Working Papers
2000
February 1, 2000
Demographic Transition in the Middle East: Implications for Growth, Employment, and Housing
Description: The working age population is expected to grow faster in the Middle East than in any other region in the world between now and 2015—rising annually by 2.7 percent, or 10 million people. This demographic explosion presents the region with a major challenge in terms of providing jobs, incomes, and housing for the growing population, but the expanding labor force can also be seen as an opportunity to generate higher per capita income growth on a sustainable basis. The paper concludes by emphasizing the importance of market-friendly institutions in turning the challenge into opportunity.
February 1, 2000
Retarding Short-Term Capital Inflows Through withholding Tax
Description: This paper proposes a price-based measure to mitigate the destabilizing impact of the volatility of global capital movements on the domestic economy of a country pursuing sound economic policies. The measure is a withholding tax on all private capital inflows, with a credit and refund provision that operates within the administrative framework of the existing domestic tax system to relieve noncapital inflows from the tax. This withholding tax, which is substantially more difficult to evade than the much-discussed alternative of imposing non-remunerated reserve requirements, can be implemented with little additional costs to the taxpayers and the tax authorities.
February 1, 2000
Currency Crisis and Contagion: Evidence From Exchange Rates and Sectoral Stock Indices of the Philippines and Thailand
Description: This paper analyzes empirically the recent Asian financial crisis using high frequency data of exchange rates and stock indices of the Philippines and Thailand. Utilizing standard time-series techniques, this study confirms that there is evidence that developments in some sectoral indices—including those of banking and financial sectors—seem to have caused upward pressure on exchange rates. A correlation between some of these variables is also found to be strong across countries in the crisis period, thereby confirming the importance of the linkages between financial markets as a transmission channel of the Thai crisis to the Philippines.
February 1, 2000
The Role of the State and the Quality of the Public Sector
Description: This paper discusses issues to be considered in designing “second generation” reforms. These reforms should focus on improving the capacity of the public sector to implement economic policies. The paper contrasts these reforms with those known as first generation reforms, which essentially focused on macroeconomic policies. The paper discusses the role of rules and institutions. It concludes that a high–quality public sector is necessary to ensure that good policies generate desirable and durable effects. The creation of such a sector requires many second generation reforms.
February 1, 2000
Tax Policy for Emerging Markets: Developing Countries
Description: This paper discusses important tax policy issues facing developing countries today. It views tax policy from both the macroeconomic perspective, which focuses on broad questions such as the level and composition of tax revenue, and the microeconomic perspective, which focuses on certain design aspects of selected major taxes, such as the personal income tax, the corporate income tax, the value-added tax, excises, and import tariffs. It provides a review of the rote of tax incentives in these countries, and identifies some policy challenges posed by the globalization of the world economy.
February 1, 2000
Two Approaches to Resolving Nonperforming Assets During Financial Crises
Description: The unprecedented rise in nonperforming assets during the recent Asian financial crisis severely tested the limit and capacity of the existing asset management infrastructure, leading policymakers to consider new approaches to resolve them. This paper examines two such approaches—the creation of asset management companies and the development of out-of-court centralized corporate debt workout frameworks—that came to define the core asset management setting in countries most seriously affected by the crisis. In addition to investigating their respective role, and evaluating their strengths and weaknesses, this paper seeks to benchmark some best practices in their design.
February 1, 2000
The Great Contractions in Russia, the Baltics and the Other Countries of the Former Soviet Union: A View From the Supply Side
Description: The output contractions during the initial transition stages in the Baltics and in Russia and the other CIS countries are examined across several dimensions, and the reliability of the available official statistics evaluated. The depth, length and breadth of the contractions are studied and set against a longer-run historical perspective. The relationship between inputs and outputs as described in a standard accounting framework shows that there is more to the contractions than collapsing investment and shrinking employment. Sharp declines in productivity, reflecting in part transition-related factors, also played a major role.
February 1, 2000
The Transition Economies After Ten Years
Description: This paper summarizes the macroeconomic performance of the transition economies. We first review the initial conditions confronting these economies, the reform strategy that was proposed, and the associated controversies that arose a decade ago. We then account for the widely different outcomes, highlighting the role of exogenous factors and the macroeconomic and structural policies adopted by the countries. We find that both stabilization policies and structural reforms, particularly privatization, contribute to growth. We also conclude that the faster is the speed of reforms, the quicker is the recovery and the higher is growth.
February 1, 2000
Estimation of Trade Protection in Middle East and North African Countries
Description: This paper studies the structure and evolution of trade protection in the Middle East and North African (MENA) countries in the 1990s. MENA countries use tariffs and nontariff barriers, and tariff dispersion and nontariff barriers, as substitute protection measures. Tariff levels and tariff dispersion are complements. Excluding Tunisia, the cross-country correlation between tariff and nontariff barriers is -0.46. The correlation between tariff dispersion and nontariff barriers is -0.8. The paper also develops an overall index of trade protection and finds that tariff levels, their dispersion, and nontariff barriers account for 60 percent, 10 percent, and 30 percent of overall protection, respectively.
February 1, 2000
Discriminating Contagion: An Alternative Explanation of Contagious Currency Crises in Emerging Markets
Description: This paper shows that a country’s vulnerability to contagious crises depends on the visible similarities between that country and other countries that are experiencing crises. A country is vulnerable to shifts in investor sentiment if it exhibits weaknesses in the same economic variables as other countries affected by a contagious crisis (particularly the country that started the contagious wave), or if it is located in the same region. The paper uses a sample of 19 emerging markets, and data from the Mexican, Asian, and Russian crises to provide evidence of this discriminating contagion, after controlling for alternative channels of contagion such as trade spillovers and financial linkages.