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Countries are increasingly being ranked by some new "mashup index of development," defined as a composite index for which existing theory and practice provides little or no guidance to its design. Thus the index has an unusually large number of moving parts, which the producer is essentially free to set. The parsimony of these indices is often appealing - collapsing multiple dimensions into just one, yielding unambiguous country rankings, and possibly reducing concerns about measurement errors in the component series. But the meaning, interpretation and robustness of these indices are often unclear. If they are to be properly understood and used, more attention needs to be given to their conceptual foundations, the tradeoffs they embody, the contextual factors relevant to country performance, and the sensitivity of the implied rankings to changing the data and weights. In short, clearer warning signs are needed for users. But even then, nagging doubts remain about the value-added of mashup indices, and their policy relevance, relative to the "dashboard" alternative of monitoring the components separately. Future progress in devising useful new composite indices of development will require that theory catches up with measurement practice.

Agriculture --- Air pollution --- Competitive markets --- Decision making --- Development policy --- Economic competitiveness --- Economic resources --- Economic Theory & Research --- GDP --- GDP per capita --- Governance --- Governance Indicators --- Income --- Inflation rate --- Information and Communication Technologies --- Information Security & Privacy --- Living standards --- Macroeconomics and Economic Growth --- National income --- Poverty Reduction --- Property rights --- Purchasing power --- Regional Economic Development --- Rural Poverty Reduction --- Shadow prices --- Tradeoffs --- Unemployment --- Unemployment rate --- Wealth

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A recent study of house price behavior in U.S. cities by Gyourko, Mayer, and Sinai (2006) raises questions about so-called superstar cities in which housing is so inelastically supplied that it becomes unaffordable, as higher-income families outbid residents. We consider the case of Accra, Ghana, in this light, estimating the elasticity of housing supply and discussing the implications for growth and income distribution. There is not a great deal of data available to examine trends in Accra, so our method is indirect. First, we use a variant of the traditional monocentric city model to calculate the elasticity of Accra's housing supply relative to those of other similarly-sized African cities. This suggests that housing supply responsiveness is much higher elsewhere. This muted supply responsiveness is consistent with the observed higher housing prices. Second, we estimate a number of traditional housing demand equations and reduced form equations. Placing a number of restrictions on the equations allows us to infer Accra's housing supply elasticity. Taken together, our approaches suggest that lower-income families in Accra have such poor housing conditions because the market is extremely unresponsive to demand. Although the outcomes we have traced-high housing prices and low quality-are not unusual relative to the other developed country superstar cities, they are extreme. The welfare costs are considerable, so much so that in addition to direct housing market effects, these policies also appear to have potentially significant implications for the achievement of more equitable growth.

Adverse Effects --- Banks and Banking Reform --- Communities & Human Settlements --- Development Economics --- Economic Theory and Research --- Economics --- Elasticity --- Equations --- Gross Domestic Product --- Housing and Human Habitats --- Income --- Income Groups --- Inflation Rate --- Macroeconomics and Economic Growth --- Markets and Market Access --- Public Sector Management and Reform --- Underestimates

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March 2000 - Does delegation of policymaking authority to independent agencies improve policy outcomes? This paper reports new theory and tests related to delegation of monetary policy to an independent central bank. The authors find that delegation reduces inflation only under specific institutional and political conditions. The government's ability to credibly commit to policy announcements is critical to the successful implementation of economic policies as diverse as capital taxation and utilities regulation. One frequently advocated means of signaling credible commitment is to delegate authority to an agency that will not have an incentive to opportunistically change policies once the private sector has taken such steps as signing wage contracts or making irreversible investments. Delegating authority is suggested as a government strategy particularly for monetary policy. And existing work on the independence of central banks generally assumes that government decisions to delegate are irrevocable. But delegation - in monetary policy as elsewhere - is inevitably a political choice, and can be reversed, contend Keefer and Stasavage. They develop a model of monetary policy that relaxes the assumption that monetary delegation is irreversible. Among the testable predictions of the model are these: The presence of an independent central bank should reduce inflation only in the presence of political checks and balances. This effect should be evident in both developing and industrial countries; Political actions to interfere with the central bank should be more apparent when there are few checks and balances; The effects of checks and balances should be more marked when political decisionmakers are more polarized. The authors test these predictions and find extensive empirical evidence to support each of the observable implications of their model: Central banks are associated with better inflation outcomes in the presence of checks and balances. The turnover of central bank governors is reduced when governors have tenure protections supported by political checks and balances. And the effect of checks and balances is enhanced in more polarized political environments. This paper - a product of Regulation and Competition Policy, Development Research Group - is part of a larger effort in the group to identify the conditions under which regulatory reforms can be effective. The authors may be contacted at pkeefer@worldbank.org or d.stasavage@lse.ac.uk.

Banks and Banking Reform --- Central Bank --- Central Bank Independence --- Central Banks --- Checks --- Contracts --- Credibility --- Credibility Problem --- Currencies and Exchange Rates --- Debt Markets --- Default --- Discount --- Economic Stabilization --- Economic Theory and Research --- Emerging Markets --- Finance --- Finance and Financial Sector Development --- Financial Literacy --- Fixed Investments --- Future --- Futures --- Holding --- ICT Applications --- Inflation --- Inflation Rate --- Information and Communication Technologies --- Macroeconomics and Economic Growth --- Monetary Policy --- Money Supply --- Option --- Political Economy --- Private Sector Development --- Shocks To Income