rafmacalaba/datause-encoder-data huggingface dataset:
**37**

# 5.5 **Impact of the GFC, Fiscal Response and Trade War on Global Trade**

<!-- Start of picture text --> Change in World Trade under 3 scenarios<br>4<br>2<br>0<br>2008 2009 2010 2011 2012 2 01 3 2014 2015 2016 2017 2018 2019 2020<br>-2<br>-4<br>-6<br>-8<br>-10<br>-12<br>-14<br>-16<br>-18<br>GFC Fiscal Trade War<br>Data source: G-Cubed model simulations<br>%deviation<br><!-- End of picture text -->

# **_6. Insights gained_**

To represent the effects of the financial crisis on the world economy and trade flows, six elements are needed. For the crisis itself three shocks are needed to capture the observed drop in asset prices and reduction in demand and trade. It is necessary to simulate the bursting of the housing bubble centred in the United States and Europe, but extending elsewhere, rising perceptions of risk by business as reflected in the equity risk premium over bonds and rising perceptions of risk by households.

The policy response has been dramatic. So the analysis has included a monetary easing across the globe and a fiscal stimulus of varying proportions across countries and regions. Also, some trade protectionism has emerged, so far in terms of some tariff increases, some support for industry, such as automobile manufacturers and other effects such as “Buy Local” programs and directives. So a third policy response has been included in the analysis, namely a rise in protectionism. There has also been a rise in financial protectionism, such as directives to banks to lend locally, but absent any estimate of how big this effect is, has not been formally included in this analysis. But financial protection affects capital flows and so would affect trade flows.
Das Gupta, Monica, Helene Grandvoinnet, and Mattia Romani. 2004. State-community synergies in community-driven development. _Journal of Development Studies_ 40 (3): 27–58.

- Das Gupta, Monica, and Peyvand Khaleghian. Overview. In M.Das Gupta and P.Khaleghian, eds., _Public Health Systems and Communicable Disease Control: case studies from Asia, Latin America and Africa._ Forthcoming.

- Di Tella, Rafael, and William Savedoff. 2002. _Diagnosis corruption: fraud in Latin America’s Hospitals_ . Washington, D.C.: Inter-American Development Bank.

- Dillinger W. 1994. _Decentralization and its implications for urban service delivery_ . Washington, D.C.: UNDP/UNCSH/World Bank Urban Management Programme. Cited in POLICY Project. 2001. “Health Reform, Decentralization, and Participation in Latin America: Protecting Sexual and Reproductive Health.” Washington, DC: The Futures Group International, POLICY Project, April 2001

- Filmer, Deon. 2002. “Autonomy, Participation, and Learning in Argentine Schools: Findings and Their Implications for Decentralization. Policy Research Working Paper 2766 (January). Development Research Group, World Bank, Washington, D.C.

- Garfield R. 1999. Malaria control in Nicaragua: social and political influences on disease transmission and control activities. _Lancet_ 354 (July 31, 1999): 414–18 .

- Gauri, Varun. 2001. Are incentives everything?: payment mechanisms for health care providers in developing countries, Policy Research Working Paper 2624. Development Research Group, World Bank, Washington, D.C.

- Gilson, L., and A. Mills. 1995. Health sector reform in sub-Sahara Africa. _Health Policy and Planning_ 32: 215–43.

- Government of India. 2002. Citizen’s Charter Website. Accessed at <u>http://goicharters.nic.in/</u> on November 15, 2002.

- Grindle, Merilee. 1997. Divergent cultures: when public organizations perform well in developing countries. _World Development_ 25(4): 481–95.

- Hurley, J, S. Birch, and J. Eyles. 1995. Geographically-decentralized planning and management in health care: some informational issues and their implications for efficiency. _Social Science and Medicine_ 41(1): 3–11.

- Institute of Medicine. 1987. _The Future of Public Health_ . Washington, D.C.: National Academy Press.

- Jeppsson, A., and S. A. Okuonzi. 2000. Vertical or holistic decentralization of the health sector? Experiences from Zambia and Uganda. _International Journal of Health Planning and Management_ 15: 273–89.

