Working Papers
2024
July 19, 2024
Gender Diversity and Corporate Resilience to Climate Change: Evidence from Greenfield Investments
Description: This paper examines the impact of board gender diversity on the performance of firms whose greenfield investments are struck by natural disasters. We find that corporations with more diverse boards are more likely to earn higher net income but less likely to have negative earnings in front of natural disasters. Further analyses indicate that those corporations with more diverse boards invest less in countries vulnerable to climate change but more in countries ready to adapt for climate change. They have lower exposure to environmental policy risks and are more likely to establish dedicated committees to oversee the risks.
July 19, 2024
From Adoption to Innovation: State-Dependent Technology Policy in Developing Countries
Description: Should policymakers in developing countries prioritize foreign technology adoption over domestic innovation? How might this depend on development stages? Using historical technology transfer data from Korea, we find that greater productivity gaps with foreign firms correlate with faster productivity growth after adoption, despite lower fees. Furthermore, non-adopters increased patent citations to foreign sellers, suggesting knowledge spillovers. Motivated by these findings, we build a two-country growth model with innovation and adoption. As the gaps narrow, productivity gains and spillovers from adoption diminish and foreign sellers strategically raise fees due to intensified competition, which renders adoption subsidies less effective. Korea’s shift from adoption to innovation subsidies substantially contributed to growth and welfare. We also explore the optimal policy and its interaction with import tariffs.
July 12, 2024
Knowledge Diffusion Through FDI: Worldwide Firm-Level Evidence
Description: This paper examines the impact of Foreign Direct Investment (FDI) on knowledge diffusion by analyzing the effect of firm-level FDI activities on cross-border patent citations. We construct a novel firm-level panel dataset that combines worldwide utility patent and citations data with project-level greenfield FDI and crossborder mergers and acquisitions (M&A) data over the past two decades, covering firms across 60 countries. Applying a new local projection difference-indifferences methodology, our analysis reveals that FDI significantly enhances knowledge flows both from and to the investing firms. Citation flows between investing firms and host countries increase by up to around 10.6% to 13% in five years after the initial investment. These effects are stronger when host countries have higher innovation capacities or are technologically more similar to the investing firm. We also uncover knowledge spillovers beyond targeted firms and industries in host countries, which are particularly more pronounced for sectors closely connected in the technology space.
July 12, 2024
A Suggested Medium-Term Fiscal Framework for Guyana
Description: Guyana is growing rapidly, and fiscal policy plays a critical role in ensuring that the country’s wealth is managed effectively and equitably. The paper analyzes crucial elements of a comprehensive fiscal policy framework, anchored on a medium-term fiscal framework, that would help in balancing several, and sometimes competing, fiscal policy objectives common to natural resource rich developing countries.
July 12, 2024
Understanding Barriers to Financial Access: Insights from Bank Pricing Data
Description: Greater availability of financial access related data in recent years is increasingly enabling policymakers to better track and monitor financial access trends and developments. However, data on barriers to financial access, including costs associated with using financial services—a key factor of financial exclusion—remain scarce. To gain insight into the costs of financial access faced by the low-income segments of population, this paper presents an analysis of a novel dataset on bank pricing containing information on fees and charges associated with various banking services—collected as part of the United Nations Capital Development Fund’s (UNCDF) Making Access Possible (MAP) program—based on a market research approach for 34 low- and middle-income countries in the ASEAN, SADC, and WAEMU regions. The results of our affordability analysis reveal that the costs of maintaining a bank checking account and conducting a few basic transactions can exceed 5 percent of monthly income for consumers in more than 10 percent of the countries in the sample, mainly in the WAEMU and SADC regions. These findings underscore the considerable challenge of affordability as a significant barrier to access to financial services, especially for low-income households and SMEs. The analysis also highlights the need to collect more granular data on the affordability aspect of financial access to facilitate more effective policymaking.
