What is the World Bank Good for? Global Public Goods and Global Institutions

"What is the World Bank Good for? Global Public Goods and Global Institutions" 
CEPR Discussion Paper No. DP12090

RAVI KANBUR, Cornell University, Centre for Economic Policy Research (CEPR), IZA Institute of Labor Economics
Email: sk145@cornell.edu

The World Bank is in the doldrums, or worse. The Global Public Goods (GPGs) argument is often put forward as a way of reviving and even rescuing an institution whose financial base to support conventional sovereign loans is receding sharply relative to needs and competition from other sources. The World Bank does have certain advantages as an institution, which the global community could use to address GPG issues. It has technical excellence and convening power to help build consensus on a range of GPG issues, although this cannot be fully realized without radical reform of its governance structures. It has experience with managing concessional and grant resources, which will be central to financing GPG mechanisms. And it also has experience with country operations to implement the country specific dimensions of GPG mechanisms. That is what the World Bank is good for now, three quarters of a century after its founding 

Book: Chapter 13

Global Financial Safity Net 1960-2015

"What Do We Know About the Global Financial Safety Net? A New Comprehensive Data Set" 
CESifo Working Paper Series No. 6184

BEATRICE D. SCHEUBEL, European Central Bank (ECB), Ludwig Maximilian University of Munich - Center for Economic Studies (CES)
Email: scheubel@lmu.de
LIVIO STRACCA, European Central Bank (ECB)
Email: Livio.Stracca@ecb.europa.eu

This paper critically reviews the theoretical basis for the provision of the global financial safety net (GFSN) and provide a comprehensive database covering four elements of the GFSN (foreign exchange reserves, IMF financing, central bank swap lines and regional financing arrangements) for over 150 countries in the sample period 1960-2015. This paper also presents some key stylised facts regarding the provision of GFSN financing and compares macroeconomic outcomes in capital flow reversal episodes depending on how much GFSN financing was available to countries. Finally, this paper concludes with some avenues for further research on the possible evolution of the GFSN. 

IMF data on the world economy: what a difference a data version makes

Data sources are regularly updated. Users typically assume that this means that new, more recent data are added and that errors are corrected. Newer data are better. But are they?  And what are the implications for replication? This guest blog of the replication network points out challenges and potential benefits of the existence of different data versions.

Variations between the different vintages of a data set are not necessarily problematic. Variations provide insight in the measurement error in the data source. A better understanding of measurement error may be helpful for establishing why a replication fails or succeeds. Moreover, performing replications over many different vintages can support the robustness of the original study’s findings. If all the data versions arrive at the same conclusion, this strengthens confidence in the replication’s verdict on the original study (be it positive or negative). It is not the difference of the data version that matters, but the similarity of findings across different data versions. As a result, different data versions can be turned into an important asset for replication research.

Terror and World Economy

"Who Has Terror Angst? Perceptions of the Effects of Terror on the World Economy" 
CESifo Working Paper Series No. 6049

DORINE BOUMANS, CESifo (Center for Economic Studies and Ifo Institute)
Email: boumans@ifo.de
JOHANNA GARNITZ, CESifo (Center for Economic Studies and Ifo Institute) - Ifo Institute
Email: garnitz@ifo.de
GUNTHER G. SCHULZE, University of Freiburg - Department of Economics
Email: Guenther.Schulze@vwl.uni-freiburg.de

We examine sources of biased terror perceptions. In particular, we investigate how international experts of the IFO World Economic Survey assess the effect of terror on the world economy and the economy of their own country. The results show that respondents from terror stricken countries have more favorable views on the effect of terror on the word economy (but not on their own countries). Male respondents and those from democratic and richer countries are likewise more optimistic. 

Global inflation

"Global Inflation Forecasts" 
BIS Working Paper No. 582

JONATHAN KEARNS, Bank for International Settlements (BIS) - Monetary and Economic Department
Email: jonathan.kearns@bis.org

Inflation co-moves across countries and several papers have shown that lags of this common inflation can help to forecast country inflation. This paper constructs forecasts of common (or 'global') inflation using survey forecasts of country inflation. These forecasts of global inflation have predictive power for global inflation at a medium horizon (12 months) but not at a longer horizon. Global inflation forecasts, and forecast errors, are correlated with survey forecasts and errors of oil and food prices, and global GDP growth, but not financial variables. For some countries, forecasts of global inflation improve the accuracy of forecasting regressions that include survey forecasts of country inflation. In-sample fit and out-of-sample forecasting exercises suggest that forecasts of global inflation generally contain more information for forecasting country inflation than do lags of global inflation. However, for most countries, lagged or forecast global inflation does not improve the accuracy of survey forecasts of country inflation. Whatever information global inflation may include about country inflation, for most countries it seems that survey forecasts of country inflation have historically already incorporated that information. 

Secular stagnation (or not?)

Fig 1 World  per head income
Regression based on recent data

One item for heated debate amongst economists is the so-called secular stagnation. The economics tribe seems to agree on the fact that world growth is at a lower growth trajectory and that a substantial output.
Figure 1 provides some data for Earth's per capita income in constant prices. The figure seems to support the concensus view. A simple linear trend has been added to recent data up to but not including the great recession. The drop in output due to the financial crisis and the departure from trend are evident: Earth is in a serious depression.
Figure 2, however, provides an alternative longer run perspective that questions this concensus of economists.

Fig. 2 World income per head
Regression based on 1960-2007 data

In Figure 2 we use the same data (source: World Development Indicators), but extend the period of observation (1960 is earliest reported number for world per capita GDP in the WDI). Now the picture changes quite dramatically. Yes the growth rate of per capita income has slowed down, but it is still above long term trend. Clearly the consensus view is blurred by the perspective of the recent past (the decade before the Great Recession) and by the fact that the advanced economies experienced a bad time.

World debt sustainability: is the IMF's optimism justified

Public debt to GPP: predicted sustainability in 2012-2014

Continues upwards shifts in debt since 2013

The 2008/9 financial crisis led to a hick-up in public debt to GPP ratio's, but for long IMF predicted that this was not very problematic as the forecasts of the IMF predicted a return to the year 2000 levels as illustrated in the Figure at the top left for the IMF's April World Economic Outlook published in 2012, 2013 and 2014. Actually, this has always been the IMF view since it started to publish world public debt to GPP ratio's.
Since 2014 this picture changed fundamentally, but not in the sense that the IMF is still predicting that the debt is still sustainable at the. end of the forecasting period as it is on a downward trend. The difference is that each recent update shows that this downward trajectory is shifting upward, demonstrating that each and every IMF forecast in the last five years has been too optimistic. This implies that serious questions arise about the sustainability of public debt at the world level.
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