rafmacalaba/datause-encoder-data huggingface dataset:
30

- Structure the financial instruments underlying the financing package to be on market terms and conditions.

- Ensure an adequate government debt management function is in place to mitigate the risks and reduce the costs arising from the government debt issued for crisis resolution..

# CHAPTER **4.** DIAGNOSING THE SCOPE OF FINANCIAL PROBLEMS

In a crisis, it is important to differentiate between banks that are winners and those that are losers. The winners are those banks that, in relative terms, have the best management, governance, finances, and operations. The losers are those banks that have unsuitable shareholders, poor governance, unqualified, reckless, or criminal managers, have become insolvent, or have poor business prospects.

Simultaneous with supporting action necessary to secure a financing package, the crisis management team needs to begin diagnosing the scope of problems facing individual banks and the financial system overall. The team requires accurate information to determine appropriate resolution mechanisms for distressed banks and to estimate the potential requirements for financing crisis resolution. This diagnostic work is of particular importance in determining the amount of support required by individual banks.

The team likely will learn that the authorities do not have accurate information regarding the financial condition of banks. Their basic sources of information are the accounting data prepared by banks and debtors and the regulatory indicators and supervisory analyses prepared by supervisory authorities. This information can be inaccurate even in normal circumstances, but especially in times of financial distress.

Contributing substantially to the problem of accounting and regulatory information are the incentives facing most stakeholders to underestimate the scope of financial problems, especially in a systemic crisis. Bankers who risk losing their jobs or investments should the bank be shown as economically insolvent have strong incentives to hide its actual condition from the authorities. Owners and managers of firms who risk losing control of their business or its assets should the firm be revealed as insolvent have similar incentives. Supervisory authorities, who may expect to be held accountable for the current situation by politicians, the media, and the public, have
Journal of Economic Literature 13, 827-846.

- Stelcner, M., A. M. Arriagada, and P. Moock, 1987, Wage Determinants and School Attainment Among Men in Peru Living Standards Measurement Study Working Paper No. 38. (The World Bank, Washington, D.C.)

- Strassmann, P. W., 1987, Home-based Enterprises in Cities of Developing Countries, Economic Development and Cultural Change 36, 1, 120-144.

- Teilhet-Waldorf, S. and W.H. Teilhet, 1983, Earnings of Self-Employed in an Informal Sector: A Case Study of Bangkok, Economic Development and Cultural Change 31, 3, 587-607.

- Vargas Llosa, M., 1987, The Silent Revolution, Journal of Economic Growth 2, 1, 3-7.

- World Bank, 1987, World Development Report (Oxford University Press and the World Bank, New York).

40
solution. The load function is approximated by a formula that fits most of the COD data with a reasonable accuracy, and it is shown that cities can very often reduce load more efficiently by sharing the effort.

A general system for load control is described: the central authority can reach its goal on a certain COD load by selecting, for each city _i_ , a proportional quota _pi_ satisfying: an amount _xi_ , so that _v_ ( _S_ ) = − min { _x_ : _LS_ ( _x_ ) ≤ _ApS_ } (where A is the maximum load accepted and _L_ is the load function).

The cities, as the authors show, will tend to cooperate to reduce load efficiently. We can define the quota = for a cooperating group of cities, or coalition _pS_ ∑ _pi_ , and thus, the requirement seen above can _i_ ∈ _S_ Now the questions are: which coalitions will form? How should costs be split within these coalitions? The CGT model may answer these questions.

> The characteristic function of a COD allocation game is _v_ ( _S_ ) = − min { _x_ : _LS_ ( _x_ ) ≤ _ApS_ } and the game is superadditive.  An equivalent model, considering the savings game < _N_ , _w_ > , has the following form

> characteristic function: _w_ ( _S_ ) = _v_ ( _S_ ) − ∑ _v_ ( _i_ ) for _S_ ≠∅ .  For this game the _Shapley value_ and the _i_ ∈ _S_

_Nucleolus_ are considered as possible solutions.