- Jimenez, Emmanuel, and Yasuyuki Sawada. 1999. Do Community-Managed Schools Work? An evaluation of El Salvador’s EDUCO program. _World Bank Economic Review_ 13(3): 415– 41.

- Khaleghian, Peyvand. 2003. Decentralization and public services: the case of immunization. _Social Science & Medicine_ , forthcoming.

- Khaleghian, Peyvand, and Monica Das Gupta. 2003. The morning after: What to do about public health services after a heady night of passionate decentralizing. Development Research Group, World Bank, Washington, D.C. Processed.

24
.e 18 nonperforming loans; (c) limiting distribution of dividends until the nonperforming loans have been fully provided; (d) allowing the large commercial banks to swap its inherited stock of nonperforming loans for equity;'° and (e) accelerating the privatization of banks in order to attract new capital into these three banks.

There are two important aspects of the Hungarian scheme. First, the scheme might fail to take full account of the total nonperforming loans in these three banks. According to independent bank audits, nonperfroming loans hovered between Ft 50 bn and Ft 100 bn by the end of 1991." Second, the scheme link,d the recapitalization of banks to the effectiveness of the bank managers in dealing with bad debtors. This was done by limiting the use of guarantees to the initiation of liquidation proceeding on the debtors and by forcing the debtors to seek approval of restructuring schemes from the banks. This approach relied on the effectiveness of bank managers' assessment of enterprises' future. Preliminary evidence indicates that bank managers requested additional guarantees and granted additional loans to debtors to improve their portfolio, and to limit the required loan loss provisions.

Aware that the true problem originated in the enterprise sector, the authiorities decided to accelerate the privatization of enterprises through the appointment of a Minister without portfolio. The authorities, committed to the gradual approach, increased the number of enterprises for sale and provided low interest finance to citizens to purchase shares in these enterprises. The National Bank of Hungary (NBH) introduced a series of refinance credit lines at subsidized interest rates (subsidy amounted to 25 percent of the base rate) to encourage the sale of enterprises and starting up new ones. The NBH argued that the subsidy would not result in NBH losses because the proceeds would be used to retire the 6 percent interest government debt."<sup>2</sup>

> I° An **example** is **the** Hungarian Credit Bank which swapped Ft 6.42 billion of Tungram's bad loans for 91 percent of its **equity.** A controlling interest of 51 percent was later sold to General Electric. See Radio Free Europe Research Report (1992).

> "1 **This is** a very conservative estnimte, **sone** other **studies** based on estimrated arrears calculate **the** size of nonperfroniing **loans** in as **much as** Ft 500 **bn** or 50 percent of **total loans** in 1991.

> 11 Se National Bank of Hungary (1991) for a discussion of the refinance schemes available to national willing to **buy** or dart new **enterprises.**
5

# **Introduction**

Among the many shifts of emphasis that have been evident in global health over the last 25 years or so, two stand out. One is the concern over equity: there has been a growing realization that the poor continue to lag behind the better off in receipt of key health interventions and health outcomes, and that international goals couched in terms of population averages could perfectly possibly be met without faster progress among the poor. The other is a concern over out-of-pocket health spending: getting people the health interventions they need is one part of the overall goal of any health system; the other is to ensure that families do not end up impoverished or otherwise suffer financial hardship by paying large sums of money out-of-pocket to ensure family members get the services they need. Neither of these concerns was reflected in the Millennium Development Goals (MDGs), which focused on population averages and made no mention of out-of-pocket expenses. By contrast, both are reflected in the Sustainable Development Goals (SDGs): the SDG equity commitment to ‘leave no one behind’ calls for data that are disaggregated by inter alia living standards; and the SDG commitment to universal health coverage (UHC) explicitly includes a commitment to ‘financial risk protection’.

