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This paper assesses the relation between access to markets and cultivated land in Sub-Saharan Africa. Making use of a geo-referenced panel over three decades (1970-2005) during which the road network was significantly improved, the analysis finds a modest but significant positive association between increased market accessibility and local cropland expansion. It also finds that cropland expansion, in turn, is associated with a small but significant increase in local gross domestic product. These results are suggestive of agricultural activities that develop at the extensive margin, which are mostly to serve local demand, but are not indicative of commercial agriculture that serves external markets.

This paper proposes a framework for ex ante evaluation of sovereign disaster risk finance instruments available to governments for funding disaster losses. The framework can be used by governments to help choose between different financial instruments, or between different combinations of instruments, to achieve appropriate and financially efficient strategies to fund disaster losses, taking into account the risk of disasters, economic conditions, and political constraints. The paper discusses the framework in the context of a hypothetical country, with parameters selected to represent a disaster-prone small island state. The paper shows how a mix of instruments can be chosen to minimize the economic opportunity cost given the underlying disaster risk faced and prevailing economic and financial conditions.

Financial regulation affects government revenue whenever it imposes both the mandatory quantity and price of government bonds. This paper studies a banking regulation adopted by the National Bank of Ethiopia in April 2011, which forces all private banks to purchase a fixed negative-yield government bond in proportion to private sector lending. Having access to monthly bank balance sheets, a survey of branch costs and public finances documentation, the effect of the policy on government revenue can be tracked. This is compared to three plausible revenue-generating alternatives: raising funds at competitive rates on international markets; distorting the private lending of the state-owned bank; and raising new deposits through additional branches of the state-owned bank. Three main results emerge: the government revenue gain is moderate (1.5-2.6 percent of the tax revenue); banks comply with the policy and amass more safe assets; banks' profit growth slows without turning negative (from 10 percent to 2 percent).

The pattern of debt flows to peripheral European Monetary Union members seems puzzling: they are mostly indirect and channeled through the large countries of the European Monetary Union. This paper examines to what extent the introduction of the euro and the elimination of the intra-area currency risk can explain this puzzle. A three-country dynamic stochastic general equilibrium framework with endogenous portfolio choice and two currencies is developed. In the equilibrium, the core members of the European Monetary Union emerge as the main group of lenders to the peripheral European Monetary Union members. Outside lenders are pushed from the periphery debt markets because of currency risk. The model generates a pattern of debt flows consistent with the data despite the absence of any exogenous frictions or market segmentations.

Groundwater is a vital yet threatened resource in much of South Asia. This paper develops a model of groundwater transactions under payoff uncertainty arising from unpredictable fluctuations in groundwater availability during the agricultural dry season. The model highlights the trade-off between the ex post inefficiency of long-term contracts and the ex ante inefficiency of spot contracts. The structural parameters are estimated using detailed micro-data on the area irrigated under each contract type combined with subjective probability distributions of borewell discharge elicited from a large sample of well-owners in southern India. The findings show that, while the contracting distortion leads to an average welfare loss of less than 2 percent and accounts for less than 50 percent of all transactions costs in groundwater markets, it has a sizeable impact on irrigated area, especially for small farmers. Uncertainty coupled with land fragmentation also attenuates the benefits of the water-saving technologies now being heavily promoted in India.

This paper presents a systematic analysis of the availability and use of fiscal space in emerging and developing economies. These economies built fiscal space in the run-up to the Great Recession of 2008-09, which was then used for stimulus. This reflects a more general trend over the past three decades, where availability of fiscal space has been associated with increasingly countercyclical (or less procyclical) fiscal policy. However, fiscal space has shrunk since the Great Recession and has not returned to pre-crisis levels. Emerging and developing economies face downside risks to growth and prospects of rising financing costs. In the event that these cause a sharp cyclical slowdown, policy makers may need to employ fiscal policy as a possible tool for stimulus. An important prerequisite for fiscal policy to be effective is that these economies have the necessary fiscal space to employ countercyclical policies. Over the medium-term, credible and well-designed institutional arrangements, such as fiscal rules, stabilization funds, and medium-term expenditure frameworks, can help build fiscal space and strengthen policy outcomes.

