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61. A Roadmap for Investment Promotion and Export Diversification: The Case for Jordan

Author:
Ricardo Hausmann, Patricio Goldstein, Ana Grisanti, Tim O'Brien, Jorge Tapia, and Miguel Ajgel Santos
Publication Date:
12-2019
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Jordan faces a number of pressing economic challenges: low growth, high unemployment, rising debt levels, and continued vulnerability to regional shocks. After a decade of fast economic growth, the economy decelerated with the Global Financial Crisis of 2008-09. From then onwards, various external shocks have thrown its economy out of balance and prolonged the slowdown for over a decade now. Conflicts in neighboring countries have led to reduced demand from key export markets and cut off important trade routes. Foreign direct investment, which averaged 12.7% of gross domestic product (GDP) between 2003-2009, fell to 5.1% of GDP over the 2010-2017. Regional conflicts have interrupted the supply of gas from Egypt – forcing Jordan to import oil at a time of record prices, had a negative impact on tourism, and also provoked a massive influx of migrants and refugees. Failure to cope with 50.4% population growth between led to nine consecutive years (2008-2017) of negative growth rates in GDP per capita, resulting in a cumulative loss of 14.0% over the past decade (2009-2018). Debt to GDP ratios, which were at 55% by the end of 2009, have skyrocketed to 94%. Over the previous five years Jordan has undertaken a significant process of fiscal consolidation. The resulting reduction in fiscal impulse is among the largest registered in the aftermath of the Financial Crises, third only to Greece and Jamaica, and above Portugal and Spain. Higher taxes, lower subsidies, and sharp reductions in public investment have in turn furthered the recession. Within a context of lower aggregate demand, more consolidation is needed to bring debt-to-GDP ratios back to normal. The only way to break that vicious cycle and restart inclusive growth is by leveraging on foreign markets, developing new exports and attracting investments aimed at increasing competitiveness and strengthening the external sector. The theory of economic complexity provides a solid base to identify opportunities with high potential for export diversification. It allows to identify the existing set of knowhow, skills and capacities as signaled by the products and services that Jordan is able to make, and to define existing and latent areas of comparative advantage that can be developed by redeploying them. Service sectors have been growing in importance within the Jordanian economy and will surely play an important role in export diversification. In order to account for that, we have developed an adjusted framework that allows to identify the most attractive export sectors including services. Based on that adjusted framework, this report identifies export themes with a high potential to drive growth in Jordan while supporting increasing wage levels and delivering positive spillovers to the non-tradable economy. The general goal is to provide a roadmap with key elements of a strategy for Jordan to return to a high economic growth path that is consistent with its emerging comparative advantages.
Topic:
Government, International Trade and Finance, Finance, and Economy
Political Geography:
Middle East and Jordan

62. Employment Structure and the Rise of the Modern Tax System

Author:
Anders Jensen
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
This paper shows how the increase in information trails through the long-run transition from self-employment to employee-jobs explains the rise of the modern income tax system. I construct a new database which covers 100 household surveys across countries at different income levels and 140 years of historical data within the US (1870-2010). Using these data, I first establish four new stylized facts: 1) within country, the share of employees increases over the income distribution, and increases at all levels of income as a country develops; 2) the income tax exemption threshold moves down the income distribution as a country develops, tracking employee growth; 3) the employee share above the exemption threshold is maximized and remains constantly high; 4) decreases in the exemption threshold are strongly associated with increases in tax collection. These findings are consistent with a model where a high employee share is a necessary condition for effective taxation and where the rise in income covered by information trails through increases in employee share drives expansion of the income tax base. To provide a causal estimate of employee share on income tax systems, I study a state-led US development program implemented in the 1950s-60s which increased the level of employee share. The identification strategy exploits within-state changes in court-litigation status which generate quasi-experimental variation in the effective implementation date of the program. I find that the exogenous increase in employee share is associated with an expansion of the state income tax base and an increase in state income tax revenue.
Topic:
Political Economy, Finance, Economy, International Development, and Tax Systems
Political Geography:
North America and United States of America

63. Synthetic MMT: Old Line Keynesianism with an Expansionary Twist

Author:
Lance Taylor
Publication Date:
10-2019
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
Expansionary macroeconomic policy with a strong redistributive component is an attractive proposition, most recently launched on the basis of Modern Monetary Theory or MMT. The Theory is a synthesis of familiar ideas, newly relevant but scarcely path-breaking. Its basics – Chartalist or fiat money, functional finance, and models based on consistent national accounting – come straight from Maynard Keynes, Abba Lerner, and Wynne Godley. Functional finance is the heart of fiscalist Keynesianism built upon automatic stabilizers for the business cycle. MMT’s job guarantee proposal is one more stabilizer which could be a modest helpful supplement to the system which exists. National accounting comparisons of a possible MMT package with the 2008 crash and the Trump tax cut are presented with emphasis on autonomous shifts in demand. The package could have problems with debt sustainability and external balance. Inflation is unlikely if wage repression in the USA is not reversed. But strong wage increases are presumably a goal of MMT.
Topic:
Economics, Monetary Policy, Finance, Economic Theory, Macroeconomics, and Money
Political Geography:
United States