In a different paper, Dinar and Howitt (1997) conduct a pollution control analysis focusing on drainage water treatment. Different allocation schemes (proportional allocation, Nash-Harsanyi, allocation according to marginal cost, Shapley value, the nucleolus and the Separable Cost, Remaining Benefit principle) are used to allocate regional joint environmental control costs under two extreme states of nature scenarios, resulting in different pollution flows. Two different states of nature are included in the model: high flow drainage and low flow drainage in the Central Valley of California. They are been separately taken into account in order to understand what happens in terms of stability and acceptability of a solution if some natural changes occur. The results provide clear empirical evidence that regional arrangements may vary with state of nature. Another important result is that the different allocation schemes have different outcomes in terms of their acceptability of the players, and in terms of their derived stability, as measured by the Shapley-Shubik Power Index, and by the Propensity to Disrupt.

The case study is about the joint treatment of irrigation drainage water by several water districts in California and the allocation of the joint costs. The authors introduce a cooperative game with sidepayments in characteristic function form. A necessary condition for an allocation to be accepted by the players is the fulfillment of the Core conditions.

Additional conditions are the stability of the coalition One measure used to assess the stability of an allocation scheme is α _i_ , comparing the gains to a player with the gains to the coalition.

19
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Consequently, very few plants are visited to check that they do comply with labor standards. In the unlikely event of one such visit, some employers add, inspectors can be easily bribed to avoid paying a fine.

Not surprisingly, employers do not feel unduly unconstrained by current labor regulations. A survey of some 200 manufacturing firms conducted in Cameroon in 1994 reports that only 2 percent of the interviewees considered labor regulations were a large or severe problem, compared to 85 percent who considered the problem was slight or non existent. The responses were 3 and 75 percent respectively for wage costs, 4 and 85 percent for rules regarding layoffs, and 5 and 63 percent for the cost of layoffs. Differences in these responses across plant sizes and sectors of activity are relatively minor, except for the cost of layoffs. More generally, labor issues appear as the less acute problem faced by firms, after taxes, corruption, price controls, government rules and difficulties in obtaining licenses, in order of decreasing importance (Gauthier, 1995).

This sanguine assessment of the labor market policies in force could be due to the fact that reforms were deeper in Cameroon than elsewhere in the CFA region. However, a similar picture emerges from studies done for other countries. In Senegal, before any deregulation of the labor market had actually taken place, most managers viewed labor market regulations more as a nuisance than a constraint (Terrell and Svejnar, 1989). In C6te d'Ivoire, the most stringent labor regulations were reportedly by-passed by firms using alternatives such as sub-contracting and apprenticeship (World Bank, 1993).

The fact that labor market regulations are not among the main concerns of employers does not imply that these regulations are irrelevant though. The Cameroon survey asks managers whether they would hire more workers if selected labor market regulations were removed. Some 6.5 percent of the interviewees declared they would if minimum wages were abolished, while 93.5 say they would not. In the case of firing restrictions, the answers were 5.5 and 75.5 respectively (Gauthier, 1995). The potential 9
example, we gain insights into whether poverty is more of a chronic or transient nature, and how this changes over time and differs between regions. Moreover, we are able to estimate conditional probabilities, such as chances of escaping poverty. Nevertheless, the caveat remains that these results are not based on true panel data and depend on our willingness to assume that actual income correlation coefficients from other countries can, as a group, proxy for the correlation of Malaysian incomes over time.

Considering poverty dynamics, we observe a large decrease in chronic poverty over the study period, to between 2-3 percent of the population over the interval 2019-2022. This decline is evident across all three poverty lines applied. It also means that those living in poverty now have much better chances of escaping poverty. In addition, poverty entry figures have continued to decline. These poverty dynamics went hand-in-hand with larger transfers to low-income households in the wake of the Covid-19 crisis. This is important to bear in mind when interpreting these results.

In contrast to the Department of Statistics Malaysia, we do not observe an increase in poverty from 2019 to 2022. This is likely due to a significant increase in the poverty line employed by DOSM from 2019 to 2022. If we pick either of these lines and keep its real value constant over time, we observe a decrease in poverty.

