Publication:
Regime-Switching in Exchange Rate Policy and Balance Sheet Effects

Loading...
Thumbnail Image
Files in English
English PDF (525.38 KB)
297 downloads
English Text (95.35 KB)
196 downloads
Date
2005-07
ISSN
Published
2005-07
Abstract
The authors apply regime-switching methods to a monetarist model of exchange rates and identify well-defined intervention policy cycles. The policy response indices include a standard exchange market pressure-based index and a model-based volatility ratio that is endogenized relative to Japan, assumed to be a "benchmark" floater. The authors find strong evidence that balance sheet effects, proxied by the stock ratio of external liabilities to assets, and economic performance, as measured by GDP and stock market indices, determine the cost of the regime shift. They use a panel of quarterly data from 1985 to 2004 for a sample of 15 countries, mostly in East Asia and Latin America.
Link to Data Set
Citation
Fiess, Norbert; Shankar, Rashmi. 2005. Regime-Switching in Exchange Rate Policy and Balance Sheet Effects. Policy Research Working Paper; No. 3653. © World Bank, Washington, DC. http://hdl.handle.net/10986/8191 License: CC BY 3.0 IGO.
Report Series
Report Series
Other publications in this report series
  • Publication
    Should Farm Input Subsidy Programs Target Poor or Non-Poor Farmers? Evidence from Malawi’s Farm Input Subsidy Program
    (Washington, DC: World Bank, 2024-07-25) Darko, Francis Addeah
    This paper addresses the question of whether farm input subsidy programs should be targeted at non-poor farmers instead of poor farmers, using a two-wave, nationally representative panel data from Malawi. The question is addressed by estimating the net gain in maize yield for targeting non-poor farmers instead of poor farmers after accounting for the difference in inorganic fertilizer use efficiency and the difference in crowding-out of commercial fertilizer by subsidized fertilizer between the poor and non-poor farmers. Consumption expenditure is used to classify households into consumption poor and non-poor households, and an asset-based wealth index is used to classify households into asset poor and non-poor households. The difference in inorganic fertilizer use efficiency is estimated with a multilevel model of maize yield, and the difference in crowding out is estimated with a double hurdle model of demand for commercial, inorganic fertilizer. The results indicate that non-poor farmers are significantly more efficient in the use of inorganic fertilizer but have significantly higher levels of crowding out, compared to poor farmers. This suggests that there is a trade-off between targeting non-poor farmers and targeting poor farmers. However, further analysis of the trade-off indicates that targeting non-poor farmers instead of poor farmers, even after accounting for the difference in crowding out, would result in an overall gain in yield of 3.14 to 4.33 kilograms of maize per kilogram of nitrogen distributed by the subsidy program. Therefore, the productivity enhancing objective of Malawi’s farm input subsidy program would be better served by targeting non-poor farmers instead of poor farmers.
  • Publication
    Do Psychosocial Stimulation, Parental Distress and Early Childhood Education Enrollment Show Different Associations with Early Childhood Development Outcomes for Boys and Girls? Findings from a Phone Survey in Pakistan
    (Washington, DC: World Bank, 2024-07-25) Franchett, Emily; Hasan, Amer; Hentschel, Elizabeth; Tahir-Chowdhry, Mahreen; Tomlinson, Heather; Yousafzai, Aisha; Zamand, Mina
    This study examined whether psychosocial stimulation, parental distress, and enrollment in pre- primary education had different associations with early child development outcomes for boys and girls in Pakistan. Using data from a nationally representative phone survey in Pakistan, it assessed these relationships for two cohorts of children—those aged 0–35 months and those aged 36–72 months. The study found that among very young children (0–35 months), lower parental distress and higher psychosocial stimulation were strongly associated with better child development for both boys and girls. Girls were more sensitive to higher levels of parental distress and lower levels of psychosocial stimulation than boys. On average, girls in the sample fared worse compared to boys in their developmental outcomes in the context of low levels of stimulation and high levels of parental distress. Among the older age cohort (36–72 months), lower psychosocial stimulation and higher parental distress were each similarly associated with lower child development outcomes, regardless of child gender. Access to early childhood education was associated with better child development outcomes for both genders. The results confirm existing evidence that early learning opportunities in the first six years of life are important supports for promoting early child development for all children and suggest that girls aged 0–35 months in this sample may be uniquely sensitive to psychosocial stimulation and parental distress.
