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Exchange Rate Movements and Economic Activity: The Role of Trade and Financial Channels
No full textThe paper analyzes the impact of exchange rate movements on economic activity for a panel of countries from 2002 to 2021. By introducing a novel approach of considering the asset side of banks balance sheets in addition to their liabilities, the paper analyzes the importance of considering banks net financial position to determine the significance of the financial channel through which exchange rate fluctuations impact output. The results confirm the importance of both - trade and financial channels - in driving the impact of exchange rate movements in the economic activity, yet the direction and magnitude of the financial channel is contingent upon banks net financial position, corroborating the noteworthiness of analyzing both sides of banks balance sheets
The Dog That Didn\u27t Bite: Sudden Stops in Emerging and Developing Countries During COVID-19
Get PDFDespite an initial reversal of capital inflows, the COVID-19 pandemic resulted in relatively mild impacts on net capital flows to Emerging and Developing Economies. In contrast to previous crises, gross capital inflows offset residents\u27 outflows, resulting in relatively stable net capital flows and modest current account adjustments. Liquid international markets, access to official resources, and sound fundamentals allowed for capital inflows, thus preventing the additional costs of widespread Sudden Stops during the pandemic. Still, we show a relatively simple model predicted Sudden Stops in net flows reasonably well in countries with weaker fundamentals
Distributional Effects of Taxation in Latin America
Get PDFThis chapter analyzes the incidence on income distribution by a comprehensive array of direct and indirect taxes in ten Latin American countries circa 2018. The study finds that although there is a significant heterogeneity, the redistributive impact is equalizing for direct taxes and unequalizing for indirect taxes. Overall, redistribution through taxes, without accounting for spending effects and interactions, is slightly equalizing for some countries and unequalizing for others, but the burden on the poor is high and even higher than on the rich. This is mainly a consequence of the high share of indirect taxes in the tax structures, and of low personal income tax collection and coverage. The inclusion of the redistributive effect of the corporate income tax contributes to improve redistribution and accounts for better comparison with the redistributive impact in more developed countries, where dividends are taxed heavily with personal income taxes rather than corporate income taxes as in Latin America. High levels of evasion and informality make payroll taxes more regressive in integrated labor markets with high informality, but make indirect taxes less regressive, since the poor pay little or no indirect taxes on some of their purchases
Cash Transfers, Poverty, and Inequality in Latin America and the Caribbean
Get PDFWe assess the non-contributory cash transfer systems in 17 Latin American and Caribbean countries to identify factors that keep them from reducing poverty and inequality. To perform this assessment, we analyze three dimensions of size (number of beneficiaries, size of transfer per beneficiary, and size of total budget) and three dimensions of targeting (coverage, leakage, and quality of demographic targeting). We identify 67 programs, which fall into three broad categories: conditional cash transfers, non-contributory pensions, and other transfers. We use an international poverty line of 6.85 dollars PPP per day (similar to the average national poverty line of upper middle-income countries) and adjust survey weights to correct for the fact that household survey data often underestimates the official number of transfer beneficiaries compared to administrative sources. We show that two key factors limit the effect of cash transfer programs on poverty and inequality: the small size of their transfers and their historic under-coverage of the population living in poverty. Transfers represent approximately 33% of the poverty gap. Additionally, only 55% of the population in poverty benefits from these programs. Forty-one percent of people living in households that receive at least one non-contributory transfer are above the poverty line. Children and Indigenous people are underrepresented, relative to their poverty rate, in the rosters of beneficiaries. Brazil, Suriname, Argentina, Chile, Costa Rica, Panama, and Uruguay consistently earn the highest scores across the assessment categories. Our policy recommendations include: (i) intensifying efforts to increase coverage among the poor, using modern poverty mapping techniques along with active, on-the-ground searches and (ii) recertifying eligibility for transfer programs more frequently by using highly interoperable administrative data and social registries. Both efforts are needed to create more efficient income protection systems that address both structural and transient poverty
The Impact of Subsidy Delivery Method on Savings Behavior: Experimental Evidence
Get PDFWe examine the impact of offering conditional cash transfer (CCT) beneficiaries the choice to receive cash transfers in bank accounts instead of cash. We investigate the effects on savings behavior and downstream outcomes such as assets and trust. We find, on average, no significant impact on overall savings or downstream outcomes. However, among individuals with nonpositive balances prior to the offering, we observe an increase in balances in savings accounts and in the transactional accounts in which the subsidies were initially deposited. These findings underscore the potential of using bank accounts to encourage savings, particularly for individuals with limited prior savings
Research Insights: Why Doesn\u27t Entry of Larger and More Productive Firms Drive Out the Many Small Firms in Developing Countries?
