GEI Projects

1. GLOBAL ECONOMIC INSTITUTIONS AND RISK MANAGEMENT IN DEVELOPING COUNTRIES

Principal Investigators

Professor CHRISTOPHER L GILBERT
Dr AMLAN ROY
Department of Economics
Queen Mary and Westfield College

Contact

Dr Amlan Roy
Department of Economics
Queen Mary and Westfield College
Mile End Road
London El 4NS

Tel: 020 7975 5085
Fax: 020 8983 3580
Email: a.roy@qmw.ac.uk

Duration of research:

1 October 1994 - 30 September 1997

AIMS AND OBJECTIVES

To assess how the structure and functioning of global economic institutions might be modified to facilitate risk management in developing countries, and whether new institutions might be set up for this purpose.

To develop theoretical models to better understand the appropriate role for global economic institutions in risk management.

To collate a database to assess the exposure of a set of developing countries to interest rate, commodity and currency risk.

To perform case studies (e.g. Argentina, Colombia) to clarify how governments have managed risk, and the role of the global economic institutions in this process.

STUDY DESIGN

A substantial database is being assembled on a group of 15 important developing countries. A set of VAR (vector autoregression) models is being developed with a common structure which will enable analysis of the origin and impact of shocks, and comparison of the outcomes with the influential, but qualitative, work of Little and Gorden.

Case studies will enable a more detailed institutional and descriptive account to be provided in parallel with the quantitative study.

Institutional studies concern the Common Fund, the effects of World Bank structural adjustment programmes on risk management in the West African economies, and on the World Bank itself.

POLICY IMPLICATIONS

Policy implications will relate in part to the existence of institutions – should some existing institutions be abolished, or new institutions created? – and in part to the role of current institutions. In particular, to what extent should development instiutions aim to substitute for inadequate market mechanisms, (e.g. in the provision of development finance) and to what extent should they aim at facilitating better access to existing markets?

There will also be implications from country studies. A growing body of evidence suggests that good economic performance is related not so much to the extent to which countries experience or are insulated from shocks, as to the extent to which the economy is managed in the face of shocks. We will attempt to quantify these conclusions. If these results are borne out the implication will be that the global economic institutions should aim at developing risk management rather than at insulation of countries from shocks.