urbanization and poverty reduction the role of rural diversification and secondary towns a rather unique panel tracking more than 3 300 individuals from households in rural kagera tanzania during 1991 4 2010 shows that about one in two individuals households who exited poverty did so by transitioning from agriculture into the rural nonfarm economy or secondary towns only one in seven exited poverty by migrating to a large city although those moving to a city experienced on average faster consumption growth further analysis of a much larger cross country panel of 51 developing countries cannot reject that rural diversification and secondary town development lead to more inclusive growth patterns than metropolitization indications are that this follows because more of the poor find their way to the rural nonfarm economy and secondary towns than to distant cities the development discourse would benefit from shifting beyond the rural urban dichotomy and focusing instead more on how best to urbanize and develop the rural nonfarm economy and secondary towns

vertical linkages and the collapse of global trade a common view is that cross border vertical linkages played a key role in the 2008 2009 collapse of global trade this paper presents two accounting results from a global input output framework that shed light on this channel we feed in observed changes in final demand and find that trade in final goods fell by twice as much as trade in intermediate goods nevertheless intermediate goods account for more than two fifths of the trade collapse we also find that vertical specialization trade fell 13 percent while value added trade fell by 10 percent because declines in demand were largest in highly vertically specialized sectors

is economic growth good for the poor tracking low incomes using general means in this paper we propose the use of an alternative methodology to track low incomes based on atkinson s 1970 family of equally distributed equivalent income functions which are called general means here we provide a new characterization of general means that justifies their use in this context our method of evaluating the effects of growth on poor incomes is based on a comparison of growth rates for two standards of living the ordinary mean and a bottom sensitive general mean the motivating question is to what extent is growth in the ordinary mean accompanied by growth in the general mean a key indicator in this approach is the growth elasticity of the general mean or the percentage change in the general mean over the percentage change in the usual mean our empirical analysis estimates this growth elasticity for a data set containing 144 household surveys from 20 countries over the last quarter century among other results we find that the growth elasticity of bottom sensitive general means is positive but significantly smaller than one this suggests that the incomes of the poor do not grow one for one with increases in average income

ultimate recovery mixtures abstract we propose a relatively simple accurate and flexible approach to forecasting the distribution of defaulted debt recovery outcomes our approach is based on mixtures of gaussian distributions explicitly conditioned on borrower characteristics debt instrument characteristics and credit conditions at the time of default using moody s ultimate recovery database we show that our mixture specification yields more accurate forecasts of ultimate recoveries on portfolios of defaulted loans and bonds on an out of sample basis than popular regression based estimates further the economically interpretable outputs of our model provide a richer characterization of how conditioning variables affect recovery outcomes than competing approaches the latter benefit is of particular importance in understanding shifts in the relative likelihood of extreme recovery outcomes that tend to be realized more frequently than observations near the distributional mean

the financial crisis and the geography of wealth transfers abstract this paper studies the geography of wealth transfers between 2007q4 and 2008q4 at the height of the global financial crisis we construct valuation changes on bilateral external positions in equity direct investment and portfolio debt to measure who benefited and who lost on their external exposure we find a very diverse set of fortunes governed by the structure of countries external portfolios in particular we are able to relate the gains and losses on debt portfolios to the country s exposure to abs abcp conduits and the extent of dollar shortage

inequality and the impact of growth on poverty comparative evidence for sub saharan africa abstract this study explores the extent to which inequality affects the impact of income growth on the rates of poverty changes in sub saharan africa ssa compared to non ssa based on an unbalanced panel of 86 countries over 1977 2004 for all three measures of poverty headcount gap and squared gap the impact of gdp growth on poverty reduction is a decreasing function of initial inequality the impacts are similar in direction for ssa and non ssa so that within both regions there are considerable disparities in the responsiveness of poverty to income growth depending on inequality nevertheless the income growth elasticity is substantially less for ssa implying relatively small poverty reduction response to growth