July 12, 2024
Distributional Impacts of Heterogenous Carbon Prices in the EU
Description: We analyse the consequences of carbon price heterogeneity on households in The EU from 2010 to 2020. Accounting for both heterogeneity in carbon pricing across emission sources and the indirect effects from inter-industry linkages, we obtain two key findings. First, due to widespread carbon pricing exemptions, household burdens are lower than previously estimated. Second, lower-income groups are affected disproportionately, because they spend a smaller share of their expenditure on products that benefit from exemptions than their higher-income counterparts. Therefore, imposing uniform carbon prices both within and across countries would reduce carbon pricing regressivity on household expenditure in the EU. A global price would be most effective in this regard, as it would raise carbon prices embodied in EU imports. Further, because EU economies are open and apply higher average carbon prices than their trade partners, the domestic revenues exceed the costs embodied in EU household consumptions bundles. This increases the scope for reducing the burden of carbon pricing on lower-income households through revenue redistribution. Our results imply that the ongoing extension of carbon pricing to more sectors through the EU ETS II and the introduction of the EU’s CBAM should make carbon pricing less regressive, all else equal.
July 12, 2024
A Monetary and Financial Policy Analysis and Forecasting Model for the Philippines (PAMPh2.0)
Description: The Bangko Sentral ng Pilipinas (BSP) has enhanced its macroeconomic modeling through the Forecasting and Policy Analysis System (FPAS), transitioning from a multi-equation econometric model to a modernized system centered on the Quarterly Projection Model (QPM). In its new version, the Policy Analysis Model for the Philippines (PAMPh2.0) integrates forward-looking projections, endogenous monetary policy, fiscal and macroprudential considerations, labor dynamics, and addresses complex shocks and policy trade-offs, facilitating effective policy mix determination and supporting real-time policy evaluation. The BSP’s modernization efforts also include refining forecast calendars and strengthening communication channels to accommodate the operationalization of PAMPh2.0. Detailed validation methods ensure empirical consistency. Finally, future refinements will align the model with evolving empirical findings and theoretical insights, ensuring its continued relevance.
July 12, 2024
Nowcasting and Near-Term Forecasting Cambodia’s Economy
Description: Assessing the current state of the economy and forecast the economic outlook in the next few quarters are important inputs for policymakers. This paper presents a suite of models with an integrated approach to forecast Cambodia’s economy in the current and next few quarters. First, we estimate historical quarterly GDP using information extracted from high-frequency indicators to construct quarterly nowcasting model. Second, we forecast current economic activities using a high-frequency data such as credit, export, tourist arrival, foreign reserves, and trading partner’s GDP. Third, we present inflation forecasting models for Cambodia. Fourth, the paper present a vector autoregression model to forecast Cambodia’s GDP in the next few quarters using global forecasts of China’s and US’s economy as well as oil and rice price. This paper showcase how high-frequency data set can be utilized in assessing current economic activities in countries with limited and lagged data.
July 12, 2024
Stepping Up Venture Capital to Finance Innovation in Europe
Description: Relative to the US, productivity growth and investment in R&D in lagging in the EU, where it is more difficult to finance and scale up promising, innovative startups. Many of the most successful EU startups move elsewhere for financing, causing the EU to lose out on both the direct growth benefits and positive spillovers from these innovative firms. The EU could nurture innovative startups by accelerating the development of its venture capital (VC) ecosystem. Reducing regulatory frictions, especially ones that deter pensions funds and insurers from investing in VC, combined with well-designed tax incentives for R&D investments could help accelerate the development of the VC sector. These and other key CMU initiatives, such as the consolidation of stock markets and reforming and harmonizing insolvency regimes, will take time. Given the urgency to boost innovation, giving public financial institutions like the European Investment Fund a more active and expanded role in kickstarting VC markets where needed and in familiarizing investors with the VC asset class can be a helpful interim step.
July 12, 2024
Balancing Environmental, Fiscal, and Welfare Impacts of Transportation Decarbonization in France
Description: France has taken a leadership role in global mitigation and made significant progress towards reducing greenhouse gas emissions, but further efforts will be needed to meet domestic mitigation targets. Accelerating emissions reductions from road transportation will be a key part of this strategy, as they account for nearly one-third of national emissions. At the same time, with the shift to more lightly taxed electric vehicles over the next decade, fiscal revenue from the sector is projected to decline and externalities, such as congestion, to worsen. Building on existing policies, a comprehensive reform that combines revenue-neutral continuous feebate schemes with a gradual introduction of road user and congestion charges could support mitigation targets, while maintaining revenue and regulating externalities. This paper discusses administratively feasible options to introduce such policies as well as key welfare and distributional considerations.