Person:
Kraay, Aart

Development Research Group, The World Bank

Fields of Specialization

Macroeconomics, Debt management, Economic growth, Inequality and shared prosperity

Departments

Development Research Group, The World Bank

Last updated: November 7, 2024

Biography

Aart Kraay is Director of Research in the Development Research Group at the World Bank. He joined the World Bank in 1995 after earning a Ph.D. in economics from Harvard University (1995), and a B.Sc. in economics from the University of Toronto (1990). His research interests include international capital movements, growth and inequality, governance, and the Chinese economy. His research on these topics has been published in scholarly journals such as the Quarterly Journal of Economics, the Review of Economics and Statistics, the Economic Journal, the Journal of Monetary Economics, the Journal of International Economics, and the Journal of the European Economic Association. He is an associate editor of the Journal of Development Economics, and co-editor of the World Bank Economic Review. He has also held visiting positions at the International Monetary Fund and the Sloan School of Management at MIT, and has taught at the School of Advanced International Studies at Johns Hopkins University.

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Publication Search Results

Now showing 1 - 10 of 21

Fiscal Policy as a Tool for Stabilization in Developing Countries
(World Bank, Washington, DC, 2013-02) Kraay, Aart; Serven, Luis
The financial crisis of 2007/2008, the subsequent great recession in rich countries and its propagation to developing countries has sparked a renewed interest in the role of fiscal policy as a potential countercyclical tool among policymakers and researchers. This paper reviews the state of empirical evidence on the effectiveness of discretionary countercyclical fiscal policy by placing a particular emphasis on developing countries. On the whole, successful fiscal interventions of this type have been rare in the developing world. This note also briefly reviews contrasting experiences of success and failure in industrial and developing countries. It concludes with several recommendations motivated by past experiences policymakers should consider before adopting any fiscal responses to the current crisis.
Growth without Governance
(World Bank, Washington, DC, 2002-11) Kaufmann, Daniel; Kraay, Aart
It is well known that there is a strong positive correlation between per capita incomes and the quality of governance across countries. the authors propose an empirical strategy that allows separation of this correlation into (1) a strong positive causal effect running from better governance to higher per capita incomes, and, perhaps surprisingly at first, (2) a weak and even negative causal effect running in the opposite direction from per capita incomes to governance. The first result confirms existing evidence on the importance of good governance for economic development. The second result is new and suggests the absence of a "virtuous circle" in which higher incomes lead to further improvements in governance. This motivates the authors' choice of title, "Growth Without Governance." They document this evidence using a newly updated set of worldwide governance-indicators covering 175 countries for the period 2000-01, and use the results to interpret the relationship between incomes and governance focusing on the Latin America and Caribbean region-within a worldwide empirical context. Finally, the authors speculate about the potential importance of elite influence and state capture in accounting for the surprising negative effects of per capita incomes on governance, present some evidence on such capture in some Latin American countries, and suggest priorities for actions to improve governance when such pernicious elite influence shapes public policy.
Governance Indicators : Where Are We, Where Should We Be Going?
(World Bank, Washington, DC, 2007-10) Kaufmann, Daniel; Kraay, Aart
Scholars, policymakers, aid donors, and aid recipients acknowledge the importance of good governance for development. This understanding has spurred an intense interest in more refined, nuanced, and policy-relevant indicators of governance. In this paper we review progress to date in the area of measuring governance, using a simple framework of analysis focusing on two key questions: (i) what do we measure? and, (ii) whose views do we rely on? For the former question, we distinguish between indicators measuring formal laws or rules 'on the books', and indicators that measure the practical application or outcomes of these rules 'on the ground', calling attention to the strengths and weaknesses of both types of indicators as well as the complementarities between them. For the latter question, we distinguish between experts and survey respondents on whose views governance assessments are based, again highlighting their advantages, disadvantages, and complementarities. We also review the merits of aggregate as opposed to individual governance indicators. We conclude with some simple principles to guide the refinement of existing governance indicators and the development of future indicators. We emphasize the need to: transparently disclose and account for the margins of error in all indicators; draw from a diversity of indicators and exploit complementarities among them; submit all indicators to rigorous public and academic scrutiny; and, in light of the lessons of over a decade of existing indicators, to be realistic in the expectations of future indicators.
When Is External Debt Sustainable?
(Oxford University Press on behalf of the World Bank, 2006-09-01) Nehru, Vikram; Kraay, Aart
The article empirically examines the determinants of debt distress, defined as periods in which countries resort to any of three forms of exceptional finance: significant arrears on external debt, Paris Club rescheduling, and non-concessional International Monetary Fund lending. Probit regressions show that three factors explain a substantial fraction of the cross-country and time-series variation in the incidence of debt distress: the debt burden, the quality of policies and institutions, and shocks. The relative importance of these factors varies with the level of development. These results are robust to a variety of alternative specifications, and the core specifications have substantial out-of-sample predictive power. The quantitative implications of these results are examined for the lending strategies of official creditors.
Governance Matters VII : Aggregate and Individual Governance Indicators 1996-2007
(World Bank, Washington, DC, 2008-06) Kaufmann, Daniel; Kraay, Aart; Mastruzzi, Massimo