poverty under the kuznets process the object of this paper is to investigate the behaviour of poverty indices during the course of development since development is a complex process one cannot hope to capture in a single model all its different facets thus for example the famous lewis 1954 model although it highlights the role of surplus labour in fixing the supply price of labour to the industrial sector assumes identical real incomes for workers in the rural and urban sectors so that it is not rich enough to provide a vehicle for analysing inequality or poverty an alternative model which also focuses on the transfer of population from the rural to the urban sector in the course of development but nevertheless permits the analysis of distributional change is that due to kuznets 1955 in the simplest version of the kuznets process the population is seen as composed of two distributions a high mean income but high inequality distribution in the urban sector and a low mean income and low inequality distribution in the rural sector and the process of development is characterised as an increase in the population share of the urban sector it is from the workings of such a process that kuznets 1955 hypothesised his famous inverse u relation between inequality and development which we have analysed elsewhere anand and kanbur 1981a our object here is to extend this analysis to an investigation of poverty under the kuznets process while the kuznets model permits an analysis of distributional change it suffers from the drawback that it does not contain an adequate explanation of how and why the population shift takes place we will take up this point later on in this paper where a model of migration is presented which does indeed rationalise the kuznets process section i sets up the kuznets process formally and analyses the behaviour of two classes of poverty indices section ii traces the poverty implications of the todaro 1969 model of migration and arrives at conclusions somewhat different from those of fields 1979 section iii winds up the paper

chronic poverty in the united states this paper proposes a method of measuring chronic and transitory poverty using an axiomatically sound additively decomposable index of aggregate poverty our approach is contrasted with alternative methods of measuring poverty persistence we use our method to measure chronic and transitory poverty in the united states during the 1980s and late 1970s and find that chronic poverty is a more serious problem than previously thought between the late 1970s and mid 1980s poverty not only increased it became more chronic and less transitory in nature this is true for the population as a whole and for some but not all of the subpopulations we considered the latter were defined according to race type of social unit and educational qualifications of the head of the social unit all empirical analyses are based on data from the panel study of income dynamics

trade finance specialization and synchronization i investigate the determinants of business cycle synchronization across regions the linkages between trade in goods financial openness specialization and business cycle synchronization are evaluated in the context of a system of simultaneous equations the main results are as follows i specialization patterns have a sizable effect on business cycles most of this effect is independent of trade or financial policy but directly reflects differences in gdp per capita ii a variety of measures of financial integration suggest that economic regions with strong financial links are significantly more synchronized even though they also tend to be more specialized iii the estimated role of trade is closer to that implied by existing models once intra industry trade is held constant the results obtain in a variety of data sets measurement strategies and specifications they relate to a recent strand of international business cycle models with incomplete markets and transport costs and on the empir

credit constraints and the international propagation of us financial shocks abstract this paper investigates whether credit constraints in the us economy amplify the international propagation of us financial shocks we model the dynamics of the us economy jointly with global macroeconomic and financial variables using a threshold vector autoregression this model captures regime specific dynamics conditional on the severity of credit constraints in the us economy we identify three main episodes of tight credit in us financial history over the past thirty years these occur in the late 1980s in the early 2000s and during the 2007 09 financial crisis we find that us financial shocks are associated with a significant contraction in global economic activity in times of tight credit by contrast there is little impact of us financial shocks on the global economy in normal times this asymmetry highlights an international dimension of the us financial accelerator mechanism

microfinance and poverty a macro perspective we test the hypothesis that microfinance reduces poverty at the macro level using cross country and panel data which are constructed by the microfinance information exchange data on microfinance institutions mfis and the world bank data taking account of the endogeneity associated with mfis loans we show that a country with higher mfis gross loan portfolio per capita tends to have lower levels of poverty indices contrary to recent micro evidence our results suggest that microfinance significantly reduces poverty at macro level and thus reinforce the case for channeling funds from development finance institutions and governments of developing countries into mfis

how well do static indicators identify the chronically poor abstract we investigate how well the most widely used static welfare indicators perform in identifying the chronically poor we propose a normative measure of performance the cost of a given impact on chronic poverty when transfers are contingent upon a purely static indicator using longitudinal household data from rural india we find that current consumption is not always a better indicator of chronic poverty than current income both however perform much better than other common indicators such as food share and access to land

concentration of income and land holdings abstract economic growth is one of the causes of income disparity among countries however some evidence suggests that the maldistribution of land holdings is the underlying factor of the inequality of income kuznets speculates that over the stages of economic growth it is the initial unequal income distribution that induces a high concentration of asset holdings and this in turn contributes to a high concentration of income to resolve this ambiguity the paper introduces latent variables in a path model designed for causal prediction estimation is done by world s partial least squares method prediction is based on the q 2 statistic findings show that for both dcs and ldcs as well as for a sample of all countries the causal predictive direction between concentrations of income and land holdings is from the former to the latter