This paper provides an overview of an international database on Health Equity and Financial Protection Indicators (HEFPI). The data set provides data on the delivery of health service interventions, health outcomes, and ‘financial protection’ in health, at both the population level and for subpopulations defined by household living standards. The data are computed from well-known household surveys that have been conducted by, or in partnership with, national governments, such as the Demographic and Health Survey (DHS) and the Living Standards Measurement Study (LSMS). None of our data comes from official reports by national governments, in part because such data do not lend themselves to disaggregation by household living standards, and in part because of concerns about accuracy, especially where governments do not face incentives to report accurate numbers (Murray et al. 2003; Lim et al. 2008; Sandefur and Glassman 2015; World Bank n.d.). Where we have been able to access the raw microdata from household surveys, we have done so.
Pischke (1999) have shown that training that is general in a technical sense can still be specific in an economic sense in situations with labor market frictions. This insight enhances the potential relevance of the holdup problem.

A final form of externality is relevant from the perspective of investments in early learning. Cunha _et al_ . (2006) argue that learning is an activity that generates dynamic spillovers. Investments in learning at a young age make investments in learning at later ages cheaper and more efficient. In that sense: learning begets learning. Implicitly, this means that the costs of investment in lifelong learning are lower for people for whom investments in early learning have been larger. For this reason, our survey of funding schemes will not be restricted to direct funding of lifelong learning arrangements only, but will also be concerned with financing forms that effectively stimulate early learning (and by implication reduce the costs of any further learning investment).

Unless they come from wealthy families, students will typically not have the funds to finance their tuition fees and the cost of living while studying. They will, therefore, have to borrow. Because human capital is stored in persons and is not readily transferable, there is no collateral in case of default. Therefore, private banks will be unwilling to provide student loans without any compensation for the default risk.

More fundamentally, capital market failures can be attributed to adverse selection and moral hazard. Adverse selection refers to the mechanism that a default premium will prevent the lowest risk students from taking up a loan. As a result, the average risk for the remaining cases 7
Additionally, research on representative firms in developing countries is particularly rare. Existing research focuses mainly on a few developed economies and on selected industries, such as high-technology industries, even though these may not be the most innovative industries in developing countries. Also, research using innovation survey data is usually conducted for those firms that are more likely to invest in innovation or had responded in the affirmative for innovation outputs — which might lead to biased estimates of the effect of innovation for generic firms.

Moreover, previous research has not explored systematically whether internal and external innovation produce different effects on the final output and firm productivity, and what accounts for the differences. While innovation outsourcing has been widely studied in a number of different fields, such as industrial organization and management, the findings are fragmented, and there is limited systematic framework to analyze the make or buy decision on innovation outsourcing separately from decisions on general outsourcing, even though innovation outsourcing might be very different from general outsourcing.

One advantage of innovation outsourcing, which also applies to general outsourcing, is shortterm cost saving. For instance, outsourcing can reduce production costs because of economies of scale or lower wages of outsourcing providers. However, there is a certain cost associated with searching for providers for outsourced activities. Thus, literature in the field of management and industrial organization has tried to provide an analytical framework for firms’ make-or-buy decisions using a profit maximization model and its extension. Profitmaximizing firms decide whether or not to outsource by measuring the trade-off between operating a larger organization with less specialization or conducting a costly search with contracting incompleteness (Grossman and Helpman 2003, 2005).