This paper develops a multi-sector, small open economy Dynamic Stochastic General Equilibrium model, which includes the accumulation of human capital, built via public expenditures in education and health. Four possible fiscal rules are examined for total public investment in infrastructure, education, and health in the context of a sustainable resource fund: the spend-as-you-go, bird-in-hand spending; moderate front-loading, and permanent income hypothesis approaches. There are two dimensions to this exercise: the scaling effect, which describes the level of total investment, and the composition effect, which defines the structure of investment between infrastructure, education, and health. The model is applied to Kenya. For impacts on the non-resource economy, efficiency of spending, and sustainability of fiscal outcomes, the analysis finds that, although investment frontloading would bring high growth in the short term, the permanent income hypothesis approach is overall more desirable when fiscal sustainability concerns are taken into consideration. Finally, a balanced composition is the preferred structure of investment, given the permanent income hypothesis allocation of total investment over time.

This report consists of two parts: Part 1 presents a review of recent economic developments and a macroeconomic outlook. Part 2 focuses in greater depth on a special, selected topic relevant to Malawi's development prospects. This report focuses on agricultural risk management. Malawi is now set to suffer a second year of poor harvests due to the effects of a drought that is sweeping Southern Africa. This drought has had a serious impact both on the economy and on food security, requiring a major humanitarian response. The current situation underscores Malawi's serious need to improve the resilience of the agricultural sector and to develop a better system of risk management. With the country expected to continue to face climate-induced shocks into the future, it is vital that the Government considers how best to mitigate the impact of such shocks. In 2015 Malawi recorded a GDP growth rate of just 2.8 percent, with this low rate the result of both adverse weather conditions and macroeconomic instability. Flooding in southern districts followed by a countrywide drought resulted in a contraction in agricultural production. Maize, the key crop in terms of food security, recorded a 30.2 percent year-on-year drop in production. As a result, an estimated 2.8 million people (17 percent of the population) were unable to meet their 2015/16 food requirements.

The papers in this series aim to provide a vehicle for publishing preliminary results on Macroeconomics and Fiscal Management (MFM) topics to encourage discussion and debate. This paper explores two new financing mechanisms that multilateral and bilateral development agencies could consider deploying to address problems of debt sustainability in small states. In this paper the authors provide an initial assessment of these proposals, informed by analysis of small state indebtedness and recent debt dynamics. Proposed financing instruments are predicated on assumptions that small states face high levels of indebtedness, and that reducing debt levels while increasing climate resilience could sustainably reduce such vulnerabilities. The authors find that levels of indebtedness vary widely across small states. Analysis of small state debt dynamics shows that small state debt accumulation has been driven by large primary and current account deficits and slow economic growth. Debt reduction from new mechanisms can only be expected to be sustainable, therefore, if countries simultaneously address the macroeconomic imbalances driving debt accumulation. The authors demonstrate that, while exposure to natural disasters is likely to have exacerbated economic management challenges in some small states, such exposures are unlikely to be the only important cause of indebtedness. The authors conclude that proposed new financing instruments can potentially help reduce small state debt burdens and gain fiscal space for climate adaptation but will not present a sustainable solution to problems of small state debt risks unless they involve macroeconomic and structural reforms to address the underlying imbalances driving rapid debt accumulation.

This technical note discusses the current status of banking supervision and regulation in Montenegro in the context of select Basel Core Principles (BCP). This note has been prepared as part of a Financial Sector Assessment Program (FSAP) update conducted jointly by the International Monetary Fund (IMF) and World Bank (WB) in September 2015. As agreed with the authorities, the FSAP tea

This paper studies tax withholding on business sales, a widely used compliance mechanism which is largely ignored by public finance theory. The study introduces a withholding scheme, whereby the payer in a transaction collects tax from the payee, in a standard evasion model. If the taxpayer can fully reclaim the tax withheld, withholding is irrelevant to her evasion decision. If reclaim is costly, however, withholding establishes a compliance default. To show this empirically, the analysis exploits a ten-year panel of registration, income tax and sales tax records from 400,000 firms in Costa Rica, and over 20 million third-party information and withholding reports. The paper first documents the anatomy of compliance, providing novel measures of compliance gaps on the extensive, intensive and payment margins. It then shows that interventions leveraging the existing third-party information reduce these compliance gaps only marginally. Coverage by a withholding scheme, in contrast, is correlated with higher reported taxable income both across firms and within firms across time. Quasi-experimental estimations show that a doubling of the withholding rate leads to a 40 percent increase in tax payment among treated firms and a 10 percent increase in aggregate revenue. The mechanisms are incomplete reclaim of the tax withheld and reduced misreporting.

