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The study documents how, over 1996–2008, large capital inflows in Southern Europe coincided with broad-based growth of the nontradable sector, extending beyond the construction and real estate sectors. The authors present a tractable two-sector, tworegion (‘North’ and ‘South’) model of a monetary union, in which they show how the sharp, permanent, fall in Southern real interest rates that occurred in the runup to EMU can explain the Southern consumption boom, wage growth, growth of the nontradable sector, and deteriorating external position. Upward pressure on the EMU-wide interest rate induces an opposite process in North. Consequently, both real exchange rates and external positions of the two regions diverge. Including a third country with a flexible exchange rate vis-à-vis the euro amplifies the effects of monetary integration in South, while dampening them in North. The study confirms the key model predictions using a panel-BVAR for the euro area and investigates various policy reforms to facilitate the ongoing rebalancing process in the eurozone.

The aim of this paper is to provide a sector-based method for carbon dioxide (CO₂) emissions control and to disaggregate China’s national CO₂ mitigation burden at the sectoral level. Based on a detailed analysis of three burden sharing indicators—responsibility, capacity, and efficiency—this paper derives a mitigation burden index to suggest which economic sectors should bear more (or less) mitigation burden. A multi criteria allocation model of sectoral CO₂ intensity (CO₂ per unit of added value) is then constructed to determine each sector’s mitigation target for 2020. The main findings are: (1) Allocation results based on multi criteria are more acceptable and practical than those based on only one criterion. (2) Policy maker preference for criteria has a significant effect on allocation results. (3) The fours sectors, manufacture of raw chemical materials and chemical products, manufacture of non-metallic mineral products, smelting and pressing of ferrous metals, and other services, consistently bear the highest mitigation burden. This paper offers policy makers a sector-based method to control CO₂ emissions. Combining this method with sectoral potential for technological advancement and sectoral mitigation costs would produce a more feasible and cost effective burden sharing scheme.

This book is intended to explain the factors underlying the stellar growth record that has led to Armenia's emergence as the Caucasian Tiger and to provide policy advice to the Armenian authorities to ensure the continuation of this growth. The book is presented in two parts, with Part I containing analysis and policy advice and Part II containing detailed background papers.

Water transfers to growing cities in sub-Sahara Africa, as elsewhere, seem inevitable. But absolute water entitlements in basins with variable supply may seriously affect many water users in times of water scarcity. This paper is based on research conducted in the Pangani river basin, Tanzania. Using a framework drawing from a theory of water right administration and transfer, the paper describes and analyses the appropriation of water from smallholder irrigators by cities. Here, farmers have over time created flexible allocation rules that are negotiated on a seasonal basis. More recently the basin water authority has been issuing formal water use rights that are based on average water availability. But actual flows are more often than not less than average. The issuing of state-based water use rights has been motivated on grounds of achieving economic efficiency and social equity. The emerging water conflicts between farmers and cities described in this paper have been driven by the fact that domestic use by city residents has, by law, priority over other types of use. The two cities described in this paper take the lion's share of the available water during the low-flow season, and at times over and above the permitted amounts, creating extreme water stress among the farmers. Rural communities try to defend their prior use claims through involving local leaders, prominent politicians and district and regional commissioners. Power inequality between the different actors (city authorities, basin water office, and smallholder farmers) played a critical role in the reallocation and hence the dynamics of water conflict. The paper proposes proportional allocation, whereby permitted abstractions are reduced in proportion to the expected shortfall in river flow, as an alternative by which limited water resources can be fairly allocated. The exact amounts (quantity or duration of use) by which individual user allocations are reduced would be negotiated by the users at the river level.

Research background: Foreign aid flows to Africa mostly the Low-Income Countries (LICs) have increased drastically since 2000. Increasing aid flows are expected to stimulate economic growth that can release resources towards enabling LICs to reduce aid dependency. Purpose: The purpose of this study is to discuss the dynamics of bilateral aid trends and patterns among 27 LICs in Africa during 2000–2017. The main question this study tries to answer is: how have aid sources, compositions and dependency changed in LICs? Research methodology: The study employs a descriptive analysis technique to analyses bilateral aid flows to LICs in Africa from 50 donors during 2000–2017. Results: Total net aid flows to LICs increased by 1.5 times during 2000–2017 and were predominantly in the form of grants (92.7%). The study found a shift of sectoral aid allocations from the economic and productive sectors towards the social sector. Net aid as a share of GDP increased almost two-fold; implying an increasing trend of aid dependency in several LICs. Novelty: This study tries to present a full account of bilateral aid flows both from Traditional Donors (TDs) and Non-Traditional Donors (NTDs), unlike many earlier studies that have focused on TDs.

