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This paper assesses the extent to which Sub-Saharan Africa (SSA)’s business cycle is synchronized with that of the rest of the world (RoW). Findings suggest that SSA’s business cycle has not only moved in the same direction as that of the RoW, but has also gradually drifted away from the G7 in favour of the BRICs. Trade with the BRICs turns out to be the strongest driver of this shift. Much of this impact unfolds through aggregate demand impulse from trade. As fiscal policy stances in SSA and the BRICs are not synchronized, they have not caused cyclical output correlation between these two groups of countries. Also, financial openness, which is at a very early stage across most SSA countries, has acted as a neutral force.

Agriculture --- Exports --- International trade --- Economic aspects --- South Africa --- Economic policy. --- Foreign economic relations. --- Exports and Imports --- Macroeconomics --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Trade Policy --- International Trade Organizations --- Empirical Studies of Trade --- Trade: General --- Economic growth --- International economics --- Business cycles --- Trade balance --- Plurilateral trade --- Trade relations --- Balance of trade --- China, People's Republic of

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This paper examines the effect of the efficiency of the education system on Foreign Direct Investment (FDI). First, it focuses on the external efficiency and applies a frontier-based measure as a proxy of the ability of countries to optimally convert the average years of schooling into income for individuals. Second, it shows the relationship between the external efficiency of the education system and FDI inflows by applying GMM regression technique. The results show that the efficiency level varies across regions and countries and appears to be driven by higher education and secondary vocational education. Similarly to other studies in the literature, there is no significant relationship between the average years of schooling and FDI inflows. However, this study shows that the external efficiency of the education system is important for FDI inflows. Improving the external efficiency of the education system can play a role in attracting FDI especially in non-resource rich countries, nonlandloked countries and countries in the low and medium human development groups.

Investments, Foreign. --- Capital exports --- Capital imports --- FDI (Foreign direct investment) --- Foreign direct investment --- Foreign investment --- Foreign investments --- International investment --- Offshore investments --- Outward investments --- Capital movements --- Investments --- Exports and Imports --- Labor --- Macroeconomics --- Economic Development: Human Resources --- Human Development --- Income Distribution --- Migration --- Education and Economic Development --- Multinational Firms --- International Business --- Education: General --- International Investment --- Long-term Capital Movements --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Demand and Supply of Labor: General --- Personal Income, Wealth, and Their Distributions --- Education --- Finance --- Labour --- income economics --- Human capital --- Labor markets --- Personal income --- Balance of payments --- National accounts --- Investments, Foreign --- Labor market --- Income --- China, People's Republic of --- Income economics

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China has been moving to a more market oriented financial system, which has implications for the monetary policy environment. The paper investigates the stability of the money demand function (MDF) in light of progress in financial sector reforms that, for example, have resulted in significant financial innovation (so-called shadow banking) and more liberalized interest rates. The analysis of international experience suggests that rapid development of the financial system often leads to structural shifts in the MDF. For example, financial innovation and liberalization alter the sensitivity of money balances to income and the interest rate. For China, we find that the stable long-run relationship between money demand, output, and interest rates that existed between 2002 and 2008 disappears after 2008. This coincides with the period of rapid financial innovation, especially the growth in off-balance sheet and nonbank financial intermediation. The results suggest that usefulness of M2 as an intermediate monetary target has declined with financial innovation and reform. A result that underscores the importance of moving toward increased reliance on more price-based targets such as interest rates.

Finance -- China. --- Interest rates -- China. --- Monetary policy -- China. --- Finance --- Business & Economics --- Money --- Banks and Banking --- Macroeconomics --- Money and Monetary Policy --- Real Estate --- Demand for Money --- Financial Markets and the Macroeconomy --- Monetary Policy --- International Financial Markets --- Personal Income, Wealth, and Their Distributions --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Housing Supply and Markets --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary economics --- Banking --- Property & real estate --- Demand for money --- Personal income --- Velocity of money --- Housing prices --- National accounts --- Prices --- Monetary base --- Income --- Banks and banking --- Housing --- Money supply --- China, People's Republic of

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China has been moving to a more market oriented financial system, which has implications for the monetary policy environment. The paper investigates the stability of the money demand function (MDF) in light of progress in financial sector reforms that, for example, have resulted in significant financial innovation (so-called shadow banking) and more liberalized interest rates. The analysis of international experience suggests that rapid development of the financial system often leads to structural shifts in the MDF. For example, financial innovation and liberalization alter the sensitivity of money balances to income and the interest rate. For China, we find that the stable long-run relationship between money demand, output, and interest rates that existed between 2002 and 2008 disappears after 2008. This coincides with the period of rapid financial innovation, especially the growth in off-balance sheet and nonbank financial intermediation. The results suggest that usefulness of M2 as an intermediate monetary target has declined with financial innovation and reform. A result that underscores the importance of moving toward increased reliance on more price-based targets such as interest rates.

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Foreign aid is a sizable source of government financing for several developing countries and its allocation matters for the conduct of fiscal policy. This paper revisits fiscal effects of shifts in aid dependency in 59 developing countries from 1960 to 2010. It identifies structural shifts in aid dependency: upward shifts (structural increases in aid inflows) and downward shifts (structural decreases in aid inflows). These shifts are treated as shocks in aid dependency and treatment effect methods are used to assess the fiscal effects of aid. It finds that shifts in aid dependency are frequent and have significant fiscal effects. In addition to traditional evidence of tax displacement and “aid illusion,” we show that upward shifts and downward shifts in aid dependency have asymmetric effects on the fiscal accounts. Large aid inflows undermine tax capacity and public investment while large reductions in aid inflows tend to keep recipients’ tax and expenditure ratios unchanged. Moreover, the tax displacement effects tend to be temporary while the impact on expenditure items are persistent. Finally, we find that the undesirable fiscal effects of aid are more pronounced in countries with low governance scores and low absorptive capacity, as well as those with IMF-supported programs.

Economic assistance --- Fiscal policy --- Structural adjustment (Economic policy) --- Absorptive capacity --- Balance of payments --- Capacity --- Capital investments --- Capital movements --- Capital spending --- Capital --- Current spending --- Expenditure --- Expenditures, Public --- Exports and Imports --- Foreign Aid --- Foreign aid --- Intangible Capital --- International economics --- International Investment --- International relief --- Investment --- Long-term Capital Movements --- Macroeconomics: Consumption --- National Deficit Surplus --- National Government Expenditures and Related Policies: General --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Public finance & taxation --- Public Finance --- Revenue administration --- Revenue --- Saving --- Taxation, Subsidies, and Revenue: General --- Wealth --- United States