This study attempts to estimate tax compliance costs and assess views of taxpayers on aspects of the tax system in Ethiopia. The study uses evidence mainly from a survey of both formal and informal businesses in Addis Ababa and four major cities (Adama, Hawassa, Mekele, and Bahir Dar) in the four largest regional states. The survey covered 1003 formal businesses and 499 informal businesses. Survey questionnaires were informed by the results of four focus group discussions conducted in Addis Ababa and Adama. The findings of the study are expected to offer tax policy makers and tax administrators an opportunity to pinpoint specific problems to help reduce the cost of complying with tax policies and procedures, thus improving the revenue performance and also the efficiency and business-friendliness of the tax system. The report is organized in four sections. The first part presents an overview of the Ethiopian tax system and recent reform initiatives; second section discusses the research objectives and the methods employed. Section three presents results of the survey while section four presents conclusions and recommendations.

This paper studies the possibility of using financial regulation that prohibits the use of money substitutes as a tool for mitigating the adverse effects of deviations from the Friedman rule. When inflation is not too high regulation aimed at eliminating money substitutes improves welfare by economizing on transaction costs. The gains from regulation depend on the distribution of income and the level of direct taxation. The area under the demand for money curve is equal to the welfare cost of inflation only when there are no direct taxes and no proportional intermediation cost: otherwise, the area under the demand curve overstates the welfare cost of inflation when money substitutes are not important and understates the welfare cost when money substitutes are important.

This report sets forth details of a financial recovery plan designed to help Vietnam Electricity (EVN), and the Vietnamese power sector more generally, to address a series of complex and interconnected challenges over the next 3 to 10 years. These challenges are operational and institutional as well as financial, and will lead to fundamental changes over time in the way that EVN and the overall power sector operate.

Effective January 1, 2018, IFRS 9 Financial Instruments will replace IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). Unlike most publications on IFRS 9, this paper focuses primarily on the application of the new standard on central banks’ foreign reserve assets, which increasingly constitute a substantial part of central banks’ balance sheet. Based on IFRS 9 implementation assessment projects with several central banks, the World Bank RAMP accounting team identified six factors that can help central banks determine appropriate business model for foreign reserve assets. Empirically, the result of applying the six factors has indicated that central banks’ reserve portfolios often display elements of more than one business model; hence management judgment coupled with a well-articulated accounting policy paper will be critical when implementing IFRS 9. Under most central banks reserves management frameworks, performing the solely payments of principal and interest (SPPI) test should be a relatively straightforward exercise, and the practical expedient option under the new impairment provisions should also apply.

The images of flattened buildings and tent cities that dominated the news following the Haitian earthquake of January 12, 2010 triggered an emergency response from the global aid and development community. Foreign governments, multilateral organizations including the World Bank, and NGOs dramatically increased the flow of funding to the devastated country. The money helped pay for emergency relief but also for higher public investment spending that sought to repair damage and press ahead with development projects that had begun before the disaster. Six years later, the flow of aid is declining, and Haiti faces pivotal challenges: how to adapt to the reductions, raise more resources internally, spend more efficiently, and safeguard the fragile social gains it has achieved in a time of extreme hardship. The infrastructure Haiti has acquired in the recent surge of investment is something like a newly built house that lacks furniture and running water, it may look good from the outside but does little for its occupants. For the present, life remains a struggle for most of the country’s 10.4 million people. Thus in addition to growth, the country needs policies that will foster inclusiveness. Analysis and past experience suggest that two factors are key: human capital and political stability. To achieve this goal, Haiti will require a new outlook favoring fair, efficient government and social inclusiveness.

