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Temperature and Growth: A Panel Analysis of the United States
Hoffmann, Bridget; Colacito, Riccardo; Phan, Toan
Working Papers - English - May, 2016

This paper documents that seasonal temperatures have significant and systematic effects on the U.S. economy, both at the aggregate level and across a wide crosssection of economic sectors. This effect is particularly strong for the summer: an increase of 1°F in the average summer temperature is associated with a reduction in the annual growth rate of state-level output of 0:15 to 0:25 percentage points. When these estimates are combined with projected increases in seasonal temperatures it is found that a reduction of U.S. economic growth by up to one third could occur over the next century.

Related JEL Codes:
O44 - Environment and Growth
Q51 - Valuation of Environmental Effects
Q59 - Environmental Economics: Other
R11 - Regional Economic Activity: Growth, Development, and Changes

Revelation of Expectations in Latin America(REVELA) - Issue 61

Newsletter / Journal - English - May, 2016

The March 2016 surveys of expectations conducted by Central Banks with inflation targeting regimes indicate that the simple average growth expectations for 2016 for the eight countries covered by REVELA have decreased by 0.1% from 1.9% to 1.8% compared to February. The GDP weighted average growth expectations have decreased by 0.2% from -0.4% to -0.6%, remaining below zero for the third consecutive month. Meanwhile, inflation expectations for 2016 have increased by 0.1% from 5.2% to 5.3% on a simple average basis, and remained constant at 5.7% on a GDP weighted average basis compared to the previous month. At the individual country level, growth expectations fell in six countries: Paraguay by 0.3%, Brazil, Chile and Guatemala by 0.2% (in all three cases) and for Mexico and Uruguay by 0.1% in both cases. Expected growth remained constant in Colombia at 3.0% and increased in Peru by 0.2% compared to the previous month. Inflation expectations fell in Brazil by 0.2% and remained constant in four countries: Paraguay at 4.7%, Chile at 3.6%, Peru at 3.5% and Mexico at 3.3%. Finally, inflation expectations increased in Colombia, Guatemala and Uruguay by 0.2% in the three cases. Expected growth for the region is as low as -3.6% for Brazil and as high as 3.6% in Guatemala, while expected inflation ranges between 3.3% in Mexico to 9.9% in Uruguay.

The Productivity Gap in Latin America: Lessons from 50 Years of Development
Fernández-Arias, Eduardo; Rodríguez-Apolinar, Sergio
Working Papers - English - May, 2016

This paper combines development accounting exercises with economic theory to assess the importance of total factor productivity and the accumulation of factors of production as engines of growth in Latin America. Using the new, drastically revised Penn World Table (PWT) and Barro-Lee datasets, the paper shows that lower and non-convergent income relative to successful development benchmarks are explained by subpar productivity gains rather than slower factor accumulation. The empirical analysis of the interplay between productivity and accumulation in the process of development suggests that one explanation for this pattern is that investment in Latin America is not as productivity-enhancing as in less distorted economies.

Related JEL Codes:
O11 - Macroeconomic Analyses of Economic Development
O47 - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

The Second Wave of Global Liquidity: Why Are Firms Acting Like Financial Intermediaries?
Powell, Andrew; Caballero, Julian; Panizza, Ugo
Working Papers - English - May, 2016

Recent work suggests non-financial firms have acted like financial intermediaries particularly in emerging economies. This paper corroborates these findings but then asks “why?” The results indicate evidence for carry-trade activities, but they are focused on countries with higher levels of capital controls, particular controls on inflows. There is little evidence for such activities given other potential motives. It is posited that this phenomenon is due more to the reaction of countries in the face of low global interest rates, quantitative easing and strong capital inflows than incomplete markets or the retreat of global banks due to impaired balance sheets or tighter regulations.

Related JEL Codes:
E51 - Money Supply; Credit; Money Multipliers
F30 - International Finance: General
F33 - International Monetary Arrangements and Institutions

Non-Contributory Pensions and Savings: Evidence from Argentina
Ruffo, Hernán; González-Rozada, Martín
Working Papers - English - Apr, 2016

This paper examines the effects of Argentina’s Plan de Inclusión Previsional (PIP), which changed the pension system in a way that generated a new noncontributory pillar, produced a huge expansion in pension coverage between 2005 and 2008 and a transfer of a vast amount of resources to households. Using a difference in differences methodology it is found that the PIP policy has reduced the incentives to work and to be in the labor force of those workers directly affected by the policy, mostly women of retirement age, but also some younger workers. The policy increases consumption of food and non-durable goods and health expenditure by beneficiary households. At the same time, the policy reduced incentives to save. Thus, the overall effect of the noncontributory pension scheme implies a substantial reduction in national savings.

Related JEL Codes:
D14 - Personal Finance
E21 - Consumption; Saving; Wealth
E23 - Production
H55 - Social Security and Public Pensions

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