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Weicheng Lian, Fei Liu, Katsiaryna Svirydzenka, and Biying Zhu
While South Asia has gone a long way in diversifying their economies, there is substantial scope to do more. Some countries – India, Nepal, and Sri Lanka – can build on their existing production capabilities; others – Bangladesh, Bhutan, and the Maldives – would need to undertake a more concerted push. We identify key policies from a large set of potential determinants that explain the variation in export diversification and complexity across 189 countries from 1962 to 2018. Our analysis suggests that South Asia needs to invest in infrastructure, education, and R&D, facilitate bank credit to productive companies, and open to trade in order to diversify and move up the value chains. Given the COVID-19 pandemic, investing in digital technologies as part of the infrastructure push and improving education are of even greater importance to facilitate the ability to work remotely and assist resource reallocation away from the less viable sectors.
Weicheng Lian, Fei Liu, Katsiaryna Svirydzenka, and Biying Zhu

, 1962 – 2014 Figure 3. Export Diversification Figure 4. Economics Complexity Figure 5. Diversification in South Asia Improved Over Time, 1972 – 2016 Figure 6. Extensive and Intensive Margin Figure 7. Quality Ladder, 2014 Figure 8. Economic Complexity Outlook Index, 2016 Figure 9. The Product Space in India and Bangladesh Figure 10. What Factors Drive Diversification and Complexity Figure 11. Mapping Factors to Observable Data Figure 12. Impact of Structural Indicators on Economic Complexity Relative to One Standard Deviation of the Distribution of

Weicheng Lian, Fei Liu, Katsiaryna Svirydzenka, and Biying Zhu

several South Asian countries increased the diversity and complexity of their exported products ( Figures 3 , 4 and 5 ). Export diversification improved dramatically in Nepal, and both diversification and complexity increased in India and Sri Lanka. Figure 3. Export Diversification Source: IMF (2014) . Figure 4. Economics Complexity Source: The Atlas of Economic Complexity. Figure 5. Diversification in South Asia Improved Over Time, 1972 – 2016 (Share of different sectors in export basket) Source: Atlas of Economic Complexity

Jihad Dagher
Financial crises are traditionally analyzed as purely economic phenomena. The political economy of financial booms and busts remains both under-emphasized and limited to isolated episodes. This paper examines the political economy of financial policy during ten of the most infamous financial booms and busts since the 18th century, and presents consistent evidence of pro-cyclical regulatory policies by governments. Financial booms, and risk-taking during these episodes, were often amplified by political regulatory stimuli, credit subsidies, and an increasing light-touch approach to financial supervision. The regulatory backlash that ensues from financial crises can only be understood in the context of the deep political ramifications of these crises. Post-crisis regulations do not always survive the following boom. The interplay between politics and financial policy over these cycles deserves further attention. History suggests that politics can be the undoing of macro-prudential regulations.
Jihad Dagher

. http://www.ft.com/intl/cms/s/0/aeb06e3c-0096–11e5-a908–00144feabdc0.htmlaxzz45ipm2NGr Fisher , Irving , “ The Debt-Deflation Theory of Great Depressions ,” Econometrica , October 1933 , 1 , 337 – 57 . Friedman , Milton , and Anna J. Schwartz , A Monetary History of the United States, 1867–1960 . Princeton : Princeton University Press , 1963 . Friedman , Jeffrey . “ A crisis of politics, not economics: Complexity, ignorance, and policy failure .” Critical Review 21 , no. 2–3 ( 2009 ): 127 – 183 . Federal Reserve Bank of