This report reflects significant changes in European Union (EU) corporate financial reporting since 2011. In June 2013, a new accounting directive was adopted, replacing the fourth and seventh directives on company law. A directive amending the 2006 audit directive and a new audit regulation addressing oversight of the most significant audits were adopted in April 2014. The new legislation, summarized in this guide, is a result of several years of drafting and discussions following the financial crisis of 2008 and it represent a landmark in the EU’s efforts to strengthen its corporate sector accounting and auditing. The accounting directive seeks to enhance the quality of financial reporting and expand it, especially with regard to public interest entities, while reducing the administrative burden for smaller companies. The new audit reporting requirements introduced by the regulation are expected to increase the usefulness of statutory audits of public interest entities, such as listed companies, credit institutions, and insurance undertakings, and reduce risks of excessive familiarity between statutory auditors and their clients, encourage professional skepticism, and limit conflicts of interest. The audit directive and the regulation will bring more consistency in audit oversight and quality assurance systems across Europe. Implementation will involve significant challenges and require increased resources to ensure systems function effectively.

This paper analyzes the business cycle characteristics of the economies of the Organization of Eastern Caribbean States using a model of a small open economy subject to interest rate and fiscal expenditure shocks and financial frictions. The paper shows that macroeconomic aggregates in this region are quite volatile, with consumption exhibiting higher volatility than gross domestic product. The analysis also finds that in these economies real interest rates are highly volatile and strongly countercyclical with gross domestic product and other macroeconomic aggregates. Similarly, fiscal expenditures show significant volatility, but are pro-cyclical with gross domestic product. The results suggest two major directions for designing policies to help reduce the volatility experienced by the Organization of Eastern Caribbean States economies. First, Organization of Eastern Caribbean States countries should seek a greater openness to international financial markets, which could help them smooth out the effects of fundamental shocks, such as shocks to technology and terms of trade, and shocks associated with natural hazards. However, this removal of international financial barriers needs to be accompanied by improvements in domestic financial conditions, as this would reduce the vulnerability of these economies to country risk premium shocks. Second, the Organization of Eastern Caribbean States region should try harder to move toward a countercyclical fiscal policy stance, as this could help to stabilize the domestic risk premium and cushion the negative effects of interest rate shocks on economic activity, hence reducing volatility.

During the last decade, the microfinance sector in MENA has caromed from crisis to crisis. Some were caused by problems within the sector itself (Morocco crisis), while others were a product of the political instability that has gripped the region since the beginning of what was known then as the Arab Spring (early 2011). Within this context, this publication was developed as a joint collaboration between IFC’s MENA Microfinance Advisory Team and Sanabel, the Microfinance Network of Arab countries. It adopts the same methodology as the Global Microfinance Banana Skin and focuses on the main risks facing the industry in the Arab World today as seen by a broad range of stakeholders, from donors to microfinance institutions to regulators.

The Indonesia Economic Quarterly (IEQ) has two main aims. First, it reports on the key developments over the past three months in Indonesia’s economy, and places these in a longerterm and global context. Based on these developments, and on policy changes over the period, the IEQ regularly updates the outlook for Indonesia’s economy and social welfare. Second, the IEQ provides a more in-depth examination of selected economic and policy issues, and analysis of Indonesia’s medium-term development challenges. It is intended for a wide audience, including policymakers, business leaders, financial market participants, and the community of analysts and professionals engaged in Indonesia’s evolving economy. This paper discusses about the economic conditions of Indonesia for the year 2015. Emerging market assets rebounded in October 2015 after the sharp losses recorded in August and September, when the uncertainty about the Chinese economic slowdown and the U.S. interest rate outlook was particularly high. Despite a more favorable market sentiment, capital flows to emerging economies have remained weak and borrowing costs relatively high. In addition to tight financing conditions, Indonesia faced subdued external demand for its exports in the near term and persistently low commodity prices over the medium run. In 2015, fire in Indonesia cost nearly twice that of reconstruction following the 2004 tsunami in Aceh. Agriculture and forestry have sustained losses and damages in trillions. Sustained exposure to haze could also lead to the volcano effect, i.e., a decrease in plant productivity in the short term due to limited sun exposure and a deleterious effect on plant physiology and photosynthesis. The recurring nature of Indonesia’s fire crisis is of particular concern. Another potential step in Indonesia’s new reform process was the country’s signaling its intention to join the Trans-Pacific Partnership (TPP) agreement in the near future. Whether membership materializes or not, the agreement is likely to have a limited impact on trade, because import tariffs in member countries are already low and Indonesia has trade agreements with most of them.

