PSD-Blog - World Bank Group

Over the weekend the New York Times ran an article about a new application available on Android called Goggles. Google's Goggles is one among a number of new and much-hyped "augmented reality" applications available on phones running Android (and to a lesser extent on the iPhone 3GS). These apps allow users to see additional information layered on top of the world around them. In the case of Goggles, users can take pictures of objects like, say, a mountain, and found out how tall it is. The NYT predicts: It’s not hard to imagine a slew of commercial applications for this technology. You could compare prices of a product online, learn how to operate that old water heater whose manual you have lost or find out about the environmental record of a certain brand of tuna. But Goggles and similar products could also tell the history of a building, help travelers...

Here's a coincidence that got me thinking: this week I came across the prototype UK site "Where does my money go?", the latest in a series of projects that aims to make government spending more transparent (see here and here for more examples). As it happens, I also spent a couple of hours on my favourite charities’ websites trying (unsuccessfully) to figure out where exactly they would invest the money I intended to donate for Christmas (for the record, I still made my donations, but not without some reservations). “Traceability”, I had to conclude, is going to be a big thing in the Development Squared world. Just like government and businesses, due to new technologies, non-profits will be increasingly under pressure to provide easily accessible (and, increasingly, real time) information to answer the “where does my money go” question. When they will be reluctant do so, citizens’ initiatives are likely...

The unemployment rate decreased in 36 US states last month. Many of Europe's banks will find coal in their stockings this year. The Christmas parties aren't going to very good either. Ten predictions for 2010 via Credit Writedowns. Markets in everything, feminist edition. Protesters in Copenhagen have a lot to learn from the past. A look at the economic impact of the World Cup. Bad for GDP, good for stock markets (initially). Great new feature from Brad DeLong: "5 (and sometimes 10) economic paragraphs worth reading." Also via DeLong, a culinary history of Don Quixote. Facebook vs Privacy. (h/t Mike) Paul Volcker is making headlines. The dollar is at its highest since September. As one commentator puts it, "In the land of the blind, the one eyed man is king." Plus, Barry Ritholtz thinks the dollar rally may go on. Is Austria next to join the PIIGs? The Atlantic's most...

A recent by Dani Rodrik paper in Vox outlines the advantages of China's currency policy: If growth depends primarily on the supply of modern manufactured products and other tradables as opposed to services and non-tradables, as I think it does, the Chinese position has more force than critics give it credit. The conventional fix for China’s current account surplus, consisting of a combination of expenditure expansion and currency appreciation, will shift the structure of the economy away from tradables and towards non-tradables. This may be good for macroeconomic balance in China and elsewhere, but it will almost certainly have adverse effects on China’s growth – perhaps large enough to even endanger the country’s social and political stability. Rodrik then makes the case for currency undervaluation as a tool for development: The reason that undervaluation of the currency works as a powerful force for economic growth is that it acts as...

The World Bank's Enterprise Surveys team has published a new survey of businesses in Eastern Europe, analyzing the long-term effects of the financial crisis in the region. The report looks at survey data collected last summer from over 1,600 firms in Bulgaria, Hungary, Latvia, Lithuania, Romania and Turkey, finding that the crisis has had a detrimental effect on demand: Survey data show that in these countries, the major effect of the crisis is a drop in demand. It is not a financial crisis—it is a demand crisis. Sales and capacity utilization decreased in all six countries. Accompanying a drop in demand is a drop in employment, which affects mostly permanent employees. Permanent employment declined in five countries, while temporary employment declined in four. In all countries but Romania, firms are using more internal funds to finance their working capital. However, there is evidence that some firms are in extreme financial...

Bloggers at CGAP are wondering if microcredit squeezes out informal moneylenders, or if microfinance loans can actually lead to additional forms of borrowing. Unfortunately, the latter is quite prevalent. Richard Rosenberg explains: I remember a conversation with Saurabh Sinha years ago in which he said that he and Imran Matin were finding that members of Grameen and other MFIs (microfinance institutions) in several Bangladesh villages used moneylenders as often as non-members, or more often. That sounds counter-intuitive, until we remember that most microcredit requires a fixed weekly repayment schedule that probably doesn’t match up very well with the irregular income streams of many borrowers. It isn’t so surprising that they would occasionally go to a more expensive short-term loan from a moneylender in order to bridge a gap in repayment of a less expensive long-term loan. Businesses small and large do exactly the same thing all the time. Borrowing from...

By now, most everyone is familiar with Dubai's economic woes. The emirate's ongoing economic malaise has had a dramatic effect on the its Western expat population, who are leaving en masse. Fear of debtor's prison has led many to abandon their cars at the airport and catch a one-way flight home, while others have covertly escaped on rafts. Yet roughly 85 percent of Dubai's expatriate population hails from South Asia. How are these migrants faring? Not so well, according to the World Bank's Dilip Ratha, who says that, in spite of reduced employment opportunities, many have little choice but to stay in Dubai and wait out the worst: Many migrant workers, from Bangladesh in particular, are somewhat stuck in Dubai because they cannot afford to return. It costs about 12,000 dirhams to pay recruitment agencies and travel costs. At a monthly income below 900 dirhams – no overtime these days...

