Turmoil at Twenty

Pradeep K. Mitra, Marcelo Selowski, Juan F. Zalduendo

Description

The transition economies of Central and Eastern Europe and the former Soviet Union, among all emerging- and developing-economy regions, have been hardest hit by the global economic crisis of 2008-09. This is partly due to the region's deep integration into the global economy across many dimensions-trade, financial, and labor flows. Attempts by countries that came later to the transition to catch up rapidly to Western European living standards at a time when global liquidity was unusually abundant, together with some policy weaknesses, made them vulnerable to reversals in market sentiment.
Written on the eve of the twentieth anniversary of the fall of the Berlin Wall, 'Turmoil at Twenty' analyzes the run-up to the current crisis and addresses a number of key questions related to vulnerability to the recession, expected recovery, and necessary reforms in the region:
▪ Did the transition from command to market economies, and the period during which this took place, plant the seeds of vulnerability that made transition countries more prone to crisis than other developing countries?
▪ Did the choices made on the road from plan to market shape the ability of crisis-hit countries to recover? What combination of domestic policy reform and international collective action is needed to bring about a recovery and minimize the humanitarian cost of the crisis?
▪ What structural reforms are needed today to address the most binding constraints on growth in a world where capital fl ows to transition and developing countries are expected to be considerably lower than before the crisis?
'Turmoil at Twenty' will be of interest to policy makers and their advisers, researchers, and students of economics who seek lessons from the current economic crisis, as well as scholars of the transition.

Sujets

• Arbitrage
• Bank regulation
• Capital account
• Capital (economics)
• Debt
• Debt restructuring
• Emerging markets
• Fiscal policy
• Currency
• Global financial system
• International Bank
• Loan
• Macroeconomics
• Market economy
• Remittance
• Transition economy

Informations

• Publié par: world-bank-publications
• Publié le: 30 octobre 2009
• Nombre de lectures: 24
• EAN13: 9780821381144
• Langue: English
• Poids de l'ouvrage: 4 Mo