Bhutan’s hydropower generation potential raises the prospect of tremendous development opportunities for the country: fast increasing export revenue, sustained economic growth, and rapid poverty reduction. Driven by developments in the hydropower sector, the country has grown at an average rate of 7 percent per year over the last decade, while poverty has declined remarkably fast. But hydropower development also creates significant challenges as follows: (i) macroeconomic instability; (ii) lack of self-reliance; and (iii) few private sector jobs. This policy note assesses the opportunities and challenges associated with hydropower development. It informs a possible strategy supportive of macroeconomic stability, fiscal self-reliance and private sector development. And it argues that fundamental changes in public finance, amounting to a paradigm shift, are central to the implementation of such strategy.

The Lebanon Economic Monitor provides an update on key economic developments and policies over the past six months. It also presents findings from recent World Bank work on Lebanon. It places them in a longer-term and global context, and assesses the implications of these developments and other changes in policy on the outlook for Lebanon. Its coverage ranges from the macro-economy to financial markets to indicators of human welfare and development. It is intended for a wide audience, including policy makers, business leaders, financial market participants, and the community of analysts and professionals engaged in Lebanon.

The Report on the Observance of Standards and Codes - Accounting and Auditing (ROSC A&A) program is part of a 12-module joint World Bank-IMF initiative to assist member countries to strengthen their financial systems by improving their capacity to comply with internationally recognized standards and codes. The program focuses on the institutional framework underpinning national accounting and auditing practices, and degree of conformity with international standards and good practices. The initial ROSC A&A for Rwanda was carried out in 2008 and provided a key input in designing necessary financial reporting reforms in the country. The 2015 update is a valuable tool for monitoring the effectiveness of the reform program. It assesses the degree to which the recommendations of the 2008 ROSC A&A review have been implemented, identifies issues that have emerged since the last review, and proposes a number of recommendations aimed at further strengthening the quality of corporate financial reporting and auditing which contributes to improving business climate, investors’ confidence and economic growth potential of Rwanda.

This background paper describes five different tools that can be used for the assessment of tax incentives by governments in low income countries’ (LICs). The first tool (an application of cost-benefit analysis) provides an overarching framework for assessment. Evaluations of the various costs and benefits of tax incentives are vital for informed decision making, but are rarely undertaken, partly because it can be a difficult exercise that is demanding in terms of data needs. The next three tools (tax expenditure assessment, corporate micro simulation models, and effective tax rate models) can be used as part of a comprehensive cost-benefit analysis, to shed light on particular aspects. Effective tax rate models shed light on the implications of tax parameters - including targeted tax incentives - on investment returns and help understand the implications of reform for expected investment outcomes. The document presents two tools for assessing the transparency and governance of tax incentives in LICs. These discuss principles in transparency and governance of tax incentives, and allow for benchmarking existing LIC practices against better alternatives.

Chinas economic growth continues to moderate, in 2014 gross domestic product (GDP) expanded by 7.4 percent, within the governments indicative growth target of about 7.5 percent for the year, but sharply slower than the 10 percent annual growth rate china averaged for three consecutive decades. An orderly correction in real estate - reflecting policy efforts to reduce supply mismatches and tighten nonbank credit - continues to weigh on economic activity. Ongoing adjustments in real estate, a buildup of excess capacity, and decelerating export growth are affecting industrial activity. In contrast growth in services remained robust as composition of growth continues to improve.