This paper reports on the latest update of the Worldwide Governance Indicators (WGI) research project, covering 212 countries and territories and measuring six dimensions of governance between 1996 and 2007: Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption. The latest aggregate indicators are based on hundreds of specific and disaggregated individual variables measuring various dimensions of governance, taken from 35 data sources provided by 32 different organizations. The data reflect the views on governance of public sector, private sector and NGO experts, as well as thousands of citizen and firm survey respondents worldwide. The authors also explicitly report the margins of error accompanying each country estimate. These reflect the inherent difficulties in measuring governance using any kind of data. The authors also briefly describe the evolution of the WGI since its inception, and show that the margins of error on the aggregate governance indicators have declined over the years, even though they still remain non-trivial. The authors find that even after taking margins of error into account, the WGI permit meaningful cross-country comparisons as well as monitoring progress over time. In less than a decade, a substantial number of countries exhibit statistically significant improvements in at least one dimension of governance, while other countries exhibit deterioration in some dimensions. These aggregate indicators, spanning more than a decade, together with the disaggregated individual indicators, are available at www.govindicators.org.
Good Countries or Good Projects?: Comparing Macro and Micro Correlates of World Bank and Asian Development Bank Project Performance
(World Bank, Washington, DC, 2015-04) Bulman, David; Kolkma, Walter; Kraay, Aart
This paper examines the micro and macro correlates of aid project outcomes in a sample of 3,821 World Bank projects and 1,342 Asian Development Bank projects. Project outcomes vary much more within countries than between countries: country-level characteristics explain only 10–25 percent of project outcomes. Among macro variables, country growth and the policy environment are significantly positively correlated with project outcomes. Among micro variables, shorter project duration and the presence of additional financing are significantly correlated with better project outcomes. In addition, the track record of the project manager in delivering successful projects is highly significantly correlated with project outcomes. There are few significant differences between the two institutions in the relationship between these variables and project outcomes.
Governance Matters III : Governance Indicators for 1996, 1998, 2000, and 2002
(Washington, DC: World Bank, 2004-05) Kaufmann, Daniel; Kraay, Aart; Mastruzzi, Massimo
This article presents estimates of six dimensions of governance for 199 countries and territories for 1996, 1998, 2000, and 2002 developed in the context of an ongoing project to measure governance across countries. Section one describes the data used in developing this round of the governance indicators, which include several new sources. Data sources used in the earlier studies were updated forward to 2002 and backward to 1996, and previously estimated indicators for 1998 and 2000were revised to reflect the new data. The aggregation procedure, described in section two, provides not only estimates of governance for each country but also measures of the precision or reliability of these estimates. Although the new data have improved the precision of the governance indicators, the margins of error remain large relative to the units in which governance is measured, so that comparisons across countries and especially over time should be made with caution.
Sovereign Defaults and Expropriations : Empirical Regularities
(World Bank, Washington, DC, 2012-10) Qian, Rong; Eden, Maya; Kraay, Aart
This paper uses a large cross-country dataset to empirically examine factors associated with sovereign defaults on external private creditors and expropriation of foreign direct investments in developing countries since the 1970s. In the long run, sovereign defaults and expropriations are likely to occur in the same countries. In the short run, however, these events are uncorrelated. Defaults are more likely to occur following periods of rapid debt accumulation, when growth is low, and in countries with weak policy performance, and defaults are not strongly persistent over time. In contrast, expropriations are not systematically related to the level of foreign direct investment, to growth, or to policy performance. Expropriations are however less likely under right-wing governments, and are strongly persistent over time. There is also little evidence that a history of recent defaults is associated with expropriations, and vice versa. The paper discusses the implications of these findings for models that emphasize retaliation as means for sustaining sovereign borrowing and foreign investment in equilibrium, as well as the implications for political risk insurance against the two types of events.
When Is External Debt Sustainable?
(World Bank, Washington, D.C., 2004-02) Nehru, Vikram; Kraay, Aart
This paper examines the determinants of "debt distress," which they define as periods in which countries resort to exceptional finance in any of three forms: (1) significant arrears on external debt, (2) Paris Club rescheduling, and (3) nonconcessional International Monetary Fund lending. Using probit regressions, the authors find that three factors explain a substantial fraction of the cross-country and time-series variation in the incidence of debt distress: the debt burden, the quality of policies and institutions, and shocks. They show that these results are robust to a variety of alternative specifications, and that their core specifications have substantial out-of-sample predictive power. The authors also explore the quantitative implications of these results for the lending strategies of official creditors.
Does IDA Engage in Defensive Lending?
(World Bank, Washington, DC, 2007-08) Geginat, Carolin; Kraay, Aart
Multilateral development banks are frequently accused of "defensive lending," the practice of extending new loans purely in order to ensure that existing loans are repaid. This paper empirically examine this hypothesis using data on lending by and repayments to the International Development Association (IDA), which is the largest provider of concessional development loans to low-income countries. The authors argue that key institutional features of IDA both (i) potentially create incentives for defensive lending, and (ii) enable particularly sharp tests of the defensive lending hypothesis. The authors find that there is a surprisingly robust partial correlation between disbursements on new IDA loans and repayments on existing loans. However, a closer look at the evidence suggests that defensive lending is unlikely to be a major explanation for this partial correlation.