64. Finance in Economic Growth: Eating the Family Cow

Author:
Peter Temin
Publication Date:
01-2019
Content Type:
Working Paper
Institution:
Institute for New Economic Thinking (INET)
Abstract:
It is hard to fit finance into the measurement of national product and of economic growth, and similar problems bedevil efforts to include other intangible investments as well. I describe how our current accounts deal with these problems, and I argue that existing NIPA data fail to describe the future path of growth in our new economy because they lack output data on financial, human and social capital investments. They fail to show that the United States is consuming its capital stock now and will suffer later, rather like killing the family cow to have a steak dinner.
Topic:
Economics, Finance, Economic growth, and Macroeconomics
Political Geography:
United States

65. The Evolution and Current Status of De Facto Stare Decisis in International Trade and Investment Tribunals: How to Understand the Present by Looking into the Past

Author:
Chanya Punyakumpol
Publication Date:
02-2019
Content Type:
Working Paper
Institution:
Centre for Trade and Economic Integration, The Graduate Institute (IHEID)
Abstract:
Is there a doctrine of 'stare decisis' in international trade and international investment law? From a positive law perspective, the answer is a definite no. However, as many scholars have observed, in practice, there has been a strong level of deference from the Appellate Body to its previous rulings, but less so from investment tribunals. Using social network analysis to assess actual citations from the Appellate Body Reports and investment arbitrations from the inception to the current time, this paper examines the evolution and 'status quo' of citation networks in international trade and international investment arbitrations. It asks, not only whether there is a 'de facto' rule of precedent in the two regimes, but also when it occurs and how the development links with the institutional design of dispute settlement. The results show how the doctrine of 'stare decisis' diverges in international trade and international investment, as well as the importance of institutional design in shaping and constraining the behaviors of tribunals.
Topic:
Economics, Globalization, International Trade and Finance, Law, Finance, and Global Political Economy
Political Geography:
Global Focus

66. 2020 State Budget of Azerbaijan: Brief Independent Review

Author:
CESD Research Team
Publication Date:
09-2019
Content Type:
Special Report
Institution:
Center for Economic and Social Development (CESD)
Abstract:
he Ministry of Finance of the Republic of Azerbaijan presented the draft of the 2020 State Budget. According to the document, the growth rate of the Gross Domestic Product (GDP) in Azerbaijan is expected to decline by 2020. The draft State Budget takes the expected cost per barrel in 2020 as US $55. Despite the fact that it is US $5 less than the previous year’s price, it doesn’t fully ensure related risks. Thus, CESD suggests to take US $50 per barrel for the state budget next year.
Topic:
Oil, Budget, GDP, and Finance
Political Geography:
Eurasia, Caucasus, and Azerbaijan

67. Cyber agenda for India’s digital payments

Author:
Sameer Patil and Sagnik Chakraborty
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Gateway House: Indian Council on Global Relations
Abstract:
India has rapidly transitioned from a cash-based economy to one reliant on digital payment systems. This has resulted in financial inclusion and greater transparency, but also expanded the system’s vulnerability to cybercrimes. This paper analyses India’s digital payments industry, maps the potential threat vectors and recommends measures to strengthen the cybersecurity of digital payment systems.
Topic:
Science and Technology, Cybersecurity, Finance, Currency, and Digitization
Political Geography:
South Asia and India

68. Finland’s 2019 presidency of the Council of the European Union: European and domestic determinants

Author:
Tuomas Iso-Markku and Juha Jokela
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Finnish Institute of International Affairs
Abstract:
The Finnish presidency of the Council of the EU faces a sensitive political climate, marked by divisions between the member states. However, some of the EU’s recent crises have also given the Union a renewed sense of purpose: striking the right balance between ambition and realism will therefore be a key challenge for Finland. During its presidency, Finland will have little legislative work, but can help in setting the EU’s priorities for the next five years, advancing the negotiations on the Multiannual Financial Framework and managing the Brexit process. The rise of the Eurosceptic Finns Party in the late 2000s had a crucial impact on Finland’s EU policy. This was reflected in harder and, at times, obstructive positions on EU issues. However, recently a new consensus on EU affairs seems to have emerged among the other parties. Antti Rinne’s new government is striving for a stronger EU with a presidency programme that resonates with the strategic agenda of the European Council, but also corresponds with the more limited role of post-Lisbon Treaty presidencies.
Topic:
Regional Cooperation, European Union, Finance, and Brexit
Political Geography:
Europe and Finland