Using the universe of all externally issued bonds by corporates and sovereigns in emerging and developing economies during 2000-14, this paper analyzes various issuance trends, including the unprecedented post-crisis surge. The paper focuses on external issuance at the country-industry and individual bond levels and finds that global factors matter greatly for emerging and developing economies issuance. A decrease in U.S. expected equity market (or interest rate) volatility, U.S. corporate credit spreads, and U.S. interbank funding costs and an increase in the Federal Reserve’s balance sheet (i) raise the odds that the monthly issuance volume of a country-industry is above its historical average; (ii) decrease individual bond yields and spreads; and (iii) raise bond maturities, after controlling for country pull factors, bond characteristics (for example, type of issuer, industry, and riskiness). Additionally, we document support that the risk-taking channel of exchange rate appreciation also operates for external bond issuance. Moreover, while the paper finds that country pull factors affect the impact of global factors, it does not find consistent evidence for this across the board. This result suggests that, during loose global funding conditions, flows are mostly driven by push factors and do not systematically discriminate between emerging and developing economies. Taken together, the findings suggest that although issuers might be able to benefit from benign international funding conditions, the large issuance volumes, currency risks, and high exposure to global factors could pose external and domestic challenges for policy makers, particularly when global cycles reverse.

The aim of this report is to illustrate the steps court users take in order to protect their interests through procedures carried out by courts. The focus is on the difference between the procedure in the law and actual practice. In outlining these differences, the report shall identify procedural inefficiencies, bottlenecks and potential areas for improvement of the procedure. It shall also estimate the approximate costs of these procedures to the parties.

This report offers five policy recommendations that could contribute to the attraction of manufacturing FDI in Africa. To further the benefits of FDI, especially in the manufacturing sector, policymakers in Africa should: First, manage FDI flows and FDI-related policies in a way that maximizes spillovers in host countries. Second, realize the emergence of FDI from newpartners, especially in manufacturing FDI, and establish platforms that help in the attraction ofnew FDI. Third, increase investment on key infrastructure to overcome constraints for manufacturing activities to develop, especially in power supply and transportation and logistics services. Fourth, take better advantage of the currently dominating market-seeking manufacturing FDI to improve the weak industry base in the shortterm. Market-seeking FDI has a sizeable positivecontribution to the host economy. Fifth, strengthen the linkages between domestic material input and foreign manufacturing investment.

Kenya’s economic performance remains solid, underpinned by strong infrastructure spending and consumer demand, which are driving growth. Growth in 2015 is estimated at 5.4 percent, a 0.6 percent downward revision from its estimate in December 2014. The revision reflects the strong headwinds the economy is facing in the foreign exchange market and the monetary policy response to calm those fears.

This background note focuses on the use of bond buybacks and bond exchanges in the domestic government securities market. The objective is to provide an overview of their functions and of the procedures that facilitate their implementation, using country examples as illustrations.

Thesis aim of this draft background note is to provide public debt managers with an overview of the matters that need to be considered by debt management offices planning to provide a securities lending facility to their primary dealers.

The Lebanon Economic Monitor provides an update on key economic developments and policies over the past six months. It also presents findings from recent World Bank work on Lebanon. It places them in a longer-term and global context, and assesses the implications of these developments and other changes in policy on the outlook for Lebanon. Lebanon continues to be impacted by the domestic political stalemate and regional turmoil, particularly along its border with Syria. Economic activity picked up in the second half of 2014. Stronger economic performance and lower oil prices pushed real GDP growth to an estimated 2.0 percent in 2014, compared to 0.9 percent in 2013. One-off cosmetic and unsustainable measures rather than policy actions helped improve the fiscal balance in 2014. We estimate the overall fiscal deficit to have declined by 2.3 percentage points. Declining imports lead an improvement in the current account balance. In 2014, a fall in merchandize imports induced a 4.4 pp reduction in the current account deficit to a still-elevated 22.2 percent of GDP. This trend is projected to continue in 2015 helped by falling oil prices and a depreciating euro, Headline inflation plummeted from 2.7 percent in 2013 to 1.9 percent in 2014 and is expected to remain tempered over the medium term. Lebanon s economy continues to be exposed to external shocks. The border with Syria is increasingly menacing as coordinated attacks by ISIS and Al Nusra are being launched more frequently from their bases in Syria. Inefficiencies in power generation impose sizable macroeconomic costs on Lebanon. The Lebanese electricity sector has been underperforming for decades with considerable socio-economic costs. The macroeconomic impact has been massive.