Poverty conditions are worst in rural East Malaysia: around 15 percent of the population here lives in chronic poverty, and over each interval in our study, around 10 percent falls into poverty. Those in poverty here have the lowest chance of all Malaysians of escaping poverty. Moreover, those out of poverty face the highest chances of falling into poverty.

Looking at three-way income mobility, an important conclusion is that results depend on which income thresholds are used to define the three groups. If we use relatively lower poverty and vulnerability lines, a bit over 50 percent of the population is persistently secure, and downward mobility has declined.

However, if we employ higher income thresholds, the persistently secure middle/upper class group is considerably smaller, at slightly more than 30 percent in 2019-2022. Moreover, the share of the population that experiences downward mobility remains sizeable at a bit below 20 percent over the latest transition interval. Furthermore, ethnic differences in mobility are also sizeable under this scenario.

Another finding is that we observe increases over time in downward mobility for rural East Malaysia and for the group of East Malaysia Bumiputera. Potentially, such downward mobility happened after having enjoyed upward mobility in the first part of our study period. Notably, an individual in urban Peninsular Malaysia is more than three times more likely to live in economic security than someone in rural East Malaysia 29
simple rules:

- (2.26) P =(PE'PE1)

- (2.27) PI = (1-X)*P + XOPIM

- (2.28) PIM EOpIM

- (2.29) PX P

where PE is the end-of-period GDP deflator, and pi represents the period average deflator of the expenditure component i, with i = I, IM, X. E is the period average nominal exchange rate, and X and -IM indicate the share of imports in investment demand, and the foreign prices of imports, respectively. Once these prices are obtained, it is straightforward to project nominal variables as follows:

# Total nominal consumption is obtained as follows:

- (2.37) NCP + NCb = NY + NIM - NIp - NIb NIO NX

Equation (2.37) constitutes the "national accounts" of the RMSM presentation. It portrays goods market equilibrium in nominal terms. Finally, the consumption deflator is obtained by dividing total nominal consumption by total real consumption: (2.38) PC = (NCp+NCb)/(CP+Cb) 19
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One of the subtler implications of the gravity model is that trade between two dynamic countries will grow exponentially faster than trade between less dynamic ones (because trade benefits from the gravity exerted by the income of both countries). The share of intra-European trade which comprised about 29 percent of world trade in 2008 will decline to about 9 percent in 2030. In contrast intra-BRICs trade and intra-BIICs (including Indonesia rather than Russia) trade will rise dramatically; intra-Asian trade, which today is about a third of intra-European trade will surpass intra-European trade well before 2030. In other words, not only will the world‘s economic center of economic gravity shift to Asia, so too will the center of trade with China as the focal point, or even ―hub.‖

**Table 2: Share of Countries in World Trade, Convergence Scenario, 2010 and 2030**

|**Country/group**|**Trade(US**|**$ billion)**|**Growth**|**Share in wo**|**rld trade**|**Trade to**|**GDP**|
|---|---|---|---|---|---|---|---|
||**2010**|**2030**|**2010-2030**|**2010**|**2030**|**2010**|**2030**|
|United States|3,224|5,827|3.0%|10.6%|7.3%|22.0%|24.3%|
|Japan|1,460|2,586|2.9%|4.8%|3.2%|26.8%|35.2%|
|China|2,972|11,972|7.2%|9.8%|15.0%|50.6%|53.4%|
|India|539|3,907|10.4%|1.8%|4.9%|35.1%|46.4%|
|Korea|892|2,617|5.5%|2.9%|3.3%|88.5%|120.5%|
|Brazil|384|991|4.9%|1.3%|1.2%|18.3%|21.4%|
|Indonesia|136|993|10.5%|0.4%|1.2%|19.2%|34.0%|
|Russia|648|890|1.6%|2.1%|1.1%|44.3%|43.3%|
|Germany|2,318|2,918|1.2%|7.6%|3.7%|89.7%|76.0%|
|**WORLD**|**30,387**|**79,905**|**5.0%**|**100.0%**|**100.0%**|**48.7%**|**57.2%**|

Source: Subramanian (2011)

# **IV. What Would Future Trade Dominance Imply?**

This section begins by noting that the odds are in favor of China maintaining an open multilateral trading system. But then we assess the implications of another, less likely but still real, possibility: that China will seek, as other dominant powers have done, to translate its power into trading privilege.