Nouriel Roubini thinks that gold is overvalued: The recent rise in gold prices is only partially justified by fundamentals. Nor is it clear why investors should stock up on gold if the global economy dips into recession again and concerns about a near depression and rampant deflation rise sharply. If you truly fear a global economic meltdown, you should stock up on guns, canned food, and other commodities that you can actually use in your log cabin. Roubini has a fair point. For now, it seems difficult to find a method to the madness of gold prices. Inflation fears? Unlikely. A weak dollar? The price of gold hasn't been responsive to the recent dollar rally. So why the sharp rise in price? One explanation comes to mind: buy gold now, because it will surely go up in value later. Uh oh. Back in 2006, I remember watching late-night infomercials selling...

Yesterday I lamented the dearth of optimism regarding the global economy, in spite of the fact that several emerging markets are having a relatively good crisis. Alas, analysts at Moody's have disregarded my plea. In today's Economix, Catherine Rampell points us to a revamped "misery index", which traditionally measures the sum of the unemployment and inflation rates. Since today's inflation rates are relatively low, Moody's has substituted inflation with national fiscal deficits. The result? A lot of misery on the European periphery: Many economists, most notably Paul Krugman, have been calling for increased government spending in order to boost employment. This makes a lot of sense for countries like the United States, where there will be few repercussions from greater short-term deficits, and many benefits from reduced unemployment (including, according to Krugman's logic, an eventual reduction in the long term deficit). Yet for countries such as Latvia, Lithuania, Ireland, and...

The World Bank's Doing Business team has been keeping busy, launching today the first subnational Doing Business in Indonesia 2010 (Doing Business in The Arab World and Russia were also recently launched, as were Paying Taxes and Getting Electricity). From the opening pages: For the first time, Doing Business goes beyond Jakarta to compare cities within Indonesia and identify opportunities for collaboration between national and local governments to cut red tape and reduce the cost of doing business. Although there are differences in the number of procedures, time, and cost to do business in Indonesia, the report finds that some cities already perform up to international standards. What I find most fascinating about the Indonesia report is the disparity in regional performance, which can actually be viewed as a good thing, as it allows regions to learn from one another, rather than from outside countries who may have very different...

Of the myriad lessons we can take away from the financial crisis, the need for grounded, fact-based realism, rather than unquestioning, economic dogma, is on the top of my list. If policymakers and economic actors had listened to the Taleb's, Roubini's and Shiller's of the world early on, America's economic bubble may have deflated before it popped (or at least stopped inflating). Instead, the "musical chairs theory of markets" took reign, and when the music stopped, the entire economic edifice collapsed (and continues to do so). Yet, as the world enters a multi-speed recovery, I can't help but asking, has sober caution given way to steadfast pessimism? Have predictions of gloom clouded the economic debate? For example, in spite of the economic successes coming from emerging markets, particularly in Asia, prophecies of doom seem to make for better headlines. And it's not just the most outspoken, such Niall Ferguson and...

The weekend in Copenhagen was characterized by a plunging thermometer outside - forcing demonstrators to wrap up ever warmer on the streets of the city. Inside the Bella Center, a whole new set of people have arrived, just as negotiations enter into in a fragile state. The second week is VIP week, and so we add around 200 limousines to the general melee. But there is good news: huddled in various hotels and echoing "offices" in the delegation portakabins, national actions are being readied irrespective in some ways of the agreement reached. And in the finance discussions, for the first time in a draft the words "private finance" appeared. The challenge of bridging the $10bn per annum (perhaps) that negotiators hope will be pledged as fast-start funding, to the $200bn or more indicated as necessary, will be resolved in off-site discussions between financiers, governments, some MDBs and others concerned to...

So now the drama really starts ratcheting up inside and out of the Bella Center in Copenhagen. Outside in the kind of biting cold that reminds you of standing (before stadium seating) in a fourth division football match on a Saturday afternoon as a kid, thousands of people are massing to march on the center - they say 50,000 and on the TV screen it looks like it could be. Inside, the entrenched positions see no sign of budging yet and the negotiations are poised for the second week, normally characterized by agreement only at the eleventh hour. (By the way: if you want to know what's going on here, blow by blow, then read the Earth Negotiations Bulletin (from the safety of your warm comfortable abode) - an institution of international sustainable development for 20 years, it is as ever indispensable (disclosure: i sometimes used to help them out))....

