Whither macro-prudential policies after the crisis?

The session, Financial Crisis and the role of Macro-Prudential Policies, sponsored by the World Bank Institute, focused on the role of macro-prudential policies, regulation and financial supervision in the post-crisis scenario. As was proven by the emergence of the crisis, traditional macro-prudential regulations were insufficient; hence, there is room for discussion of new and innovative approaches that may help to achieve financial stability.

The session showcased various innovative viewpoints on prudential policies to deal with the adverse changes in macroeconomic and financial conditions, as well as systemic risk. The session highlighted the determinants and tools that can be used for identifying, analysing and curtailing the next possible financial crisis. The panellists represented both national Central Banks and International Financial Institutions (IFIs).

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‘Context is King’ in bridging research and policy

Research Shaping Policy Session

Research Shaping Policy Session

The new buzzword around the world is ‘evidence-based policymaking’. But how effectively does research reach and inform policies in the real world, and what is the role of think tanks in bridging this divide? The Directors of three Think Tanks in Colombia, Chile and Equador shared tactical approaches in a session entitled Research Shaping Policy: Latin America’s Experience, and lived up to their reputation for ‘fierce debate’.

The GDNet-convened session highlighted how crucial  the political context is in shaping the effectiveness of think tank interventions in a country. For Orazio Belletini, Executive Director of FARO in Equador, rapid turnover of politicians is a constant problem: Ministers of Finance last an average of only six months in his country. Information is scarce, dispersed, highly technical and difficult for policymakers to use.  “The political landscape is characterised by ideological fragmentation and volatile coalitions”, he said. “By the time a researcher has finished his policy paper, the Minister interested in the results is no longer in office”.

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The emerging landscape of aid

Helen Milner

Helen Milner,  Director of the Niehaus Center for Globalization and Governance at Princeton’s Woodrow Wilson School addressed foreign development aid from a geopolitical perspective in the fifth plenary of GDN’s 12th Annual Conference. In contrast to the previous high-profiled participants who were economists, she comes from the Political Science world. Her presentation argued how aid is an integral part of countries’ foreign policy, and how changes in the international system are transforming aid.

Professor Milner started by sketching the history of aid and locating its origins in the Marshall Plan. She highlighted how an ‘international aid regime’ has been created by the ‘traditional donors’ (USA, Japan, Western Europe) during the last 20 years through agreements, such as: DAC principles, Paris Declaration, Monterrey Consensus, Millennium Development Goals and the Accra Agenda, among others. However, new donors such as China, Brazil and India do not seem to be following these guidelines.

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Which Foreigners Are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI

During the GDNet Awards and Medals Finalists Communications training that took place on the 11-12 January, 2010 participants were asked to write a blog to capture the key issues underpinning their work.

The following blog post is by Tomáš Havránek.

Developing and transition countries try to attract foreign investors. Some give them money, some give them tax incentives. And the most important reason behind these subsidies is that policy-makers believe that FDI has positive effects on domestic firms. Recently, researchers in this area have been focusing especially on knowledge transfer from foreign investors to their local suppliers.

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Tool to rationalize hometown investment by overseas Filipinos eyed

Alvin Ang and Jeremaiah Opiniano

During the GDNet Awards and Medals Finalists Presentation Skills Training that took place on the 11-12 January, participants were asked to write a blog to capture the key issues underpinning their work.

We feature here a blog written by Alvin Ang and Jeremaiah Opiniano, from the University of Santo Tomas Research Cluster on Culture, Education and Social Issues in the Philippines, who were last night declared the winner of the Japanese Award for Outstanding Research on Development (ORD).

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Financial Inclusion for Development: How to get Banking to the Poorest?

Guillermo Perry

The panelists in the third Plenary Session of GDN’s 12th Annual Conference addressed how the financial sector can support the achievement of the Millennium Development Goals (MDGs), by means of improving financial depth and access, while paying close attention to the formulation of relevant policies and the role played by its main actors.

The first panelist, Fabrizio Coricelli, Associate Researcher of the Paris School of Economics, said that poverty in developing and transitional economies can be alleviated by widening people’s access to financial services. He suggested that there are two dimensions to the problem: demand and supply and he proposed that the greatest potential for widening access lies in better supply. One promising approach is connecting social cash transfers programs to financial services, which would lower administrative costs for the banks, thereby increasing the attractiveness of carrying out business with lower income groups.