# **Self-interested openness**

An economically dominant China will be a China that, like other leading powers, acts out of selfinterest—at least on key issues. But it is not necessarily a China that will seek to roll back the open trade and financial system bequeathed by the US after World War II. The view that China will broadly continue the current system relies on the fact that is exceptionally open.

Taking account of China‘s size and the regularity that large countries tend to trade less than small countries, China is an exceptionally big importer and trader. China‘s openness, measured in terms of trade outcomes, is far greater than anything achieved by the United States in the postwar period and resembles the levels of openness achieved by the United Kingdom at the height 11
Africa. For example, when the MVP was just beginning, Sachs (2005: 236) called for foreign aid to Kenya to increase fifteen-fold in order to provide $1.5 billion per year for Millennium Village interventions in that country alone. Before any evaluation had been published, MVP (2008b) applauded plans to expand the MVP in several countries and concluded, “The MVP has therefore created a powerful pressure to expand as a result of its notable successes.” At the same time, the MVP has received criticism similar to that of earlier model villages: Carr (2008) decries “absence of critical thought” in the design of the short-term intervention and fears that “human well-being in the Millennium Villages is ... likely to rely on a constant flow of aid money in the foreseeable future.”

# **4 Estimated Effects Depend Critically on the Evaluation Method**

We begin by taking a critical look at the mid-term evaluation results reported by the MVP for five village clusters. The design of the project makes it impossible to carry out a truly rigorous assessment of the project’s effects. Our goal here is not to perform such an assessment, but to demonstrate the importance of careful evaluation by showing that the estimated effects of the project depend crucially on the point of comparison for the experience of the treated village clusters.

# _The Mid-term MVP Evaluation Report_

In June 2010, the project released its first public evaluation of the effects of the intervention on the Millennium Villages (MVP 2010c). The report describes the interventions and compares baseline values to those three years into the MVP for several indicators, using surveys from five Millennium Village sites: Sauri, Kenya; Ruhiira, Uganda; Pampaida, Nigeria; Bonsaaso, Ghana; and Mwandama, Malawi. This before-and-after comparison follows the now-outdated evaluation design described by the MVP three years earlier in the _Proceedings of the National Academy of Sciences_ : “project impact is assessed by rigorous before-and-after comparisons and detailed studies by sector” (Sanchez et al. 2007). The MVP (2010d) portrays changes over time at these sites as having been caused by the project, and describes these changes as evidence that their 9
# I. WL'Y INSTITUTIONS

Neoclassical growth theory holds that **LiLe** difference between developed and developing countries is that the latter have less human and nonhuman capital. The diagnosis prescribes the cure: increase the capital resources of developing countries and they will grow, indeed they will grow faster than developed countries per unit of capital input because the marginal return will be higher. Not only will there be growth, but the benefits of growth will be distributed widely if not equitably.

But as development experience suggests, (supported by economic literature)i the outcomes anticipated by the neoclassical model have not been realizcd. While one cannot deny that increases in capital resources are necessary for development, they are not sufficient for sustainable growth and the relief of poverty in developing countries. In addition to capital resources, there must be appropriate institutional structures.

Experience with poverty reduction programs and sustainable projects suggests that "appropriate" institutions are important for development for two main reasons. First, in the absence of "appropriate" institutional arrangements the benefits from major inflows of physical capital tend to accrue to the elite and rarely reach the poor. Second, such institutions not only help to distribute benefits more equitably, but also will do something more important: they will contribute to the sustainability of projects and thus to sustainable growth. This critical link between "appropriate" institutions and sustainable growth is supported broadly by the World Bank's Annual Review of 2000 Evaluations (1988) which found investment 1 See Joseph Stiglitz, "Markets and Market Failures, and Development" in AEA paper and proceeding, May 1989 pp. 19/-203, other relevant writing by Stiglitz and others are cited in this paper.