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Much of Sub-Saharan Africa's post-independence macroeconomic history has been characterized by boom-bust cycles. Growth accelerations have been common, but short lived. Weak policy formulation and implementation led to large external and fiscal imbalances, excessive debt accumulation, volatile inflation, and sharp exchange rate fluctuations. This characterization changed, however, in the mid-1990s, when debt relief and better macroeconomic policy began to provide a source of stability that has helped sustain robust growth throughout much of the region. In resource rich countries, the process was supported over the past few years by a dramatic increase in commodity prices. But resources are only one part of the story. Growth has exhibited impressive resilience even in the face of negative external shocks, as in 2008-2009. While the short-term outlook remains positive, over the medium term policy makers face new challenges. Several countries have the potential to greatly expand natural resource production and become major commodity exporters; volatile resource revenue will complicate their fiscal and monetary planning. Rising investor appetite for financial assets of frontier markets and the development of domestic debt markets will continue to broaden the menu of and trade-offs among financing options at a time when global interest rates may start sloping upward. Complex financing arrangements-notably for private-public or public-public partnerships in infrastructure-will become more common and will generate new types of fiscal commitments and contingencies.

Currencies and Exchange Rates --- Debt --- Debt Markets --- Economic Theory & Research --- Emerging Markets --- Environmental Economics & Policies --- Fiscal --- Growth --- Macroeconomics --- Macroeconomics and Economic Growth --- Monetary --- Poverty Reduction --- Shocks --- Africa

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This paper provides new insight into the poverty, malnutrition and vulnerability issues in Mali, using existing household survey data. First, it presents a profile of households that are poor, "food poor," or have malnourished children. Second, it explores the impact of recent weather and price shocks on household welfare and identifies those affected most by the shocks. Finally, it estimates vulnerability to poverty by modeling both households' expected consumption and their consumption volatility, and by distinguishing between idiosyncratic and covariate risks. The basic results of the analysis match conventional knowledge about poverty, food poverty, and malnutrition. The prevalence of chronic malnutrition is high in Mali, with 44 percent of Malian households and 66 percent of food poor Malian households having at least one stunted child. A 25 percent increase in cereal prices and a 25 percent decrease in cereal production are estimated to increase the number of food poor by 610,000 people. An estimated USD 5.4 million of extra aid per year will be needed to lift the newly food poor above the food poverty line. About USD 182 million is needed to do this for all existing and new food poor. Vulnerability incidence is in general two to three times higher among the poor than the non-poor, except in urban areas and in the region of Sikasso where the vulnerability incidence is five to six times higher among the poor. Overall, vulnerability is mostly driven by poverty induced vulnerability, except in the capital, Bamako, where vulnerability is more driven by risk induced vulnerability.

Food & Beverage Industry --- Impact of shocks --- Macroeconomics and Economic Growth --- Malnutrition --- Poverty --- Poverty Lines --- Poverty Reduction --- Regional Economic Development --- Rural Poverty Reduction --- Vulnerability --- Mali

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The objective of the paper is to explain the last boom and bust in consumption in Ireland by the failure of consumers to correctly distinguish permanent changes in productivity from temporary changes. It uses a business cycle model, where agents update their beliefs about long-run productivity using information-that they receive continuously-about the future state of the economy. The analysis finds that a large and prolonged disconnect between consumption and long-run productivity occurred in the years leading to the economic crisis, which led to "over-consumption" for several quarters. A strong downward adjustment in 2008 followed when Irish consumers finally realized their mistake.

Business cycles --- Consumption --- E-Business --- Economic Theory & Research --- Knowledge for Development --- Labor Policies --- Long-run productivity --- Macroeconomics and Economic Growth --- News shocks

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This paper examines whether and how rainfall shocks affect tariff setting in the agricultural sector. In a model of strategic trade policy, the authors show that the impact of a negative rainfall shock on optimal import tariffs is generally ambiguous, depending on the weight placed by the domestic policy maker on tariff revenue, profits and the consumer surplus. The more weight placed on domestic profits, the more likely it is that the policy maker will respond to a rainfall shortage by reducing import tariffs. These findings are robust to alternative assumptions about market structure and the timing of the game. Using detailed panel data on applied tariffs and rainfall for 70 nations, the authors find robust evidence that rainfall shortages generally induce policy makers to set lower tariffs on agricultural imports.

Agribusiness --- Agriculture --- Economic Theory & Research --- Free Trade --- International Economics & Trade --- Markets and Market Access --- Optimal tariffs --- Rainfall shocks --- Science of Climate Change --- Strategic trade policy

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From 2008 to 2011, Egypt was hit by significant shocks, both global and country-specific. This paper assesses the impact of the resulting macroeconomic instability on the banking sector, and examines its role as a shock absorber. The Central Bank of Egypt accommodated the shocks by supplying liquidity to the market. The paper verifies a change in the fiscal regime from one in which the primary fiscal balance was used an instrument to stabilize the public debt ratio to one in which the policy instrument stopped playing that role and affected investors' assessment of the risk of holding public debt. This pattern suggests that fiscal conditions influenced exchange rate and price expectations originating a fiscal dominance situation in which the Central Bank could not control inflation. Hence, the Central Bank lacked functional independence in spite of its de jure independence, which underscores the importance of strengthening institutions that facilitate policy coordination and allow policy to be more predictable. The government also funds itself through non-market mechanisms, in a typical financial repression scheme. The paper estimates the revenue from financial repression at about 2.5 percent of gross domestic product in 2011, which together with the revenues from seignoriage add up to close to 50 percent of the budgeted tax revenues, indicating the need for an in-depth review of the governance of the public banks and the funding of public sector activities. Finally, the paper estimates the impact of shocks to macroeconomic variables on loan portfolio quality and bank capital.

Access to Finance --- Banks & Banking Reform --- Currencies and Exchange Rates --- Debt Markets --- Economic Theory & Research --- Financial repression scheme --- Fiscal dominance --- Macroeconomic shocks --- Macroeconomics and Economic Growth --- Poverty Reduction --- Price expectations --- Public debt ratio