why have urban poverty and income inequality increased so much argentina 1991 2001 abstract this article analyzes the trends in income inequality and poverty among argentine households during the nineties we assess the effect of changes in labor force participation unemployment educational levels and returns to individual characteristics on income inequality and poverty by using a microsimulation approach we found that unemployment accounts for a large part of the increase in income inequality and poverty experienced in the past decade changes in labor force participation had an equalizing effect over the whole period while changes in the returns to workers sociodemographic characteristics could be associated with a small increase in income inequality with respect to poverty unemployment affected negatively the proportion of households below the poverty line amplified the poverty gap and increased the severity of poverty in contrast changes in labor force participation are associated with a reduction in the poverty rate

the welfare cost of means testing pensioner participation in income support we estimate parametric and semi parametric binary choice models of benefit take up by british pensioners and use a revealed preference argument to infer the cash equivalent value of disutility arising from stigma or complexity of the claims process these implicit costs turn out to be relatively small averaging about 3 4 per week across income support recipients using the foster greer thorbecke measure of poverty among pensioners we find that allowing for implicit claim costs incurred by benefit recipients raises the measured degree of poverty by not more than 13 copyright 2007 john wiley sons ltd

unravelling financial market linkages during crises an empirical model of multiple asset classes across countries is formulated in a latent factor framework a special feature of the model is that financial market linkages during periods of financial crises including spillover and contagion effects are formally specified the model also captures a range of common factors including global shocks country and market shocks and idiosyncratic shocks the framework is applied to modelling linkages between currency and equity markets during the east asian financial crisis of 1997 98 the results provide strong evidence that cross market links are important spillovers have a relatively larger effect on volatility than contagion but both are statistically significant

forecasting bank loans loss given default abstract with the advent of the new basel capital accord banking organizations are invited to estimate credit risk capital requirements using an internal ratings based approach in order to be compliant with this approach institutions must estimate the loss given default the fraction of the credit exposure that is lost if the borrower defaults this study evaluates the ability of a parametric fractional response regression and a nonparametric regression tree model to forecast bank loan credit losses the out of sample predictive ability of these models is evaluated at several recovery horizons after the default event the out of time predictive ability is also estimated for a recovery horizon of 1 year the performance of the models is benchmarked against recovery estimates given by historical averages the results suggest that regression trees are an interesting alternative to parametric models in modeling and forecasting loss given default

fiscal policy in good and bad times in this paper we analyze whether the effect of fiscal policy differs across the business cycle to tackle this question we use a regime switching error correction framework where nonlinearities are only modeled in the short run and have no impact on the long run equilibrium regime specific shocks to government revenue and government purchases are identified using sign restrictions linear combinations of the impulse responses of these basic shocks are used to construct a deficit spending shock and a deficit financed tax cut shock we find that active spending policies have a stronger impact in recession with multipliers exceeding unity and should be preferred to deficit financed tax cuts

a macroeconomic model with a financial sector this paper studies a macroeconomic model in which financial experts borrow from less productive agents we pursue four sets of results i the economy is prone to instability and occasionally enters volatile episodes as volatility spikes agents precautionary motive increases depressing prices even further log linear approximations fail to capture these non linear effects that can cause economies to be significantly depressed for long periods of time ii endogenous risk during volatile episodes increases asset price correlations iii financial experts impose a negative externality on each other and on the labor sector by not maintaining adequate capital cushion and funding structure iv while risk sharing within the financial sector through securitization and derivatives contracts reduces many inefficiencies it can also amlify systemic risks

the effects of a large discrete maize price increase on the distribution of household welfare and poverty in rural kenya1 this study estimates the effects of a large discrete maize price increase on the welfare of a sample of rural kenyan households the usual first order welfare approximation formula is extended to a second order formula that allows for supply and demand responses to the price change results show that many rural households are not affected greatly by the price change and there are about as many gainers as losers however these full sample results mask important differences across regions welfare gains generally take place in major production areas while losses are in areas where most households are net buyers of maize semiparametric methods are used to investigate the relationship between income and the size of the welfare effect and poverty dominance techniques are applied to study the impacts of the maize price increase on rural poverty

should we track migrant households when collecting household panel data household relocation economic mobility and attrition biases in the rural philippines based on household panel data that tracked migrant households with an additional survey cost of 17 percent this article describes behavior of household relocation and quantifies the extent of attrition biases in estimating the determinants of percapita household consumption and of its growth rate many households relocate for non economic reasons and to rural destinations while the small number of urban migrants improved their wellbeing faster than did others such heterogeneity among migrants may be a reason behind the negligible attrition biases caused by the omission of migrants in the inference on the average behavioral coefficients among the original population