No full textAn expansion from zero to the average number of chain stores in a Mexican neighborhood (6.7) reduces the number of neighborhood shops by 15%. This reduction is not driven by increased shop exits but by decreased shop entries. Shops retain their sales of fresh products and 96% of their customers, but customers visit shops less often and spend less on non-fresh and packed goods. Shops survive by exploiting comparative advantages stemming from being small and owner-operated, such as lower agency costs, building relationships with the community, having a broader and tailored product mix, and offering informal credit
Household Led by Women: Understanding Access to Housing Credit in Latin America and the Caribbean
Get PDFThe share of Latin American and Caribbean households led by women is rapidly increasing, at the same time as these households are overrepresented among those living in housing deficit. In this study, we looked at whether there is a gender gap in access to housing loans, one of the main tools available to housing. In addition, we explored which are the characteristics of FHHs and to which extent they can have an impact on their access to adequate housing. This study shows how FHHs face greater housing deficits. Our findings indicate that gender gaps in other areas, most importantly in labor markets, are conditioning income and therefore access to financial services. And yet, once results are controlled for observable variables, the gender gap in obtaining a mortgage in LAC shrinks but persists. At all income levels, women had a lower proportion of housing credit ownership than men did at the same income level. That is, a woman would need higher levels of income and education than a man does to achieve the same access to financial services. Likewise, gender gaps are noticeable even when comparing men and women with housing loans. For example, our results indicate that women in the second wealthiest quintile would have the same access to credit as men in the second poorest quintile. Our study also supports the notion that FHHs tend to prioritize housing location over housing, which may explain why FHHs are overcrowded even if not poor
Gender Inequality in Latin America and the Caribbean
Get PDFThis chapter examines gender inequality, focusing on two critical spheres in which gender inequality is generated: education and work. The objective is to provide a current snapshot of gender inequality across key indicators as well as a dynamic perspective that highlights successes and failures. Facilitating a cross-country comparison as well by grouping countries within Latin America by their level of economics development and drawing comparisons with countries outside the region. Finally, it reflect on differences in the ways that gender inequalities play out across different socio-economic groups, particularly those that highlight other sources of inequality. The second part of the chapter focuses on the worksphere. Here it document significant improvements in female labor force participation over the last 20 years, especially among the least-educated women (those with incomplete secondary education). However, progress has not been equal across all the countries in the region the pace of improvement in this dimension has been slowest in the least economically developed countries. These are also the countries where a significant proportion of the adult working population, especially among men, continue to hold highly conservative norms about women\u27s participation in work
Research Insights: Does the Method of Delivery Matter for Cash Transfers?
No full textOffering conditional cash transfer (CCT) recipients the option of receiving cash transfers in bank accounts, rather than in cash, does not significantly impact total savings or other long-term outcomes such as assets and trust. However, those with no previous balances experience a significant increase in their savings and transactional account balances after receiving the grants. This evidence suggests that transferring subsidies to bank accounts can be an effective means of incentivizing savings for people with no prior formal savings
What Policies are Effective at Eradicating Violence Against Women?
No full textViolence against women is widespread in Latin America and the Caribbean. On average, every day, 10 women are murdered in the region, and of the 25 countries with the highest rates of femicide in the world, 13 are in this region. Violence against women invades womens everyday lives and takes place in both public and private spheres and within all socioeconomic groups. Most femicides are committed by their partners or former partnersone out of every three women between the ages of 15 and 49 in the region have experienced physical and/or sexual violence at the hands of a partner, with rates ranging between 17% (for the Dominican Republic) and 53% (for Bolivia). Violence against women has a negative impact (physical and psychological) on the health of victims, and it also affects their economic decisions and opportunities for development. Additionally, it increases the probability that children suffer abuse, corporal punishment, and/or negligent/dysfunctional care as well as the likelihood that minors end up reproducing this behavior when they are adults, perpetuating the cycle of violence