Working Papers 2013 Abstract

 

The spillover effects of unconventional monetary policies in major developed countries on developing countries

  • Reference number: ST/ESA/2013/DWP/131
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The objective of this paper is to examine the impact of unconventional monetary policy measures adopted in developed countries (the US, UK, Euro Area and Japan) on developing economies (Brazil, China, India and Russia). First, we analyse the domestic and cross-border financial market impact of unconventional monetary policy announcements by central banks, using a series of event studies. We find that quantitative easing (QE) by the FED, BoE, ECB and BoJ influenced long term yields, equity prices, and possibly exchange rates both in the developed and developing countries (for example we find that QE resulted in decreases in long term yields by about 125 basis points in the US, about 100 basis points in the UK, and about 50 basis points in the Euro Area and Japan). Next, using the National Institute’s global macroeconomic model NIGEM, we conduct a series of macroeconomic simulations that allow us to assess the impact of lower yields, higher equity prices, and lower investment premia (attributable to unconventional monetary policy measures) on the real economy in the developed and developing countries (for example, we find that lower yields only, could have stimulated GDP (average change in levels, over a 5 year period) by about 1¾ per cent in the US, 1½ per cent in the UK, ¾ per cent in the Euro Area and Japan, about 1 per cent in Brazil and Russia (in Brazil more than Russia), and ¾ per cent in India and China (in India more than China)).

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The new aid paradigm: A case of policy incoherence

  • Reference number: ST/ESA/2013/DWP/128
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From around 2000 onward, donors and recipient governments embarked upon a new aid paradigm.
The most important elements include increased selectivity in the aid allocation, more ownership of recipient countries based on nationally elaborated PRSPs, and more donor alignment and harmonization
via program-based approaches such as budget support. The paper assesses the theoretical merits of this new paradigm, identifying some contradictions and limitations, and then examines its implementation over the past decade and its results. The empirical results largely confirm the earlier identified weaknesses and limitations. The paper concludes with some suggestions for improving aid practices.

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Half a Century of Proposals for ‘Innovative’ Development Financing

  • Reference number: ST/ESA/2013/DWP/125
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This paper recalls the history of proposed “innovative” mechanisms by which governments could strengthen financial cooperation for development. Such proposals sought more predictable and assured financial flows to facilitate recipient country programming, while also substantially adding to the volume of highly concessional international support for development. International discussions of these proposals mostly began in the 1960s and in many cases continue today, although implementation thus far has been modest. These discussions are contrasted with generally more recent proposals that proponents call “innovative” but that do not share the characteristics of the more radical thinking underlining the older proposals.

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The distributional effects of fiscal austerity

  • Reference number: ST/ESA/2013/DWP/129
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This paper examines the distributional effects of fiscal austerity. Using episodes of fiscal consolidation measures for a sample of 17 OECD countries over the period 1978-2009, we find that fiscal consolidation episodes have typically led to a significant and long-lasting increase in inequality. Tax-based consolidation episodes tend to have a larger and more persistent effect on inequality than spendingbased consolidations. The evidence also shows that while fiscal consolidations have typically led to a fall in wage income, they have not had a significant effect on profit and rent income.

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