Asia Rising -- explores Asia's role in the world economy, the challenges faced from globalization, the quest for greater regional financial integration, the problem of lagging investment, and why East Asia performed so much better than Latin America. It also looks at the recovery of Japan and the rise of India and China. The economies of the ASEAN-4 come under the microscope in Country Focus. Other articles examine financial sector reform in Africa and the remaining hurdles to financial integration in the European Union. People in Economics profiles Paul Krugman, Back to Basics focuses on hedge funds, and the Straight Talk column looks at the problem of underdevelopment.
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Thailand is recovering from a challenging year marked by natural disasters of historic magnitude. This 2012 Article IV Consultation highlights that positive signs of a recovery are already under way with sharp improvements seen in high frequency indicators since December 2011. Executive Directors have commended the Thai authorities for their policy response to last year’s floods, which propelled the strong recovery under way. Directors have also supported the authorities’ ambitious reform agenda aimed at promoting more inclusive growth.
Weather-related natural disasters and climate change pose interrelated macro-fiscal challenges. Using panel-VARX studies for a sample of 19 countries in Developing Asia during 1970 to 2015, this paper contributes new empirical evidence on the dynamic adjustment path of growth and key fiscal variables after severe weather-related disasters. It does not only show that output loss can be permanent, but even twice as large for cases of severe casualties or material damages than people affected. Meanwhile, key fiscal aggregates remain surprisingly stable. Event and case studies suggest that this can reflect both a deliberate policy choice or binding constraints. The latter can make governments respond through mitigating fiscal policy efforts such as ad hoc fiscal rebalancing and reprioritization. The findings help better customize disaster preparedness and mitigation efforts to countries’ risk exposure along a particular loss dimension.
Ms. Yevgeniya Korniyenko, Magali Pinat, and Brian Dew
Anecdotal evidence suggests the existence of specific choke points in the global trade network
revealed especially after natural disasters (e.g. hard drive components and Thailand flooding,
Japanese auto components post-Fukushima, etc.). Using a highly disaggregated international trade
database we assess the spillover effects of supply shocks from the import of specific goods. Our
goal is to identify inherent vulnerabilities arising from the composition of a country’s import basket
and to propose effective mitigation policies. First, using network analysis tools we develop a
methodology for evaluating and ranking the supply fragility of individual traded goods. Next, we
create a country-level measure to determine each country’s supply shock vulnerability based on the
composition of their individual import baskets. This measure evaluates the potential negative
supply shock spillovers from the import of each good.
This paper creates the first dataset of bilateral remittance flows for a limited set of developing countries and estimates a gravity model for workers' remittances. We find that most of the variation in bilateral remittance flows can be explained by a few gravity variables. The evidence on the motives to remit is mixed, but altruism may be less of a factor than commonly believed. Most strikingly, remittances do not seem to increase in the wake of a natural disaster and appear aligned with the business cycle in the home country, suggesting that remittances may not play a major role in limiting vulnerability to shocks. To encourage remittances and maximize their economic impact, policies should be directed at reducing transaction costs, promoting financial sector development, and improving the business climate.