credit and economic activity credit regimes and nonlinear propagation of shocks in this paper we examine empirically whether credit plays a role as a nonlinear propagator of shocks this propagation takes the form of a threshold vector autoregression in which a regime change occurs if credit conditions cross a critical threshold using nonlinear impulseresponse functions we evaluate the dynamics implied by the threshold model these suggest that shocks have a larger effect on output in the tight credit regime than is normally the case and that contractionary monetary shocks typically have a larger effect than expansionary shocks finally using a nonlinear version of historical decompositions we attempt to determine the relative contribution to output growth of shocks and the nonlinear structure

what does a financial shock do first international evidence in this paper we attempt to evaluate the quantitative impact of financial shocks on key indicators of real activity and financial conditions we focus on financial shocks as they have received wide attention in the recent literature and in the policy debate after the global financial crisis we estimate a panel var for 21 advanced economies based on quarterly data between 1985 and 2011 where financial shocks are identified through sign restrictions we find robust evidence that financial shocks can be separately identified from other shock types and that they exert a significant influence on key macroeconomic variables such as gdp and particularly investment but it is unclear whether these shocks are demand or supply shocks from the standpoint of their macroeconomic impact the financial development and structure of a given country is found not to matter much for the intensity of the propagation of financial shocks moreover we generally find that these shocks play a role not only in crisis times but also in normal conditions finally we discuss the implications of our findings for monetary policy fabio fornari and livio stracca

agrarian structures urbanization and inequality summary this study examines the impact of agrarian structures on income inequality over the long run first it exhibits the relationship between land and income distribution by developing a theoretical model based on harris and todaro 1970 and lewis 1954 high land inequality increases income gini coefficients in the urban sector as well as the rural sector not only by creating congestion in the urban subsistence sector but also by feeding the growth of the urban reserve army of labor which pulls down the wages in the urban capitalist sector next the study investigates the empirical relationship between land inequality level of urbanization and income inequality using cross country datasets the estimation results support the theoretical model and indicate that the level of land inequality has a significant impact on determining the level of urbanization and urban and overall income inequalities moreover the analysis finds that overurbanization increases income inequality the empirical analysis controls for institutional factors like education inequality and the level of democracy the results present a stronger evidence on the land inequality s influence through urbanization than through education and democracy these results suggest that policymakers should have a broader view as to the importance of agrarian policies a progressive land reform or and subsidies protecting small peasantry can also reduce urban income inequality and poverty over the long run

modelling the recovery outcomes for defaulted loans a survival analysis approach this study investigates the determinants affecting the recovery outcome for bank loans when firms default we develop survival analysis models explaining the transition hazards of bank loan recoveries varying over time within the conditional probability of firms either fully recovering or not both loan and recovery covariates are critical for recovery outcomes furthermore we identify a hump shaped hazard function peaking at 23 months from default date followed by a drop the log logistic parametric model describes the best fit our results demonstrate the significant covariates affecting loan recovery rates highlighting the importance for banks to structure their loans in the best possible way

liquidity management of u s global banks internal capital markets in the great recession abstract the recent crisis highlighted the importance of globally active banks in linking markets one channel for this linkage is through how these banks manage liquidity across their entire banking organization we document that funds regularly flow between parent banks and their affiliates in diverse foreign markets we show that parent banks when hit by a funding shock reallocate liquidity in the organization according to a locational pecking order affiliate locations that are important for the parent bank revenue streams are relatively protected from liquidity reallocations in the organization while traditional funding locations are more extensively used to buffer shocks to the parent bank balance sheets

optimal non linear income taxation for the alleviation of income poverty there has been much discussion recently of structuring tax and transfer programs to ensure that resources go to the poor with minimal leaks to the nonpoor the poor have no incentive to earn income with 100 percent marginal tax rates but how high or low the marginal rate of taxation should be and how they should vary with income is a complex issue and opinions vary social security schemes that withdraw benefits represent an extremely high effective marginal tax rate other schemes call for relatively low marginal tax rates at the bottom of the income distribution which tax transfer schedule does most to reduce poverty the issue is one of optimal nonlinear income taxation the authors show that one of the key theoretical results of the welfarist literature is overturned if it is desirable for everybody to work the optimal marginal tax rate on the very poorest individuals is strictly negative they argue that the nonwelfarist perspective points toward lower marginal tax rates in the lower part of the income distribution than does the welfarist perspective but numerical simulations suggest that the effect is of limited quantitative significance using conventional functional forms and parameter values optimal marginal tax rates on the poor are in the 60 70 percent range

