implemented negative interest rate policies (NIRP) to provide additional monetary policy stimulus over the past few years. This paper studies the sources and implications of NIRP. It reports four main results. First, monetary transmission channels under NIRP are conceptually analogous to those under conventional monetary policy but NIRP present complications that could limit policy effectiveness. Second, since the introduction of NIRP, many of the key financial variables have evolved broadly as implied by the standard transmission channels. Third, NIRP could pose risks to financial stability, particularly if policy rates are substantially below zero or if NIRP are employed for a protracted period of time. Potential adverse consequences include the erosion of profitability of banks and other financial intermediaries, and excessive risk taking. However, there has so far been no significant evidence that financial stability has been compromised because of NIRP. Fourth, spillover implications of NIRP for emerging market and developing economies are mostly similar to those of other unconventional monetary policy measures. In sum, NIRP have a place in a policy maker’s toolkit but, given their domestic and global implications, these policies need to be handled with care to secure their benefits while mitigating risks.
Publication(World Bank, Washington, DC, 2016-06) Huidrom, Raju ; Kose, M. Ayhan ; Lim, Jamus J. ; Ohnsorge, Franziska L.This paper analyzes the relationship between fiscal multipliers and fiscal positions of governments using an Interactive Panel Vector Auto Regression model and a large data-set of advanced and developing economies. The methodology permits tracing the endogenous relationship between fiscal multipliers and fiscal positions while maintaining enough degrees of freedom to draw sharp inferences. The paper reports three major results. First, the fiscal multipliers depend on fiscal positions: the multipliers tend to be larger when fiscal positions are strong (i.e. when government debt and deficits are low) than weak. For instance, the long-run multiplier can be as large as unity when the fiscal position is strong, while it can be negative when the fiscal position is weak. Second, these effects are separate and distinct from the impact of the business cycle on the fiscal multiplier. Third, the state-dependent effects of the fiscal position on multipliers is attributable to two factors: an interest rate channel through which higher borrowing costs, due to investors' increased perception of credit risks when stimulus is implemented from a weak initial fiscal position, crowd out private investment; and a Ricardian channel through which households reduce consumption in anticipation of future fiscal adjustments.
Publication(World Bank, Washington, DC, 2016-06) Huidrom, Raju ; Kose, M. Ayhan ; Ohnsorge, Franziska L.This paper presents a systematic analysis of the availability and use of fiscal space in emerging and developing economies. These economies built fiscal space in the run-up to the Great Recession of 2008-09, which was then used for stimulus. This reflects a more general trend over the past three decades, where availability of fiscal space has been associated with increasingly countercyclical (or less procyclical) fiscal policy. However, fiscal space has shrunk since the Great Recession and has not returned to pre-crisis levels. Emerging and developing economies face downside risks to growth and prospects of rising financing costs. In the event that these cause a sharp cyclical slowdown, policy makers may need to employ fiscal policy as a possible tool for stimulus. An important prerequisite for fiscal policy to be effective is that these economies have the necessary fiscal space to employ countercyclical policies. Over the medium-term, credible and well-designed institutional arrangements, such as fiscal rules, stabilization funds, and medium-term expenditure frameworks, can help build fiscal space and strengthen policy outcomes.
Publication(World Bank, Washington, DC, 2015-12) Didier, Tatiana ; Kose, M. Ayhan ; Ohnsorge, Franziska ; Ye, Lei SandyA synchronous growth slowdown has been underway in emerging markets (EM) since 2010. Growth in these countries is now markedly slower than, not just the pre‐crisis average, but also the long‐term average. As a group, EM growth eased from 7.6 percent in 2010 to 4.5 percent in 2014, and is projected to slow further to below 4 percent in 2015. This moderation has affected all regions (except South Asia) and is the most severe in Latin America and the Caribbean. The deceleration is highly synchronous across countries, especially among large EM. By 2015, China, Russia, and South Africa had all experienced three consecutive years of slower growth. The EM‐AE growth differential has narrowed to two percentage points in 2015, well below the 2003‐08 average of 4.8 percentage points and near the long‐term average differential of 1990‐2008. The recent slowdown in EM has been a source of a lively debate, as evident from the quotations at the beginning of this note. Some economists paint a bleak picture for the future of EM and argue that the impressive growth performance of EM prior to the crisis was driven by temporary commodity booms and rapid debt accumulation, and will not be sustained. Others emphasize that a wide range of cyclical and structural factors are driving the slowdown: weakening macroeconomic fundamentals after the crisis; prospective tightening in financial conditions; resurfacing of deep‐rooted governance problems in EM; and difficulty adjusting to disruptive technological changes. Still others highlight differences across EM and claim that some of them are in a better position to weather the slowdown and will likely register strong growth in the future. This policy research note seeks to help move the debate forward by examining the main features, drivers, and implications of the recent EM slowdown and provides a comprehensive analysis of available policy options to counteract it.
Publication(World Bank, Washington, DC, 2015-03) Baffes, John ; Kose, M. Ayhan ; Ohnsorge, Franziska ; Stocker, MarcThis note combines and distills existing and new research to inform discussion on the topical policy issue of oil prices. Following four years of relative stability at around $105 per barrel (bbl), oil prices have declined sharply since June 2014 and are expected to remain low for a considerable period of time. The drop in prices likely marks the end of the commodity supercycle that began in the early 2000s. Since the past episodes of such sharp declines coincided with substantial fluctuations in activity and inflation, the causes and consequences of and policy responses to the recent plunge in oil prices have led to intensive debates. This paper addresses four questions at the center of these debates, with particular emphasis on emerging market and developing economies: 1) How does the recent decline in oil prices compare with previous episodes? 2) What are the causes of the sharp drop and what is the outlook for oil price? 3) What are the economic and financial consequences? 4) What are the main policy implications? The decline in oil prices will lead to significant real income shifts from oil exporters to oil importers, likely resulting in a net positive effect for global activity over the medium term. However, several factors could counteract the global growth and inflation implications of the lower oil prices. These include weak global demand and limited scope for additional monetary policy easing in many countries. The disinflationary implications of falling oil prices may be muted by sharp adjustments in currencies and effects of taxes, subsidies, and regulations on prices. Regarding fiscal policy, the loss in oil revenues for exporters will strain public finances, while savings among oil importers could help rebuild fiscal space. Lower oil prices also present a window of opportunity to implement structural reforms. These include, in particular, comprehensive and lasting reforms of fuel subsidies, as well as energy taxes more broadly.