There are several disadvantages in innovation outsourcing, as there are in general outsourcing. Outsourcing is a trade-off situation and presents a dilemma because it may damage the capacity for producing new products, and thus the innovation capability of firms (Bengtsson and Berggren 2008). The outcome of outsourcing is moderated by the strategy for internal and external integration. The integration needs and mechanisms are themselves affected by the complexity of products and manufacturing processes (see, for example, 6
|Study|Topic|Background Variables|
|---|---|---|
|Eim et al. (2008)|Tracking|gender,<br>mother’s<br>education,<br>father’s<br>education,<br>mother<br>is<br>a<br>housewife, school’s teacher's average age, average experience,<br>school size, private school, girls school, boys school|
|Ammermeuller et al. (2006)|Peer Effects|age, gender, parent's origin, language spoken at home, number<br>of books at home, number of persons living in household, class<br>size, teacher's gender, teacher's education, teacher’s experience,<br>community<br>size,<br>daily<br>instruction<br>hours,<br>shortage<br>of<br>staff,<br>teaching materials andbuildings|
|Gibbons et al. (2006)|Peer Effects|gender,<br>ethnicity,<br>free-school-meal<br>entitlement,<br>special<br>educational needs, age, year|
|echneeweiss et al. (2005)|Peer Effects|gender, grade, single parent family, number of siblings, ethnic<br>Austrian,<br>mother’s<br>education,<br>socioeconomic<br>status,<br>cultural<br>communication, books<br>at home, educational resources, parents<br>unemployed, school size, total hours of instruction, urban school|
|Zimmer (2003)|Peer Effects in Tracking|gender,<br>father’s<br>occupation,<br>mother’s<br>occupation,<br>father’s<br>education,<br>mother’s<br>education,<br>teacher's<br>gender,<br>teacher's<br>experience, teacher's age, teacher's education, class size|
|Fertig,M (2002)|PeerEffects|gender, whether parents work,<br>intact family, native<br>student,<br>parent born abroad, second generation, other languages at home,<br>parents education, homework feedback, poor school conditions,<br>regular<br>tests,<br>teacher<br>shortages,<br>discipline<br>problems,<br>student<br>teacher ratio|
|Betts and Shkolnik (1998)|Tracking|student teacher ratio, teacher education, teacher experience, race|
Integrating to GVC represents a challenge to countries that are far from trade hubs. However, there are also some opportunities. OECD (2015) suggests that location is one of the main nonpolicy determinants of GVC participation: evidence suggests that because GVC activity is organized around large manufacturing hubs, the larger the distance to the main manufacturing hubs in Europe, North America and Asia, the lower is the backward (buyer) engagement. On the other hand, while there is a premium to locating close to “headquarter” economies, there are also opportunities for GVC integration for countries located far from large manufacturing hubs; a recent empirical analysis conducted by Cheng et al. (2015) on the determinants of GVC participation suggests that physical distance (weighted by economy size) is negatively associated with trade in GVCs only for low-tech manufacturing sectors. Moreover, production networks serving European or U.S. markets do not need to be the only geographical focus of countries that want to integrate into GVCs. With growing markets in the Americas, a regional network of production might be increasingly sustainable.

Increasing the number and depth of preferential trade agreements (PTAs) offers an important channel to increase participation in GVCs. Given the increasing unbundling of export goods production, PTAs have become the main vehicle to bring in new disciplines (such as competition policy, intellectual property, investment, etc.) that allow factories to connect across borders in a seamless way. The frequency and depth of PTAs have been increasing substantially: data presented in Hollweg and Rocha (2017) show that the number of agreements notified to WTO have increased from about 70 in 1990 to close to 300 presently in force. The same data set<sup>25</sup> shows that more recent PTAs cover more policy areas than earlier PTAs: agreements signed before 1991 included on average 9 provisions whereas agreements signed between 2005 and 2015 included on average 15 provisions; more than 50 percent of agreements include deeper provisions such as anti-dumping and countervailing measures, rules on competition, movement of capital and intellectual property rights. Evidence presented by Hollweg and Rocha (2017) also suggests that GVC-related trade – proxied by trade in parts and components - is higher on average for countries that have signed deeper agreements (Figure 16), where depth of an agreement is the number of legally enforceable provisions.

> 25 The World Bank data set on PTAs content; see Annex 3 for further details.

13
explained by the variables. In general, obstacles to trade are higher in countries that are landlocked, poor, vast and unpopulated.

The SADC dummies indicate that SADC countries do not face unusually severe obstacles to trade (conditional on geography, population and income) relative to the rest of the world. The obstacles to trade are high, but these reflect particular geographical constraints and correspond closely with their level of development. In fact, the results based on the ETI reveal that the overall trading environment and market access and border administration in particular (but not transport and communications infrastructure) are on average better in the SADC region than the rest of the world, conditional on GDP, population and geography. SADC performs poorly in terms of the timeliness with which its shipments reach the consignee.

Regressions including individual country dummies reveal relatively high obstacles associated with logistics in Angola, Botswana, Namibia, Mauritius and Zambia (see Table 10 and Table 11 in Appendix 2). Further, the SACU members, Angola, Zambia and Malawi perform poorly relative to their peers in terms of the required documents, time and cost of exporting and importing. In contrast, Madagascar, Mauritius, Mozambique and Tanzania perform well relative to their income levels.