financial contagion and asset pricing abstract asset market interconnectedness can give rise to significant contagion risks during periods of financial crises that extend beyond the risks associated with changes in volatilities and correlations these channels include the transmission of shocks operating through changes in the higher order comoments of asset returns including changes in coskewness arising from changes in the interaction between volatility and average returns across asset markets these additional contagion channels have nontrivial implications for the pricing of options through changes in the payoff probability structure and more generally in the management of financial risks the effects of incorrectly pricing risk has proved to be significant during many financial crises including the subprime crisis from mid 2007 to mid 2008 the great recession beginning 2008 and the european debt crisis from 2010 using an exchange options model the effects of changes in the comoments of asset returns across asset markets are investigated with special emphasis given to understanding the effects on hedging risk during financial crises the results reveal that by not correctly pricing the risks arising from higher order moments during financial crises there is significant mispricing of options while hedged portfolios during noncrisis periods become exposed to price movements in times of crises

education democracy and growth abstract this note presents a model of endogenous growth where redistribution determined by a political equilibrium is in the form of public education it is shown that there need not be a negative relationship between growth and redistribution as public education increases the level of human capital in the conomy and at the same time tends to produce a more even income distribution

detecting contagion in a multivariate time series system an application to sovereign bond markets in europe this paper proposes an original three part sequential testing procedure stp with which to test for contagion using a multivariate model first conditional on breaks in the conditional mean the procedure identifies distinct structural breaks in the volatility of a given set of countries a further structural break test applied to the correlation matrix identifies and then dates the potential contagion mechanisms as a third element the stp tests for the distinctiveness of the break dates previously found as a result of using multi dimensional data the stp has high testing power and is able to locate the dates of contagion more precisely the application to european long term interest rates shows that immediate contagion from greece does not take place but the dynamic spillovers are shown to increase after controlling for breaks in the different model parameters for other countries we find evidence of both contagion and flight to quality mechanisms

an historical decomposition of the great depression to determine the role of money abstract the innovation accounting technique of historical decomposition seems ideally suited as a vehicle for a re examination of money s role during the depression its application using u s monthly data for 1919 to 1941 reveals that innovations in money exerted a considerable influence on prices and output after october 1929 although the depth of the depression and the extent of the subsequent recovery cannot be attributed solely to monetary factors an important albeit occasionally diminished monetary effect is also identified even when a passive contemporaneous response by money to price and output fluctuations is assumed not to contribute to the effect

how do us credit supply shocks propagate internationally a gvar approach abstract we study how us credit supply shocks are transmitted to other economies we use the recently developed gvar approach to model financial variables jointly with macroeconomic variables in 33 countries for the period 1983 2009 we experiment with inter country links based on bilateral trade portfolio investment foreign direct investment and banking exposures capturing both bilateral trade and financial exposures in a gvar fits the data better than using trade weights only we use sign restrictions on the short run impulse responses in the us model to identify the credit supply shocks we find that negative credit supply shocks have strong negative effects on us and foreign gdp credit and equity markets in several countries respond clearly to the shocks exchange rate responses are consistent with a flight to quality to the us dollar the credit supply shocks explain about a fifth of one year ahead output forecast error variance in the us and about a tenth in the euro area and the uk but considerably less elsewhere

poverty and basic needs fulfilment in africa during structural change evidence from cote d ivoire abstract much attention is given in the literature to the evolution of social indicators during periods of structural adjustment and economic reform this paper argues that these processes are not distribution neutral from the point of view of basic needs fulfilment and that hence the focus should not be on aggregate indicators but on the distribution of beneficiaries of social services and changes in this distribution evidence is presented for cote d ivoire during the second half of the 1980s a period of intense structural change which shows that the poorest absorbed the bulk of the decline in basic needs fulfilment as a result of structural change this was the case for almost all aspects of basic needs and occurred regardless of the overall trend in the social indicators

the determinants of recovery rates in the us corporate bond market we examine recovery rates of defaulted bonds in the us corporate bond market based on a complete set of traded prices and volumes a study of the trading microstructure around various types of default events is provided we document temporary price pressure with high trading volumes on the default day and the following 30 days and low trading activity thereafter based on this analysis we determine market based recovery rates and quantify various liquidity measures we study the relation between the recovery rates and these measures considering additionally a comprehensive set of bond characteristics firm fundamentals and macroeconomic variables