  • Publication
    Electricity Transition in MFMod
    (Washington, DC: World Bank, 2024-07-25) Jooste, Charl; McIsaac, Florent; Haider, Alexander
    This paper describes power sector modeling methodologies for the World Bank’s macrostructural model — MFMod. Macrostructural models generally do not model sectors, such as the power sector, in detail, limiting their capacity to represent deep system transformation (for example, low-carbon energy transitions). The main constraints to adequate sector modeling are data availability and technological representation of the power system. Time-series data for specific production factors across sectors do not exist consistently for most countries in World Bank models. This paper describes two distinct methods to overcome this constraint: (i) using a more granular representation of the production function and (ii) linking the macrostructural model with the World Bank's electricity planning models. These methods provide a more nuanced technical representation of deep transformations, enabling discussions on their macroeconomic consequences. The paper provides results for Mauritania and South Africa. These methodologies serve as a blueprint for macroeconomic modeling of energy transitions in this class of models.
  • Publication
    Does Climbing the Jobs Ladder Promote Poverty Reduction ?
    (Washington, DC: World Bank, 2024-07-24) Choi, Yunji; Gronert, Mario; Honorati, Maddalena; Merfeld,, Joshua D,; Newhouse, David
    This paper explores trends in and the potential determinants of the types of jobs held by workers, and their relationship with poverty reduction, in an unbalanced panel of 89 countries over the past 30 years. Jobs are classified into five categories according to formality, occupation or level of skills required, and wage work versus self-employment. Net shifts into "upper tier" or skilled informal wage jobs, defined as professionals, managers, technicians, or clerks, from "lower tier" or lower skilled informal jobs were strongly associated with poverty reduction at the $1.90 and $3.20 lines. In contrast, net shifts into formal wage jobs from lower tier informal jobs were associated with modest poverty reductions at the $5.50 poverty line. The share of workers in informal upper tier jobs represents less than 2 percent of the workforce and has increased little over the past 30 years in low- and middle-income countries. The findings show that increases in upper tier informal wage jobs are associated with shifts of the workforce from microenterprises to small firms in lower- and upper-middle-income countries, but they are not discernibly associated with higher educational attainment or urbanization. In contrast, increases in the share of formal wage jobs are strongly associated with increases in the share of workers with post-secondary education, driven by high-income countries. The results suggest that upper tier informal wage jobs and the skills they require play a potentially important role in poverty reduction but are not automatically generated by increased educational attainment, urbanization, or firm size.
  • Publication
    Assessing Power System Disruptions and Associated Economic Impacts from Increasing Extreme Heat Events in Southeast Europe Using an Idealized Design Methodology Design Methodology
    (Washington, DC: World Bank, 2024-07-24) Farnham, David; Eisenberg, Ross; Bonnafous, Luc
    As the world endeavors to decarbonize and shift toward sustainable energy sources, power systems will become increasingly dependent on weather conditions. This dependence creates the challenge of managing fluctuations in both power supply and demand (particularly for cooling), which can jeopardize system reliability, particularly during extreme weather events. To what extent will the increases in peak cooling demands manifest more frequent power system disruptions, posing risks to human health and economic activity This paper focuses on urban centers in Southeast Europe and utilizes state-of-the-art climate simulations to estimate changes in the magnitude of extreme heat events. It also estimates the frequency of potential associated power system disruptions and their ensuing impacts on economic activity by assuming an idealized design methodology. The analysis reveals that between 2021 and 2070, urban centers in Southeast Europe may be at risk of an estimated four to nine power system disruptions per decade due to increasing trends in extreme heat events. These disruptions have the potential to incur annual economic costs of up to tens of millions of dollars in some cities. The projected disruptions highlight the challenges of adapting power systems to climate change, even with idealized regular redesign and maintenance efforts. To mitigate power system fragility during heat waves, the paper recommends implementing measures such as securing reserve power capacity, promoting urban cooling through greening initiatives, adopting demand-side management with smart-grid infrastructure, and increasing the deployment of solar power, which typically has high generation potential during heat waves.
Journal
Journal Volume
Journal Issue
Associated URLs
Associated content
Citations