This paper contributes to the literature on economic growth by seeking to join several lines of research on structural factors in a more fully specified framework, on the one hand, and by making this more inclusive supply side to interact with demand factors in a model of export-led growth, on the other hand. Balance-of-payments constraints influence the adoption of investment-specific technological change which requires the import of capital goods, while the sectoral allocation of physical and human capital is likewise revealed to be crucial for growth, both results having important policy implications. Keywords: embodied technological change; sectoral allocation of investment; human capital accumulation; export-led growth. JEL Codes: O11; O33; O41.

This paper gauges the potential effects on employment of rebalancing China's exportoriented growth model toward domestic demand, particularly private consumption. Shifting to a private consumption-led growth likely means more demand for existing and new services as well as reorienting the production of tradable goods toward domestic markets. In China's case, this would also imply moving a large number of less skilled labor from the tradable sector to the nontradable sector. The paper shows that while rebalancing China's growth toward a domestic-demand-led economy would likely raise aggregate employment and employment opportunities in the longer term, there could be employment losses in the short run as the economy moves away from the tradable sector toward the nontradable sector. Mitigating these costs will require active labor market policies to cushion the employment impact in the transition, particularly in meeting the skills gap of associated with this transition.

This paper contributes to the literature on economic growth by seeking to join several lines of research on structural factors in a more fully specified framework, on the one hand, and by making this more inclusive supply side to interact with demand factors in a model of export-led growth, on the other hand. Balance-of-payments constraints influence the adoption of investment-specific technological change which requires the import of capital goods, while the sectoral allocation of physical and human capital is likewise revealed to be crucial for growth, both results having important policy implications. Among the latter, the fact that the growth path of the traditional sectors is positively related to the growth rate of exports. The higher the fraction of the production of non-durable consumption goods that is exported, the stronger the impact of a change in the growth rate of exports on the growth rates of the production of non-durable consumption and capital goods.   JEL Codes: O11, O33, O41  

By integrating their poverty reduction strategies (PRSs), national budgets, and the corresponding reporting processes, low-income countries can strengthen domestic accountability and the implementation of pro-poor policies. Minding the Gaps, based on nine low-income country case studies and a review of relevant experience in four higher-income countries, offers practical insights for donors and national governments on how to strengthen the links between PRSs and budgets.PRS countries' efforts to integrate policy with budgeting processes have often had limited effect. Their policy making, planning, and budgeting are often embedded in fragmented processes and institutions. Going beyond mainly technical fixes that have been commonly used to address this fragmentation, this study frames domestic accountability in terms of ownership and incentive structures. Experience counsels the use of a simple approach that is not too ambitious. This approach should be centrally led and make use of existing systems while gradually improving them. It should build support from within and foster incentives for integration, for example by better linking PRS and budget reporting to actual decision-making processes. Also, simple budget reforms can significantly improve the budget's responsiveness to policies. Structuring a poverty reduction strategy paper in a more budget friendly manner can facilitate the interface with the budget by involving sector agencies more closely in elaborating policy priorities and establishing resource implications. It can also expand ownership and boost incentives for integration of a great number of stakeholders, thereby strengthening domestic accountability.

Effective, efficient and transparent management of public resources is particularly important in a poor country like Niger. This study shows how difficult it is for Niger to significantly change its expenditure composition in a short time span. A narrow and volatile domestic resource base, heavy dependence on aid, and a large share of pre-determined expenditures such as external debt payments are important factors behind this lack of flexibility. There are ways, though, to create space in the budget for increasing public spending on priority sectors. The study identifies a number of measures in this regard, such as increasing domestic revenues, more realistic and conservative budgeting, strengthening cash management, controlling the wage bill, prudent borrowing and attracting higher external financing for recurrent costs in priority sectors. The study also shows that enhancing the efficiency and transparency of public spending is as important as increasing spending for PRS priority sectors. It thoroughly assesses public management systems in Niger and presents an action plan, jointly elaborated by the Government and its main external partners, to address the main challenges in this area. This action plan contains a priority set of measures to improve budget preparation, execution as well as internal and external oversight.