the determinants of bank loan recovery rates in good times and bad new evidence abstract we find that factors explaining bank loan recovery rates differ depending on the state of an underlying credit cycle our modelling approach incorporates a two state markov switching mechanism to capture underlying economic conditions this latent credit cycle variable helps to explain differences in observed recovery rates over time using us bank default loan data from moody s ultimate recovery database and covering the pre and post global financial crisis gfc period the paper develops and implements a dynamic model for bank loan recovery rates we accommodate the distinctive empirical features of the recovery rate data while incorporating a large number of possible determinants we find that certain loan specific and other variables hold different explanatory power with respect to recovery rates in good versus bad times in the credit cycle i e depending on underlying credit market conditions our findings demonstrate the importance of accounting for counter cyclical expected recovery rates when determining capital retention levels

recovery rates uncertainty certainly matters abstract previous studies identify default rate as the main systematic determinant of bond recovery rates we revisit this paradigm by investigating the impact of another factor economic uncertainty based on a wide sample of american default issues and relying on beta regression models well suited for the bounded heteroskedastic and skewed sample of recovery rates we analyze the determinants of recovery rate distributions we find economic uncertainty to be of paramount importance as it proves to be the most important systematic determinant of recovery rate distributions significant for both their mean and dispersion by contrast default rate remains a key determinant of the dispersion of these distributions but not for their means considering this evidence is critical to the sound implementation of stochastic recovery rate models used by financial institutions for the computation of regulatory capital

systematic effects among loss given defaults and their implications on downturn estimation abstract banks are obliged to provide downturn estimates for loss given defaults lgds in the internal ratings based approach while downturn conditions are characterized by systematically higher lgds it is unclear which factors may best capture these conditions as lgds depend on recovery payments which are collected during varying economic conditions in the resolution process it is challenging to identify suitable economic variables using a bayesian finite mixture model we adapt random effects to measure economic conditions and to generate downturn estimates we find that systematic effects vary among regions i e the us and europe and strongly deviate from the economic cycle our approach offers straightforward supportive tools for decision makers risk managers are enabled to select their individual margin of conservatism based on their portfolios while regulators might set a lower bound to guarantee conservatism in comparison to other approaches our proposal appears to be conservative enough during downturn conditions and inhibits over conservatism

is the international propagation of financial shocks non linear evidence from the erm abstract this paper tests for the presence of non linearities in the propagation of devaluation expectations among the countries that were members of the exchange rate mechanism of the ems we show that whenever it is possible to estimate a model for financial interdependence a full information technique to detect such non linearities is more efficient than the limited information estimator proposed in a similar context by rigobon 2000 this happens in particular when the periods of market turbulence are relatively short our evidence suggests that non linearities in the propagation of devaluation expectations were a general phenomenon in the erm normally the non linearity amounts to a stronger effect in the same direction but sometimes as in the dutch case it implies a significant effect in the opposite direction evidence of flight to quality

market power in banking countercyclical margins and the international transmission of business cycles abstract by introducing an imperfectly competitive banking sector into a standard two country two good rbc model with complete asset markets we study the international transmission of aggregate tfp shocks in an environment with noncompetitive financial intermediation in this model price cost margins in a global loan market are endogenous and countercyclical as a result a positive tfp shock in one country spills over to another through a reduction in the global cost of both credit and externally financed investment the quantitative analysis shows that countercyclical margins on loans play a key role in bringing the predictions of the theory closer to the observed cross country cyclical co movements of consumption employment investment and output recessions are deeper when the cost of credit rises during these economic downturns thus a financial accelerator arises in our framework unveiling the increased importance of stabilization policies in economies where margins in credit markets are countercyclical

evaluating international financial integration under leverage constraints abstract the global financial crisis has undermined many economists views about the benefits of open financial markets anecdotal evidence seems to indicate that financial linkages may propagate shocks during crises this paper develops a simple two country model in which financial liberalisation across countries takes place in the presence of credit market distortions within countries countries may be subject to macro risk coming from productivity shocks and direct shocks to the credit system financial shocks three different degrees of financial linkages between countries are examined it is shown that the type of financial integration is critical for both macroeconomic outcomes and welfare in particular financial integration in bond markets alone may increase aggregate consumption volatility and reduce welfare financial integration in both bond and equity markets generates high positive co movement across countries but is welfare improving