This benchmarking analysis suggests that trade is not particularly constrained in SADC compared to other countries at similar levels of development, although there is variation at the country level. This does not imply that further investments in reducing obstacles to trade will not enhance trade flows from SADC countries. However, investments in these areas will also require an analysis of the comparative costs and (trade) benefits relative to improvements in other institutions rather than those specific to the trade environment. The results are likely to vary by country, which motivates country-level analysis that ideally uses firm level data.

Furthermore, trade-related reforms require consideration of the complementarities between the various policy constraints. Building multilane highways will not raise trade if trucks must wait at the border. Port improvements would have limited impact if the problem is getting goods to the coast. For example, Freund and Rocha (2010) highlight the importance of getting goods through transit countries in Africa while Behar, Manners and Nelson (2009) find that your neighbor‟s logistics quality positively influences your own exports. Regional policy co-ordination on reducing obstacles to trade is particularly important for SADC countries, many of which are landlocked.

20
# **References:**

Anderson, S., Allen, P., Peckham, S. and Goodwin, N. (2008) Asking the right questions: Scoping studies in the commissioning of research on the organisation and delivery of health services. _Health Research Policy and Systems,_ (6) 7: 1-12.

Arksey, H., O’Malley, L., Baldwin, S. and Harris, J. (2002) Services to Support Carers of People with Mental Health Problems: Literature Review Report, Social Policy Research Unit, University of York, York.

Arksey, H. and O’Malley, L. (2005) Scoping Studies: Towards a Methodological Framework. , _International Journal of Social Research Methodology_ , 8, 1, 19-32.

Bates, S. and Coren, E. (2006) Mapping the literature on the extent and impact of parental mental health problems on the family, the interventions available and the acceptability; accessibility and effectiveness of interventions, Systematic Map 1: Summary report, London: Social Care Institute for Excellence, www.scie.org.uk/publications/index.asp Bates, S., Clapton, J. and Coren, E. (2007) Systematic maps to support evidence base in social care, Evidence & Policy , Vol 3, 4, 539-51.

Bates, S. And Rutter, D. (2008) Developing the process of systematic mapping-the social welfare literature, SCIE available from <u>http://www.campbellcollaboration.org/artman2/uploads/1/SocialWelfare_Rutter.pdf</u> Becker, L.A. and Oxman, A.D. (2011), ‘Overviews of reviews’, Chapter 22 in Higgins, J.P.T. and Green, S. (Eds), _Cochrane Handbook for Systematic Reviews of Interventions_ Version 5.1.0 (updated March 2011). The Cochrane Collaboration, 2011. Available from www.cochrane-handbook.org <mark>Bhavsar, A., Hombrados, J,G., Snilstveit, B., Vojtkova, M., and Waddington, H. (2012) ‘3ie Maternal Health Gap Map’, The International Initiative for Impact Evaluation. Available from http://www.3ieimpact.org/en/about/what-3ie-does/systematic-reviews-programme/3ies-house-systematic-</mark> <u><mark>review-research/</mark></u> Bragge, P., Clavisi, O., Turner, T., Tavender, E., Collie, A. and Gruen, R. (2011) The Global Evidence Mapping Initiative: Scoping research in broad topic areas. BMC Medical Research Methodology 2011, (11) 92: 1-12.

Chandler, J., Churchill, R., Higgins, J., Lasserson, T. and Tovey, D. (2011), Methodological Expectations of Cochrane Intervention Reviews (MECIR): Methodological standards for the conduct of new Cochrane - - Intervention Reviews, Version 2.2, available from: http://www.editorial <u>unit.cochrane.org/sites/editorial unit.cochrane.org/files/uploads/MECIR_conduct_standards%202.2%2017122012_0.pdf</u> – accessed 17/7-2013 Clapton, J., Rutter, D. And Sharif, N. (2009) SCIE Systematic mapping guidance, April 2009 [draft]. Using knowledge in social care, research resource 03. Social Care Institute for Excellence.

Cooper, H., Hedges, L. V. and Valentine, J. C. (2009), The Handbook of Research Synthesis and MetaAnalysis, New York: Russell Sage Foundation.

21