Great speech by Adair Turner, Chairman of Britain's FSA. "This was not just a crisis of specific institutions or regulations, but of economic theory." (h/t Max) The World Bank's Caroline Freund asks, "What is holding back African exports"? Rachel Kyte's recommended reading for an overview of climate finance issues. Our East Asia blog discusses a poll revealing that average citizens in China, Vietnam and Indonesia favor action on climate change, even if there are costs The latest word in repairing global imbalances: "Sit bank and relax: US and China, this is going to take a while" Gillian Tett explains why London's role in global finance is being undermined. It's not about new taxes. Global imbalances vs the NBA: Yao Ming edition. Cool economics quiz from the New York Times. Ukraine has requested a $2bn emergency loan from the IMF. The fund has already paid out $11bn. Matt Taibbi's latest polemic:...

A strange day in Copenhagen today. More and more people arriving and the building and the incredibly generous and helpful Danes straining to cope. The Bella Center beginning to look like a scene from a science fiction movie where the whole of humanity takes off from earth into some kind of space vehicle. The rumor, counter rumor, the side shows, the side events, the spontaneous demonstrations in the corridors, the more planned but no less emotional demonstrations by delegations in the plenary and working groups: is there life outside? There were signs of life at Business Day in downtown Copenhagen. Here gathered the business lobby who believes it is part of the solution and who is straining in an atmosphere where it has no place at the international table, though it does at the national level. Yvo de Boer questioned how effective it has been so far both in letting...

Like many of my World Bank colleagues, I begin each day by quickly flipping through the pages of the Financial Times. Many of the ideas I come up with for the blog can be traced back to events and ideas I come across in the FT. However, there is one section that consistently fails to inspire my work, until now... Whenever How to Spend It is included in Friday's paper, Ryan and I jest about the curious idea of a publication offering advice to its readers on how to purchase things they probably cannot afford. (I recall an issue published during the worst of the financial crisis entitled "Yachts that Rock". Today, we are given advice on how Alpine chalet owners can profit from changing trends in ski-tourism.) In the end, the magazine seems more like a fantasy guide for the aspiring rich than a spending manual for the global...

A few months back, Justin Lin, the World Bank's chief economist, and Bill Easterly had a friendly debate about the merits of industrial policy. Lin has been promoting a concept he terms New Structuralist Economics, or what might more plainly be called Industrial Policy 2.0. I was reminded of the debate while reading How Markets Fail, a book that applies some basic lessons about market failures to the financial crisis. John Cassidy, the author of the book and a journalist at The New Yorker, makes the following observation: Two of the biggest success stories in the U.S. economy are commercial aircraft production and the rise of online commerce. At first glance, the two industries don't seem to have much in common, but they share a common heritage: the technologies they are based on—the jet engine and the Internet—were both developed by the government... ...These stories aren't untypical. The list of...

Today IFC and S&P; launched the Carbon Efficient Index for Emerging Markets. The index is designed to closely track the Investable Emerging Markets Index begun by IFC, but is now managed by S&P; with 24% more carbon efficiency. The methodology for measuring carbon efficiency was developed by Trucost, with the support of the UK's Department for International Development. We hope that within three years more than $1bn will be following the index. A modest hope, but it's a signal. More than $5 trillion of funds under management by institutional investors are passively invested. If between 1 and 2 percent are invested in emerging markets - then a small portion of that is where we start. As we discuss the need for financing for climate change in developing countries, it is increasingly important that we think of emerging market entrepreneurs. Their access to long term finance supports their plans to grow...

The World Bank’s Investment Climate Department (CIC) has reviewed the recent literature on the relationship between restrictive regulation, corruption and business environment reforms, finding that corruption is positively correlated with restrictive regulation. Using databases of investment climate reforms (Doing Business) and corruption (World Wide Governance Indicators) from 2005-2008, Figure 1 shows a significant and positive correlation between corruption and the number of procedures for starting a business in 183 countries. The number of procedures is not the only indicator of regulatory barriers that may contribute to corruption. Figure 2A shows that for a given number of procedures, the number of days to start a business is positively correlated with corruption. Figure 2B shows that the greater the number of documents needed to import and export, the higher the corruption rank, even after accounting for the number of procedures to start a business. Analysis of the reform and corruption data from...

I ride an Ulaanbaatar city bus to work almost every day. This is unusual for someone in my position. Most people would expect a driver to pick me up in large, black Toyota Land Cruiser with diplomatic plates. Yet I ride the bus. Everyone thinks this is weird. I’d like to say I do this because I’m deeply concerned about climate change, and eager to reduce my carbon footprint. But the truth is much simpler. In Mongolia’s bitter-cold winters, the bus is much easier than driving. Our office is too small to have its own car and a driver, and driving myself is a chore. My car is locked in a garage 300 meters from my house, behind heavy doors which scrape noisily against concrete and ice when opened. Then I face gridlock traffic, bumpy roads, horrific drivers, and kamikaze pedestrians. In the evening, after being outside in subzero temperatures...