69. A Review of Pillar I & II of Zambia’s Economic Stabilisation and Growth Programme 2017-2019

Author:
Florence Banda-Muleya, Shebo Nalishebo, Mbewe Kalikeka, Nakubyana Mungomba, Ignatius Masilokwa, and Caesar Cheelo
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Zambia Institute for Policy Analysis and Research (ZIPAR)
Abstract:
The economic crisis of 2015 destabilised Zambia’s economic performance. The depreciation of the Kwacha and its pass-through effects led to inflation of as high as 22% and growth, at 2.9%, was far below the 5% target. The overall Budget deviation was 15% of Parliamentary appropriations in 2015, disrupting planned activities and attainment of set macroeconomic objectives. There were huge variations between what the consequent national Budgets committed to do and what they actually did. To fix this and nudge the country back towards high sustained economic growth, the Economic Stabilisation and Growth Programme (ESGP) was crafted in 2017. The five-pillar plan aimed to ensure prudent fiscal management by providing a system of accountability and a standard against which results could be measured, among other things. The aim of this paper is to review the ESGP, particularly, its performance in 2018. The paper sets out to understand how well Zambia faired in implementing the ESGP as well as to highlight the broader fiscal trends recently. It ultimately seeks to make recommendations about how Zambia can revive its path to economic stability and growth. The paper focuses tightly on the first two pillars of the ESGP, i.e. (i) restoring budget credibility; and (ii) enhancing domestic resource mobilisation and refocusing public expenditure. The remaining three pillars are slated to be reviewed in the second half of 2019.
Topic:
Budget, Finance, Economic growth, and Economic Stability
Political Geography:
Africa and Zambia

70. The Privatisation of the Polish Banking Sector

Author:
Hubert A. Janiszewski
Publication Date:
01-2019
Content Type:
Journal Article
Journal:
Warsaw East European Review (WEER)
Institution:
Centre for East European Studies, University of Warsaw
Abstract:
The Polish banking sector, at the outset of the Balcerowicz reform plan, was com- posed of the central bank (NBP), 9 regional commercial banks (which had spun out from NBP back in 1988): the state savings bank – PKO BP; the state bank handling foreign com- merce – Bank Handlowy SA; the state bank handling retail foreign exchange transfers – PeKaO SA; the state bank for financing the agriculture sector – BGZ; and a number of small cooperative banks – BRE SA a bank financing export industries established in 1986; and a single private bank, albeit with equity provided by state enterprises – BIG SA. The Ministry of Finance faced a formidable task, firstly to restructure the banking sec- tor – primarily commercial banks and at a later stage privatize the whole sector in order to i.a make it market oriented, flexible and serve large chunks of the rapidly privatizing economy as well as to cater to the needs of the population. It should be stressed – to give the full description of the sector, that the percentage of bad loans in all the above-mentioned banks (except BIG, BRE and probably PKO BP) was between 30 to 50% of their portfolios! It was therefore decided by Finance Minister Leszek Balcerowicz and his key staff, that prior to their privatization, restructuring of the banks was the key for their success. The major problem with restructuring was a lack of funding, which was not available as the Polish state was bankrupt and private resources were by far too small, and politi- cally inaccessible; moreover the parliament would not allow creation of additional debt by way of equity injections to the ailing banking sector. Under those difficult conditions Balcerowicz managed to pass through parliament a set of legislation on restructuring the economy including banks, which allowed for the provision of banks with so-called restructuring bonds (a special law had been enacted called the “Law on financial restructuring of banks and enterprises”) to strengthen their balance sheets and force them to individually, over time, repay such new debts. In order to guide and help the banks with the restructuring, with the assistance of the British Government, the so-called British Know How Fund was created, whose purpose was to provide professional advice and assistance to all commercial banks. This advice was strengthened by a so-called “twinning arrangement”, under which each of the nine commercial banks was provided with a “twin partner” in the form of an established western bank. Among the banks that participated in this scheme were the Allied Irish Bank (twinned to WBK based in Poznan), ING (Bank Śląski in Katowice) and the Midland Bank (Bank Za- chodni in Wroclaw). The whole operation was launched in early 1990 and was completed by early 1993, thus most of the commercial banks were potentially ”ready” for privatization with substan- tially improved balance sheets. Parallel to the above, all the other banks embarked on the restructuring of their balance sheets, if only in order to stay competitive in the market.
Topic:
Privatization, Finance, State Capitalism, and Banking
Political Geography:
Europe, Eastern Europe, and Poland