Working Papers

The pandemic-induced global economic crisis has contributed to the re-emergence of sovereign default risk, especially for emerging and developing economies, and has directed attention to the impact of the institutions that are tasked with attempting to predict defaults: the international credit rating agencies. This paper describes four main challenges posed by credit rating agencies, especially from a developing and emerging economies perspective: potential bias in ratings, pro-cyclicality of ratings, governance issues and conflicts of interest, and incorporation of climate risk. It concludes with potential policy solutions addressed at ratings agencies, regulators, and policy makers.…

The COVID-19 pandemic has caused the most universal health and socio-economic crisis in recent history. However, the magnitude of the economic damage has differed widely; some countries were hit particularly hard, while others have managed to weather the storm much better. In this paper, we use cross-country regression analysis to identify factors that help explain the differences in the growth impact of the COVID-19 shock. Our findings underscore the critical role of balancing health and economic concerns in managing the pandemic as both a country’s exposure to the coronavirus and the stringency of containment measures are strongly correlated with its growth performance. In addition,…

In Article 25 (1) of the Universal Declaration of Human Rights, the United Nations recognized in 1948 the basic human right to “security in the event of unemployment, sickness, disability, widowhood, old age or other lack of livelihood in circumstances beyond ... control.” This paper examines how economic insecurity is related to, yet different from, poverty and inequality, why it matters for human well-being and how it has been changing in different countries around the world in recent years. The paper concludes with discussion of how economic insecurity has been and will be affected by the Covid-19 pandemic/recession.

Demographic dynamics have strong repercussions for development and need to be addressed in the definition of the global development strategy for post 2015. Despite divergent trends across countries, international migration offers no definitive solution. A comprehensive approach is needed. Countries with declining and ageing workforces need to sustain or raise productivity. Countries with growing labour forces need to embark in growth patterns that are labour intensive, offer possibilities for dynamic structural change and productivity increases. Both cases require investments in education, skill formation and upgrading. The impact of population ageing on economic variables is nuanced but…

Demographic dynamics have strong repercussions for development and need to be addressed in the definition of the global development strategy for post 2015. Despite divergent trends across countries, international migration offers no definitive solution. A comprehensive approach is needed. Countries with declining and ageing workforces need to sustain or raise productivity. Countries with growing labour forces need to embark in growth patterns that are labour intensive, offer possibilities for dynamic structural change and productivity increases. Both cases require investments in education, skill formation and upgrading. The impact of population ageing on economic variables is nuanced but…

The international community has advanced in reforming the international aid system. Such reform comes at a time when there is a renewed skepticism about aid effectiveness and when the crisis sheds new doubts about the sustainability of donors´ commitments. At the same time, the international reality has changed as a consequence of the growing heterogeneity of the developing world, the new geography of global poverty, the emergence of new powers from the developing world, the presence of new aid players and, finally, the enlargement of the sphere of international public goods. Such changes demand a deeper reform in the development cooperation system.

The International Finance Facility for Immunization (IFFIm), which securitized future aid commitments by donor countries, has been successful in providing funds to immunize children in poor countries. Since capital is likely to remain scarce, the paper evaluates the prospects of setting up IFFIm-like mechanisms to fund a variety of objectives. Two broad conclusions emerge. First, replicating IFFIm could prove challenging because donor pledges will lack the desired credibility. Second, credit enhancements like third party guarantees, excess coverage, and channeling of pledges through a preferred creditor, could overcome this deficiency. Finally, Advance Market Commitments and Cash on…

This paper argues that the technical and political difficulties of using SDRs for development can be overcome. This requires an SDR-based reserve system and a fully SDR-funded IMF. The IMF would allocate SDRs counter-cyclically and treat them as deposits of countries, which could be used in lending to them. A substitution account is needed for a smooth transition from major reserve currencies to SDRs. To avoid the deficiency payments, a counterpart account – which would be credited when the substitution account is in surplus and debited when in deficit – is required. Alternatively, politically-feasible cost-sharing mechanisms could be designed.

This paper assesses the scope and impact of innovative development finance (IDF) in the Latin America and the Caribbean (LAC) countries in the 2000s. It also reports the views from the region’s relevant actors regarding IDF. The paper finds that very little IDF flowed to LAC in the 2000s, though it was significant for a few, poorer, and smaller countries, such as Haiti and Nicaragua. The views from the region suggest that LAC should fight for greater share of existing and prospective IDF, but also make better use of other available resources, such as remittances and flows through South-South cooperation.

This paper argues that SDRs should become a more relevant instrument of international monetary cooperation. This requires transforming them into a pure reserve asset and the IMF into a fully SDR-funded institution. SDRs would then be issued counter-cyclically and treated as deposits of countries in the IMF, which can in turn lend to countries. This approach would correct basic deficiencies of the current global monetary system. Complementary reforms include a substitution account for an orderly and smooth transition from major reserve currencies to SDRs, and the issuance of SDR-denominated bonds as an alternative to other major short-term assets.

The Millennium Development Goals (MDGs) were introduced to monitor implementation of the United Nations Millennium Declaration which set out a vision for inclusive and sustainable globalization based on human rights principles. This paper critically assesses the MDG experience including their policy purpose, ethical commitments, political origins, and consequences. It proposes that post-2015 goals should be based on principles of equity, sustainability and human security and address key contemporary challenges such as climate change, unemployment, inequality and global market instability.

During the last decade, the world economy has experienced a worsening in financial stability, food prices, income inequality and environmental conditions. Seven development strategies are evaluated to determine which could help solve ‘quadruple crisis’. These strategies are assessed using a common methodology which first documents the economic, social, environmental and food security policies adopted, and then assesses their outcomes using 11 performance indicators. The strategies are then ranked on the basis of their overall success score. While all strategies produced some positive results, the East Asian Miracle and the new Latin American development approach generated the greatest…