structural adjustment macroeconomic adjustment and poverty a methodology for analysis abstract the object of this paper is to set out a methodology for analyzing the impact on the poor in less developed countries ldcs of adjustment to disturbances arising in the international sectors sectors of these economies the methodology is not based on a detailed general equilibrium model of the whole economy but instead focuses on the effects of the adjustment process on the sectoral composition of national output and expenditure the paper provides a framework for the calculation of quantitative estimates of the impact of adjustment on poverty using household income and expenditure surveys currently available in ldcs it is proposes the use of decomposable poverty indices as a tractable vehicle for calculating the impact of adjustment on overall poverty this framework does require however reasonably disaggregated data on income distribution

the impact of coffee certification on small scale producers livelihoods a case study from the jimma zone ethiopia what is the impact of product certification on small scale farmers livelihoods to what extent does the participation of ethiopian small scale coffee farmers in certified local cooperative structures improve their socioeconomic situation to answer these questions this article employs household data of 249 coffee farmers from six different cooperatives collected in the jimma zone of southwestern ethiopia in 2009 findings show that the certification of coffee cooperatives has in total a low impact on small scale coffee producers livelihoods mainly due to 1 low productivity 2 insignificant price premium and 3 poor access to credit and information from the cooperative differences in production and organizational capacities between the local cooperatives are mirrored in the extent of the certification benefits for the smallholders good cooperatives have reaped the benefits of certification whereas bad ones did not fare well in this regard the cooperative effect overlies the certification effect

the changing international transmission of financial shocks evidence from a classical time varying favar we study the changing international transmission of financial shocks over the period 1971 2012 global financial shocks are measured as unexpected changes of a u s financial conditions index fci developed by hatzius et al 2010 we model the fci jointly with a large international data set through a time varying parameter factor augmented var and find that financial shocks have a considerable impact on growth in the nine countries considered moreover financial shocks during the global financial crisis are found to be large by historical standards they explain approximately 20 of gdp growth variation on average over 2008 9 compared to an average of 5 prior to the crisis

why have some indian states done better than others at reducing rural poverty the unevenness of the rise in rural living standards in the various states of india since the 1950s allowed the authors to study the causes of poverty they modeled the evolution of average consumption and various poverty measures using pooled state level data for 1957 91 they found that poverty was reduced by higher agricultural yields above trend growth in nonfarm output and lower inflation rates but these factors only partly explain relative success and failure in reducing poverty initial conditions also mattered states that started the period with better infrastructure and human resources with more intense irrigation greater literacy and lower infant mortality rates had significantly greater long term rates of consumption growth and poverty reduction by and large the same variables that promoted growth in average consumption also helped reduce poverty the effects on poverty measures were partly redistributive in nature after controlling for inflation the authors found that some of the factors that helped reduce absolute poverty also improved distribution and none of the factors that reduced absolute poverty had adverse impacts on distribution in other words there was no sign of tradeoffs between growth and pro poor distribution

poverty transition and persistence in ethiopia 1994 2004 summary this study analyzes the persistence of poverty in both rural and urban areas in ethiopia during 1994 2004 the key finding is that households move frequently in and out of poverty but the difficulty of exiting from poverty like the chance of avoiding slipping back increases with the time spent in that state and varies considerably between male and female headed households our results imply that it is important to design anti poverty policies both to hinder households from slipping into extreme poverty and to minimize the length of the poverty spell for households once they have fallen into it

one kind of freedom poverty dynamics in post apartheid south africa abstract a 1993 south african living standards survey documented the legacy of apartheid in the form high levels of inequality and human insecurity drawing on a 1998 re survey of households in the 1993 study this paper explores whether this legacy has been superseded or whether apartheid s end has been only one kind of freedom that has left households in a poverty trap from which they cannot escape after proposing a theoretically grounded dynamic poverty typology that distinguishes stochastic from structural poverty transitions the paper goes on to estimate that significant numbers of the south african poor are potentially trapped in a structural poverty trap and lack the means to escape poverty over time

poverty reduction during the rural urban transformation the role of the missing middle as countries develop they restructure away from agriculture and urbanize but structural transformation and urbanization patterns differ substantially with some countries fostering migration out of agriculture into rural off farm activities and secondary towns and others undergoing rapid agglomeration in mega cities using cross country panel data for developing countries spanning 1980 2004 the analysis in this paper finds that migration out of agriculture into the missing middle the rural nonfarm economy and secondary towns yields more inclusive growth patterns and faster poverty reduction than agglomeration in mega cities this suggests that patterns of urbanization deserve much more attention when striving for faster poverty reduction