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The second plenary of GDN’s twelfth Global Development Conference addressed the issue of “Rethinking Microfinance”.

Victor Murinde

Victor Murinde

For many years, microfinance has been perceived as a kind of ‘magic bullet’ that raises the income and consumption of the poor and helps them cope with poverty. For its supporters, microfinance is not about income or consumption, but rather freedom and empowerment (Rich Rosenberg CGAP). But the perception of microfinance is changing.

A study on the impact of Spandana microfinance in South India presented by Professor Dean Yang, Associate Professor at the University of Michigan, shows that the impact of microcredit schemes differ by subpopulation. He found that those who already have businesses invest in durables and restrict their consumption, while those who do not have or want a business consume more. Proof perhaps, that microfinance is not quite the magic bullet as its supporters propose.

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The emerging landscape of development finance: the Bourguignon perspective

Francois Bourguignon speaking in the Plenary Session

Francois Bourguignon

Is the global financial crisis at the heart of the emerging landscape of development finance? Francois Bourguignon, at the opening plenary of GDN’s Annual Conference, says not. Bourguignon, Director of the Paris School of Economics, speaking in the session ‘Financing Development in a Post-Crisis World: The New Agenda’ believes that the changes in the global economy had already been set in motion before the crisis. This was underpinned by a shift over time from a focus on the quantity to quality of development finance.

For many years, policy makers and academics talked about a two gap model, which saw development countries as lacking investable resources and foreign currency. The solution to this problem was seen as increasing foreign flows, and this led to a focus on North-South flows of finance.

The quantity of development finance is no longer seen as the primary restraint on development. Bourguignon was keen to point out that this shift is linked to the evolution of the global economy, and the acceleration of growth rates in the South.

Emerging Economies

In the majority of emerging economies, finance is not seen as a problem because of advances in international capital markets, countries and their financial sectors. It was also outlined how this situation has been enhanced by domestic saving rates, which have increased by around 3.5% since the 1970s in low and middle-income countries (increasing from 20% to 23.5%).

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GDN Conference opens with Colombian optimism

 Colombian President Juan Manuel Santos address at the GDN 12th Annual Conference

Colombian President Juan Manuel Santos

Juan Manuel Santos, the President of Colombia, welcomed GDN’s 12th Annual Conference back to the Latin American continent for the first time in nine years. He spoke of the importance of the conference in bringing together critical thinkers to inform good policy decisions. “We never make decisions with 100% certainty that it will be right, but institutions like GDN, which the entire world acknowledges is of the highest intellectual level, can give us important guidance and signals….to make our world a better world.”

The President, looking relaxed but walking with a stick as a result of an injury sustained during a friendly with Colombia’s talented Sub20 football team, talked about the failure of economists to predict the 2008 global financial crisis. He said that he hoped the Colombian team, who have gone to Peru to play a preliminary for the World Cup, would do better than the economists.

The President looked forward to a healthy economic future for his country. He spoke about the progress made in recent years to stem the violence in Colombia, and outlined the five ‘vehicles for growth’ which would establish the country’s economic place in the world. He put a figure on his ambitions for growth for the first time, to the delight of the media (link to Santiago’s story), as more than 5% per year.

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Financing development in a post-conflict world: The new agenda

Panel plenary session 1 - Financing development in a post-crisis world: The new agenda

Panel plenary session 1 - Financing development in a post-crisis world: The new agenda

The panelists in the first Plenary Session of GDN’s 12th Annual Conference agreed that financing has become widely available for developing countries in the past few years, and that the main issue has become how to allocate it.

Francois Bourguignon, Director of the Paris School of Economics, claimed that financing has increased significantly in the last years and the main issue has become finding the most suitable finance scheme to maximize social return and avoid a poverty trap. Asli Demirguc-Kunt, Chief Economist of the Financial and Private Sector Network in the World Bank, pointed out that there are some undesirable effects of having such a wide availability of financing, including the irresponsible expansion of access to credit. But at the same time, she acknowledged that financial systems, and financing in general, are still crucial to developing economies because they underpin economic development. She suggested that in order to attain sustainability, the State must play a clear and defined role and that regulations have to be well formulated and enforced.

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