Person:
Kose, M. Ayhan
Author Name Variants
Fields of Specialization
International macroeconomics,
International finance
Degrees
External Links
Departments
Prospects Group, The World Bank
Externally Hosted Work
Contact Information
Last updated
January 31, 2023
Biography
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
1 - 8 of 8
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Publication
Slowdown in Emerging Markets: Rough Patch or Prolonged Weakness?
(World Bank, Washington, DC, 2015-12)A 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
How Does the Sensitivity of Consumption to Income Vary Over Time?: International Evidence
(World Bank, Washington, DC, 2016-04)This paper studies how the sensitivity of consumption to income has changed over time as the degree of financial integration has risen. In standard theory, greater financial integration facilitates international borrowing and lending, helping to reduce the sensitivity of consumption growth to fluctuations in income. The paper examines the empirical validity of this prediction using an array of indicators of financial integration for a large sample of advanced and developing countries over the period 1960-2011. Two main results are reported. First, the sensitivity of consumption to income has declined over time as the degree of financial integration has risen. The decline has been more pronounced in advanced economies than in developing ones. Second, the regression analysis indicates that a higher degree of financial integration is associated with a lower sensitivity of consumption to income. This finding is robust to the use of a wide range of empirical specifications, country-specific characteristics, and other controls, such as interest rates and outcome-based measures of financial integration. The paper also discusses other potential sources of the temporal changes in the sensitivity of consumption to income. -
Publication
Do Fiscal Multipliers Depend on Fiscal Positions?
(World Bank, Washington, DC, 2016-06)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
Challenges of Fiscal Policy in Emerging and Developing Economies
(World Bank, Washington, DC, 2016-06)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
Challenges of Fiscal Policy in Emerging and Developing Economies
(Taylor and Francis, 2018)This article presents a systematic analysis of the availability and use of fiscal space in emerging and developing economies. We report two major results. First, emerging and developing economies built fiscal space in the run-up to the Great Recession of 2008–2009, which was then used for stimulus. Since then, fiscal space has shrunk and remains narrow as these economies have taken advantage of historically low interest rates. Second, fiscal policy in emerging and developing economies has become countercyclical (or less procyclical), i.e., “graduated,” since the 1980s, as most clearly demonstrated during the Great Recession. The move towards graduation is most pronounced for those economies with greater fiscal space, which suggests that fiscal space matters for a government’s ability to implement countercyclical fiscal policy. -
Publication
Why Do Fiscal Multipliers Depend on Fiscal Positions?
(World Bank, Washington, DC, 2019-03)The fiscal position can affect fiscal multipliers through two channels. Through the Ricardian channel, households reduce consumption in anticipation of future fiscal adjustments when fiscal stimulus is implemented from a weak fiscal position. Through the interest rate channel, fiscal stimulus from a weak fiscal position heightens investors' concerns about sovereign credit risk, raises economy-wide borrowing cost, and reduces private domestic demand. The paper documents empirically the relevance of these two channels using an Interactive Panel Vector Auto Regression model. It finds that fiscal multipliers tend to be smaller when fiscal positions are weak than strong. -
Publication
How Important are Spillovers from Major Emerging Markets?
(World Bank, Washington, DC, 2017-06)The seven largest emerging market economies -- China, India, Brazil, Russia, Mexico, Indonesia, and Turkey -- constituted more than one-quarter of global output and more than half of global output growth during 2010-15. These emerging markets, called EM7, are also closely integrated with other countries, especially with other emerging and frontier markets. Given their size and integration, growth in EM7 could have significant cross-border spillovers. The authors provide empirical estimates of these spillovers using a Bayesian vector autoregression model. They report three main results. First, spillovers from EM7 are sizeable: a 1 percentage point increase in EM7 growth is associated with a 0.9 percentage point increase in growth in other emerging and frontier markets and a 0.6 percentage point increase in world growth at the end of three years. Second, sizeable as they are, spillovers from EM7 are still smaller than those from G7 countries (Group of Seven of advanced economies). Specifically, growth in other emerging and frontier markets, and the global economy would increase by one-half to three times more due to a similarly sized increase in G7 growth. Third, among the EM7, spillovers from China are the largest and permeate globally. -
Publication
The Global Role of the U.S. Economy: Linkages, Policies and Spillovers
(World Bank, Washington, DC, 2017-02)This paper analyzes the role of the United States in the global economy and examines the extent of global spillovers from changes in U.S. growth, monetary and fiscal policies, and uncertainty in its financial markets and economic policies. Developments in the U.S. economy, the world's largest, have effects far beyond its shores. A surge in U.S. growth could provide a significant boost to the global economy. Tightening U.S. financial conditions -- whether due to contractionary U.S. monetary policy or other reasons -- could reverberate across global financial markets, with adverse effects on some emerging market and developing economies that rely heavily on external financing. In addition, lingering uncertainty about the course of U.S. economic policy could have an appreciably negative effect on global growth prospects. While the United States plays a critical role in the world economy, activity in the rest of the world is also important for the United States.