the kuznets process and the inequality development relationship abstract in his classic paper on economic growth and income inequality kuznets discussed the process of population shift from traditional to modern activities as the basis for a theory of distributional change during the course of development in this paper we present a formalization of the kuznets process conduct a general analysis of distributional change under this process and derive the functional forms of and conditions for a turning point in the inequality development relationship for six commonly used indices of inequality the functional form appropriate to each index is then estimated using cross section data on 60 developing and developed countries finally some extensions to the initial formalization of the kuznets process are considered

time variation in macro financial linkages summary we analyze the contribution of credit spread house and stock price shocks to the us economy based on a time varying parameter vector autoregressive model we find that the contribution of financial shocks to gross domestic product growth fluctuates from about 20 in normal times to more than 50 during the great recession the great recession and the subsequent weak recovery can largely be traced back to negative housing shocks housing shocks have become more important for the real economy since the early 2000s and negative housing shocks are more important than positive ones unexpected increases in credit spreads have not been deflationary recently copyright 2016 john wiley sons ltd

the evolving role of agriculture in poverty reduction an empirical perspective abstract the role of agriculture in development remains much debated this paper takes an empirical perspective and focuses on poverty as opposed to growth alone the contribution of a sector to poverty reduction is shown to depend on its own growth performance its indirect impact on growth in other sectors the extent to which poor people participate in the sector and the size of the sector in the overall economy bringing together these different effects using cross country econometric evidence indicates that agriculture is significantly more effective in reducing poverty among the poorest of the poor as reflected in the 1 day squared poverty gap it is also up to 3 2 times better at reducing 1 day headcount poverty in low income and resource rich countries including those in sub saharan africa at least when societies are not fundamentally unequal however when it comes to the better off poor reflected in the 2 day measure non agriculture has the edge these results are driven by the much larger participation of poorer households in growth from agriculture and the lower poverty reducing effect of non agriculture in the presence of extractive industries

the great recession us dynamics and spillovers to the world economy abstract this paper provides an empirical investigation of both the within us and international channels of transmission of macroeconomic and financial shocks by means of a 50 country macroeconometric model estimated over the 1980 2009 period including measures of excess liquidity and financial fragility specifically designed in order to evaluate the relevance of the boom bust credit cycle view put forward as an interpretation of the recent great recession episode we find that such a view is consistent with the empirical evidence moreover concerning the real effects of financial shocks within the us we detect stronger evidence of an asset prices channel rather than a liquidity channel concerning the spillovers to the world economy we find that while financial disturbances are transmitted to foreign countries through us house and stock price dynamics as well as excess liquidity creation the trade channel is the key trasmission mechanism of real shocks

structural break threshold vars for predicting us recessions using the spread this paper proposes a model to predict recessions that accounts for non linearity and a structural break when the spread between long and short term interest rates is the leading indicator estimation and model selection procedures allow us to estimate and identify time varying non linearity in a var the structural break threshold var sbtvar predicts better the timing of recessions than models with constant threshold or with only a break using real time data the sbtvar with spread as leading indicator is able to anticipate correctly the timing of the 2001 recession

the transmission mechanism in a changing world this paper aims at improving the understanding of the transmission of shocks across countries and how this transmission may have changed over time by employing a model that allows for parameter changes across regimes we show that transmission of shocks from the us to european countries may depend on the values of transition variables such as financial prices exchange rates international capital flows trade links and monetary policy instruments we also show that transmission mechanisms estimated with the proposed models have good performance in describing the 2001 downturn in some european countries as an effect of a us shock more generally the models have a good forecasting performance over short horizons

poverty and growth in india over six decades we study the evolution of consumption poverty measures for post independence india including 20 years since extensive economic reforms began in 1991 progress against poverty was negligible until the mid 1970s after which a downward trend in poverty measures emerged the pace of poverty reduction accelerated in the post reform period despite rising inequality amidst faster growth a key finding is that the relationship to the pattern of growth changed greatly suggesting stronger intersectoral linkages with urban consumption growth benefiting both the rural and urban poor in contrast to the pre reform period growth in primary secondary and tertiary sector outputs yielded similar impacts on poverty