Extrait

Turmoil at
Twenty
Recession,RR Rec Recovery, and
Reform in CentrReform in Cen al and
Eastern Euroope and the
Former Soviet Unionormer So
Pradeep Mitra, Marcelo Selowsky,
and Juan ZalduendoTurmoil at
Twenty
Recession, Recovery, and
Reform in Central and
Eastern Europe and the 20Former Soviet UnionTurmoil at
Twenty
Recession, Recovery, and
Reform in Central and
Eastern Europe and the 20Former Soviet Union
Pradeep Mitra, Marcelo Selowsky,
and Juan Zalduendo© 2010 T e International Bank for Reconstruction and Development/T e World Bank
1818 H Street NW
Washington, DC 20433
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Internet: www.worldbank.org
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ISBN: 978-0-8213-8113-7
eISBN: 978-0-8213-8114-4
DOI: 10.1596/978-0-8213-8113-7
Cover photo shows Riga, Latvia. © istock/Sergey Skleznev
Cover design by Naylor Design, Inc.
Library of Congress Cataloging-in-Publication Data has been requested.Table of contents
Acknowledgments xiii
Overview1
1 Prelude to the crisis 25
Vulnerable . . . but with variation 29
Transition meets global f nance 36
Would dif erent macroeconomic policies have lessened vulnerability? 54
Opening the toolkit 60
Annex 1.1 S eparating wheat from chaf —evidence of market
dif erentiation from EMBI spreads 69
Annex 1.2 Finance in transition 70
2 How much adjustment? How much fi nancing? 75
Dif erent shocks for dif erent countries 76
Sharing the burden: private and public, domestic and external 78
Crisis, adjustment, and f nancing in low-income and lower middle-
income CIS countries 91
Of parents and of spring: understanding rollover risks in ECA 95
T ree concluding arguments—three caveats 113
Annex 2.1 Description of the Bank for International
Settlements (BIS) Dataset 115
3 Restructuring bank, corporate, and household debt 117
Financial systems need to be f xed 118
For the lenders: bank restructuring 122
For the borrowers: corporate and household debt restructuring 127
Lessons on restructuring from previous banking and capital
account crises 142
Lessons for strengthening bank regulation and supervision 148
v4 Scaling up social safety nets 163
Existing social assistance programs 164
Safety nets: ready to be scaled up? 167
How important are safety nets in transferring income? 171
Cost of expanding means-tested programs 173
An opportunity for further reform 175
5 Prioritizing structural reform 179
Interpreting business environment surveys 180
Overview of results 183
Growth bottlenecks 185
T e persistence of legacy in shaping the business environment 196
Annex 5.1 Conceptual framework 206
Annex 5.2 M oving away from the benchmark:
f rm characteristics and constraints 210
Annex 5.3 Tables 213
6 The day after 219
Bottlenecks in electricity—an agenda for reform 220
T e education and skills agenda—making the grade 237
Bibliography 253
Boxes
1.1 Shades of vulnerability—a cluster analysis approach to
classifying countries35
1.2 Playing cat and mouse—staying ahead of regulation arbitrage
in Southeastern Europe 52
1.3 Why foreign currency lending did not take of in the Czech
Republic 66
2.1 Sticking together through thick and thin: the European Bank
Coordination (Vienna) Initiative 80
2.2 From Bangkok to Budapest: ECA’s adjustment compared with
East Asia’s 86
2.3 Countercyclical f scal policy in f nancially integrated countries:
Kazakhstan and the Russian Federation 88
2.4 Tajikistan’s declining remittances can hurt the poor
disproportionately 93
vi TABLE OF CONTENTS2.5 Foreign ownership and funding sources 107
3.1 ECA’s growth prospects—green shoots? Maybe. High growth
rates? Unlikely 121
3.3 An agenda for modern banking sector institutions in ECA
countries 151
3.4 Capital—what is it and why require it? 155
3.5 Taking the rough with the smooth—dynamic provisioning in
Spain 158
4.1 Aiming high to serve the poor: Georgia’s new Targeted Social
Assistance Program 168
4.2 Enough bang for the buck? Safety nets in the Russian
Federation 172
5.1 Transition economies converge in structure to market
economies 198
5.2 Comparing constraints in transition (BEEPS 1999–2005) and
nontransition (ICA) countries 203
6.1 Electricity tarif increases and poverty impacts 227
6.2 Ukraine norms for education facilities 249
Figures
1 Means-tested safety nets: targeting accuracy, coverage, and
transfers to the poorest quintile 14
1.1 Income convergence with EU15, by country, 1999 and 2008 26
1.2 Trade integration, by region, 1994–2008 26
1.3 Financial integration, by region, 1994–2008 27
1.4 Labor integration, by country, 2007 and 2008 27
1.5 Capital f ows in developing East Asia 29
1.6 Capital f ows in Europe and Central Asia 30
1.7 Capital f ows in Latin America and the Caribbean 30
1.8 Capital f ows in other emerging economies 31
1.9 Real GDP growth, median values, 2000–08 31
1.10 Current account, net of FDI, median values, 2000–08 32
1.11 Inf ation, median values, 2000–08 32
1.12 Fiscal balance, median values, 2000–08 33
1.13 External debt to GDP, median values, 2000–08 33
1.14 Ratio of short-term debt to foreign exchange, median values,
2000–08 34
1.15 Current account, net of FDI, median per group, 2000–08 38
1.16 Fiscal balance, median per group, 2000–08 38
TABLE OF CONTENTS vii1.17 External debt to GDP, median per group, 2000–08 39
1.18 Short-term debt to foreign exchange reserves, median per
group, 2000–08 39
1.19 Bank ownership patterns in Europe and Central Asia transition
economies, 1997 and 2005 40
1.20 Banking crises in transition economies, 1990–2002 41
1.21 Average return on equity, parent banks and competition,
2004–08 42
1.22 Average return on assets, parent banks and competition,
2004–0842
1.23 Private sector credit to GDP, median value, 2000–08 44
1.24Loans to deposits, median value, 2000–08 44
1.25 Foreign exchange assets to liabilities, median value, 2000–08 45
1.26 Liabilities to equity, median value, 2000–08 46
1.27 Private sector credit developments in 2005–08: catch-up or
excess? 47
1.28Real housing price developments 49
1.29Exchange rate regimes 55
1.30Average policy outcome/stance: exchange rate f exibility, by
group and period 56
1.31Average policy outcome/stance: f scal policy, by group and
period56
1.32 Average policy outcome/stance: monetary conditions, by
group and period 57
1.33 Average policy outcome/stance: nominal exchange rate
volatility, by group and period 57
1.34 Policy response to balance-of-payment pressures: exchange
rate f exibility, by group and period 58
1.35 Policy response to balance-of-payment pressures: f scal policy,
by group and period 58
1.36 Policy response to balance-of-payment pressures: monetary
policy conditions, by group and period 59
1.37 Policy response to changes in net foreign assets: sterilization
of foreign exchange, by group and period 59
1.38 Median real GDP growth, by group and period 64
1.39 Median current account balance, by group and period 64
1.40 Change in real ef ective exchange rate, by group and period 65
1.41 Policy response to balance-of-payment pressures: real ef ective
exchange rate, by group and period 65
viii TABLE OF CONTENTS1.1.1 Country-specif c components of EMBI spreads 70
1.2.1 Financial dee