Better insurance against rainfall risk could improve the security of hundreds of millions of agricultural households around the world. However, customers have shown little demand for stand-alone insurance products. This paper theoretically and experimentally analyzes an innovative financial product called a Weather Insurance Savings Account (WISA), which combines savings and rainfall insurance. The paper uses a standard model of intertemporal insurance demand to study how customers demand for a WISA varies with the amount of insurance offered. A laboratory experiment is then used to elicit participants valuations of pure insurance, pure savings, and intermediate WISA types. Contrary to the standard model, within-subjects comparisons show that many participants prefer both pure insurance and pure savings to any interior mixture of the two, suggesting that market demand for a WISA is likely to be low. Additional experimental and observational evidence distinguishes between several alternative explanations. One possibility that survives the additional tests is diminishing sensitivity to losses, as in prospect theory.

Armenias economic growth remained resilient in 2014. Output expansion slowed to 3.4 percent in 2014, relative to 3.5 percent in the previous year. On the supply side, while services particularly transport and telecoms), agriculture, and manufacturing performed well, construction, mining, and energy made negative contributions to output growth. On the demand side, net exports were the main contributor to growth, offsetting weak private consumption and negative private investment. However, by the last quarter, Russias economic slowdown and the steep depreciation of the ruble began to depress remittances, FDI inflows, and exports. Few jobs were created during the year, and the unemployment rate reached to 17.6 percent in 2014. A weak labor market, combined with slower emigration and return migration from Russia, are likely to have undermined growth in the incomes of the poor. Declining remittances and higher inflation in the last few months of 2014 reinforced these trends. Poverty at US$2.5/day was 30.2 percent in 2014, still above the levels recorded in the period leading up to the 2008 financial crisis. Fiscal policy continued to be prudent throughout the year, and monetary tightening responded to the currency depreciation. Developments in Russia will adversely affect economic growth in 2015, underscoring the needfor Armenia to press ahead with structural reforms.

The Pakistani economy faced four major domestic shocks as of April 2015: (i) a political sit-in by opposition parties in Islamabad that lasted between August and December and raised significant political uncertainty; (ii) the September floods in Punjab that affected agricultural crops; (iii) the postponed sale of Oil and Gas Development Company Limited (OGDCL) equity shares in November that reduced its expected privatization proceeds and foreign direct inflows (FDI); and (iv) the terrorist attack in a school in Peshawar that heightened security concerns. However, supported by a favorable slump in international oil prices, and steady implementation of structural reforms by the government, the economy is improving. Preliminary data for the first half of FY15 show growth picking up, driven mainly by strong performance in the agriculture and services sectors. Despite the floods last year, growth improved in the cotton, wheat, and rice crops. The services sector was boosted by transport, storage, communications, finance, and insurance. On the demand side, growth continues to be driven by private consumption partly fuelled by high remittance inflows. Credit to the private sector continued to grow, but slightly less rapidly than last year: as a percentage of GDP, it fell to 13.4 percent in January 2015 compared with 14.1 percent in January 2014. Pakistan is on track to meet a fiscal deficit target of 4.8 percent of GDP in FY15. The newly elected government appears to be committed to fiscal discipline and has made fiscal consolidation the cornerstone of its economic program supported by the IMF, the World Bank and other donors. At present, Pakistan is facing three sources of risk: first is the prospect of an early reversal of the fall in oil prices. Second is the repeat of political events of the first half that keep FDI flows and private investment low; and also affects foreign reserves, privatization program and growth prospects. An uncertain political environment undermines investor confidence and depresses economic activity. Third is the continuation of a troubled domestic energy sector that continues to endure a long-due complex inheritance on its circular debt. Given past trends and the current growth rate, poverty is expected to continue to fall and shared prosperity to improve in this and the next fiscal year. However, a large mass of the population is clustered around the official poverty line, so that small improvements in household real consumption can translate into substantial movement in poverty in either direction.

