Working Papers
2004
September 1, 2004
R&D, Innovation, and Economic Growth: An Empirical Analysis
Description: This paper investigates the main postulations of the R&D based growth models that innovation is created in the R&D sectors and it enables sustainable economic growth, provided that there are constant returns to innovation in terms of R&D. The analysis employs various panel data techniques and uses patent and R&D data for 20 OECD and 10 Non-OECD countries for the period 1981–97. The results suggest a positive relationship between per capita GDP and innovation in both OECD and non-OECD countries, while the effect of R&D stock on innovation is significant only in the OECD countries with large markets. Although these results provide support for endogenous growth models, there is no evidence for constant returns to innovation in terms of R&D, implying that innovation does not lead to permanent increases in economic growth. However, these results do not necessarily suggest a rejection of R&D based growth models, given that neither patent nor R&D data capture the full range of innovation and R&D activities.
September 1, 2004
Institutions, Program Implementation, and Macroeconomic Performance
Description: This paper assesses empirically the links among a country's institutions and political environment, its implementation of IMF-supported programs, and macroeconomic performance in a sample of 197 programs approved between 1992 and 2002. We find that a stronger institutional and political environment is associated with better macroeconomic outcomes, especially at longer time horizons. This direct beneficial effect of institutions on macroeconomic outcomes is in addition to their indirect effect through better program implementation. We also find that program implementation exerts an independent influence on macroeconomic outcomes, especially over shorter time horizons of up to two years. Better-implemented programs are associated with lower inflation and with initially weaker but ultimately stronger external and fiscal outcomes, but with a statistically insignificant impact on economic growth.
September 1, 2004
Intercreditor Distribution in Sovereign Debt Restructuring
Description: Intercreditor equity represents one of the main objectives of bankruptcy proceedings. Yet, recent restructurings of sovereign debt suggest that violation of intercreditor equity is common. While existing contractual provisions, and guidelines issued by creditor committees, establish fundamental principles about creditor treatment, they seem to remain too vague to guide debt restructuring processes effectively. The paper focuses on distribution, and argues that lack of clear guidelines for distribution may complicate and delay the resolution process and induce undue uncertainty about the predictability and viability of the restructuring outcome. The paper discusses and proposes parameters which may contribute to establishing explicit principles for the assessment of intercreditor equity in distribution.
September 1, 2004
Pension Funds and Emerging Markets
Description: This paper focuses on the investment behavior of pension funds in developed and emerging market countries. First, it analyzes the main determinants of the emerging market asset allocation of pension funds in developed countries. Second, it assesses how pension funds in emerging markets have contributed to the development of local securities markets. Third, it analyzes the determinants of pension funds' investment performance. The paper concludes with a discussion of why the emerging market asset allocation of pension funds in developed countries is likely to increase and what the challenges faced by pension funds in emerging markets are.
September 1, 2004
Microfinance in Africa: Experience and Lessons From Selected African Countries
Description: Based on the experience of selected countries, this paper offers a critical presentation of the development of the microfinance sector in Africa. The paper supports the view that microfinance institutions, especially those engaged in full financial intermediation, complement effectively the banking sector in extending financial services and successfully draw on the rich experience of community-based development and preexisting informal methods of financial intermediation in Africa. Growing linkages between microfinance institutions and the banking system and the dissemination of good practices by nongovernment organizations contribute to the sound development of the sector, supported by regulation and supervision by local authorities.
September 1, 2004
Foreign Currency Deposits and International Liquidity Shortages in Pakistan
Description: This paper studies the implications of foreign currency deposits (FCDs) for international liquidity shortages in Pakistan. The analysis focuses on how the large volume of FCDs and the specific institutional characteristics of those deposits have made the Pakistan economy highly vulnerable to exogenous shocks. The analysis shows that FCDs created another channel for government borrowing, and fiscal sustainability in a "closed" system may be very different from sustainability in a more "open" system. There is a need to think of these issues in terms of total balance sheet vulnerability, and we recommend measures that would make domestic-currency-denominated assets attractive to investors.
September 1, 2004
Monetary and Exchange Rate Policies in Colombia: Progress and Challenges
Description: This paper focuses on monetary and exchange rate policies in Colombia, with particular emphasis on the period 1999-2002, when flotation of the peso and inflation targeting were adopted. We argue, first, in favor of adopting "operational inflation target ranges" and, second, in favor of strengthening the current scheme of foreign exchange options. The impact of reductions in the reference rates of the Central Bank of Colombia is also assessed. We find that a lower central bank policy interest rate is likely to affect demand only if mortgage refinancing takes place. We present preliminary estimates of Taylor rules in an openeconomy framework for Colombia.
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