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Alassane Drabo
The three main financial inflows to developing countries have largely increased during the last two decades, despite the large debate in the literature regarding their effects on economic growth which is not yet clear-cut. An emerging literature investigates the dependence of their effects on some country characteristics such as human and physical capital constraint, macroeconomic policy and institutional capacity. This paper extends the literature by arguing that climate shocks may undermine the effect of Foreign Direct Investment (FDI), official development assistance (ODA) and migrants’ remittances on economic expansion. Based on neoclassical growth framework, the theoretical model indicates that FDI, ODA, and remittances improve economic growth, and the size of the effect increases with good absorptive capacity. However, climate shocks reduce this positive effect of financial flows in developing countries. Using a sample of low and middle-income countries from 1995 to 2018, the empirical investigation confirms the theoretical conclusions. Developing countries should build strong resilience to climate change. Actions are also needed at global level to reduce greenhouse gases emissions, and build strong structural resilience to climate shocks especially in developing countries.
Rahul Giri, Mr. Saad N Quayyum, and Rujun Yin
We identify key factors, from large set of potential determinants, that explain the variation in export diversification across countries and over time using Bayesian Model Averaging (BMA), which addresses model uncertainty and ranks factors in order of importance vis-a-vis their explanatory power. Our analysis suggests, in order to diversify, policy makers should prioritize human capital accumulation and reduce barriers to trade. Other policy areas include improving quality of institutions and developing the financial sector. For commodity exporters reducing barriers to trade is the most important driver of diversification, followed by improving education outcomes at the secondary level and financial sector development.
Mr. Andrew M. Warner
The global boom in hydrocarbon, metal and mineral prices since the year 2000 created huge economic rents - rents which, once invested, were widely expected to promote productivity growth in other parts of the booming economies, creating a lasting legacy of the boom years. This paper asks whether this has happened. To properly address this question the empirical strategy must look behind the veil of the booming sector because that, by definition, will boom in a boom. So the paper considers new data on GDP per person outside of the resource sector. Despite having vast sums to invest, GDP growth per-capita outside of the booming sectors appears on average to have been no faster during the boom years than before. The paper finds no country in which (non-resource) growth per-person has been statisticallysignificantly higher during the boom years. In some Gulf states, oil rents have financed a migration-facilitated economic expansion with small or negative productivity gains. Overall, there is little evidence the booms have left behind the anticipated productivity transformation in the domestic economies. It appears that current policies are, overall, prooving insufficient to spur lasting development outside resource intensive sectors.
Mr. Serhan Cevik and Mr. Mohammad Rahmati
This paper provides a broad empirical analysis of the determinants of post-conflict economic transitions across the world during the period 1960–2010, using a dynamic panel estimation approach based on the system-generalized method of moments. In addition to an array of demographic, economic, geographic, and institutional variables, we introduce an estimated risk of conflict recurrence as an explanatory variable in the growth regression, because post-conflict countries have a tendency to relapse into subsequent conflicts even years after the cessation of violence. The empirical results show that domestic factors, including the estimated probability of conflict recurrence, as well as a range of external variables, contribute to post-conflict economic performance.
Mr. Mustapha K. Nabli and Mr. Rabah Arezki
This paper takes stock of the economic performance of resource rich countries in the Middle East and North Africa (MENA) over the past forty years. While those countries have maintained high levels of income per capita, they have performed poorly when going beyond the assessment based on standard income level measures. Resource rich countries in MENA have experienced relatively low and non inclusive economic growth as well as high levels of macroeconomic volatility. Important improvements in health and education have taken place but the quality of the provision of public goods and services remains an important source of concerns. Looking forward we argue that the success of economic reforms in MENA rests on the ability of those countries to invest boldly in building inclusive institutions as well as high levels of human capacity in public administrations.
Mr. Jean-Claude Nachega and Mr. Thomson Fontaine
This paper investigates empirically the sources of aggregate output growth and the determinants of total factor productivity (TFP) in Niger between 1963 and 2003. A growth accounting analysis indicates that the erosion in output per capita over the sample period is due to the negative growth of both TFP and physical capital per capita. Sound macroeconomic policies, supported by official development assistance and structural reforms, are found to be key to raising TFP growth.