Migration experiences are often associated with some sort of transnational economic activity which connects the past and the present of migrants abroad, and specifically with remittances. Motivations to send money at origin have been deeply investigated at the micro as well as at the macro level, as remittances can affect recipient households’ well-being, investment and consumption levels in the receiving countries and play an insurance role against external shocks. This paper contributes to the literature on migrants’ remittances providing evidence for migrants from Morocco, Peru and Romania, three traditional labor-exporting countries with a medium level of economic development, from three different geographical areas and with different migration patterns to Italy. Exploiting a relatively rich, albeit small-scale, dataset we analyze the spatial distribution of migrants’ nuclear families and households and we build three different migratory profiles, Loners, Pioneers and followers, characterized by the timing and sequence of the migration event with respect to the rest of the nuclear family. Then author test a negative binomial model to describe the variation in the variable ‘remittances amount’. Beyond cross-country variations and after controlling for the most commonly used individual demographic and economic characteristics, our analysis consistently clusters migrants according to their family and household structure in Italy and abroad to explain the total amount of remittances sent to the origin country.

Russia's economy experienced two shocks in 2014. On top of the structural crisis that began in 2012, Russia had to deal with cyclical and idiosyncratic challenges to the economy. One of the new shocks illustrates Russia s integration into the world economy through its natural resource exports, and thus its dependence on the global commodity cycle: oil prices more than halved between July and December 2014, giving Russia a terms-of-trade shock. The ruble lost 46 percent of its value against the US dollar, which worsened already eroded business and consumer confidence. The monetary tightening in response made credit expensive, further dampening domestic demand. The other, more idiosyncratic, shock was related to the geopolitical tensions that began in March 2014 and led to economic sanctions. The tensions not only heightened perceptions that Russian investments had become riskier, they also dramatically increased the costs of external borrowing for Russian banks and firms. Spreads on Russian credit default swaps peaked in December at 578 basis points, compared to 159 a year ago. Together with the financial sanctions imposed on Russia in late July, which have restricted the access of Russia s largest state-connected banks and firms to Western international finance markets, this all but extinguished investment. The current World Bank baseline outlook, however, sees the national poverty rate increasing from 10.8 percent in 2013 to 14.2 percent in 2015 and 2016. Poverty is expected to increase because real disposable income and consumption will decline. This would be the first significant increase in poverty rates since the 1998-1999 crises. Russia weathered the 2008- 2009 crisis well as disposable incomes continued to grow slightly. Given the current limited fiscal space, additional support for the poor and vulnerable is likely to be less generous than it was during the 2008-2009 crisis. Although people at the bottom of the income distribution are the most vulnerable, there will be less opportunity for an increase in shared prosperity in 2015-2016, and there is a worrisome possibility that recent achievements might be reversed.

Growth rebounded in 2014 along with the lift of restrictions over credit and imports, tourism expansion, and the resumption of hydropower investment. Bhutan’s significant dissaving is illustrated by a large current account deficit. Priority will have to be given to private sector development and asset diversification if Bhutan wants to reduce its vulnerability to donor finance and address rising youth unemployment.

This paper estimates the effects of peer benchmarking by institutional investors on asset prices. To identify trades purely due to peer benchmarking as separate from those based on fundamentals or private information, the paper exploits a natural experiment involving a change in a government imposed underperformance penalty applicable to Colombian pension funds. This change in regulation is orthogonal to stock fundamentals and only affects incentives to track peer portfolios allowing the authors to identify the component of demand due to peer benchmarking. The authors find that peer effects among pension fund managers generate excess in stock return volatility, with stocks exhibiting short-term abnormal returns followed by returns reversal in the subsequent quarter. Additionally, peer benchmarking produces an excess in comovement across stock returns beyond the correlation implied by fundamentals.

Panama's economic growth has been at the top of the Latin American and Caribbean (LAC) region in recent years. The country s rapid growth has been largely pro-poor and translated into significant poverty reduction. The new Administration is well placed to tackle these challenges, with its commitment to maintaining an open and diversified economy and redressing social imbalances. Looking ahead, the country s main challenges are to maintain the current growth performance and ensure that its benefits are extended to all. The World Bank Group s (WBG) new Country Partnership Framework (CPF) seeks to support Panama s continued high growth, while ensuring inclusion and opportunities for marginalized groups, and bolstering resilience and sustainability. These themes are highlighted as priorities in the Government s 2014-2019 Strategic Development Plan (SDP) and in the WBG s Systematic Country Diagnostic (SCD). The CPF seeks to maximize over a six-year period, the comparative advantages of the WBG, through packages of innovative public and private financing options based on cutting edge global knowledge and experience.