How Low-Income Countries Can Diversify and Grow

By Chris Papageorgiou, Lisa Kolovich, and Sean Nolan 

(Version in Español)

Low-income countries have spent a lot of time thinking about how they can achieve faster growth, and we have done some research to help them. We found that pursuing export diversification is a gateway to higher growth for these economies. Using a newly constructed diversification toolkit, our empirical analysis shows that both the range and quality of the goods a country produces has a direct impact on growth 

Country trends 

Low-income countries have historically depended on a narrow range of primary products and few export markets for the bulk of their export earnings.

But export diversification is associated with higher per capita incomes, lower output volatility, and higher economic stability—relationships that can be tracked using our new publically available  dataset, which gives researchers and policymakers access to measures of export diversification and product quality for 178 countries from 1962-2010.

We have looked at two measures of export diversification and their impact on economic growth.  One measure captures diversification into new product lines, the other development of a more balanced mix of existing products.  Analysis using these measures shows that export diversification in low-income countries is indeed among the most effective drivers of economic growth.

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The New Frontier: Economies on the Rise

Min ZhuBy Min Zhu

(Version in 中文,FrançaisPortuguês, and Español)

There is a group of fast-growing low-income countries that are attracting international investor interest—frontier economies. Understanding who they are, how they are different, and how they have moved themselves to the frontier matters for the global economy because they combine huge potential with big risks. 

Get to know them  

The first thing to note is that some of these countries already have moved to the lower-middle income group. While a working definition of frontier economies is subject to further discussion, broadly speaking, these countries have been deepening their financial markets, such as Bangladesh, Kenya, Nigeria, Mozambique, and Vietnam.

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March of the Billionaires

From billionaires Bill and Melinda Gates and Warren Buffett to Aliko Dangote and George Soros, the titans of capitalism are backing good causes with their cash. By financing new vaccines, championing maternal health, supporting learning, building libraries, or buying up Amazon rain forest to protect the environment, philanthropists are backing innovations and new approaches that are changing lives and building dreams. The new issue of Finance & Development magazine looks at the world of targeted giving and social entrepreneurship.

Tharman Sees “Greater Global Policy Resolve”

The world is now in a much better situation than six months ago when it comes to policy solutions, according to Tharman Shanmugaratnam, Singapore's Deputy Prime Minister and Minister for Finance , who is Chair of the IMF's policy-setting committee, the IMFC, speaking about the outcome of the IMF-World Bank annual meetings in Tokyo.

Global Economy: Some Bad News and Some Hope

The world economic recovery continues, but it has weakened further. In advanced countries, growth is now too low to make a substantial dent in unemployment. And in major emerging countries, growth that had been strong earlier has also decreased. Relative to the IMF's forecasts last April, our growth forecasts for 2013 have been revised down from 1.8% to 1.5% for advanced countries, and from 5.8% down to 5.6% for emerging and developing countries.The downward revisions are widespread.

Tokyo links — IMF-World Bank Annual Meetings

The 2012 annual meetings of the IMF and the World Bank are being held this year in Tokyo at a crucial time for the world economy. Key reports out this week are the closely watched World Economic Outlook, the Fiscal Monitor, and the Global Financial Stability Report.

Top 20 — iMFdirect’s Top 20 list

The IMF blog has helped stimulate considerable debate about economic policy in the current crisis, on events in Europe and around the world, on fiscal adjustment, on regulating the financial sector, and the future of macroeconomics, as economists learn lessons from the Great Recession. As readers struggled to understand the implications of the crisis, our most popular post by far was IMF Chief Economist Olivier Blanchard's Four Hard Truths, a look back at 2011 and the economic lessons for the future.

Growing Institutions? Grow the People!

The current crisis in the eurozone also highlights the importance of coherent economic and political institutions at all levels of economic development. Weaknesses in national macroeconomic and statistical institutions in supposedly “advanced” countries were at the root of the crisis, especially in Greece. And the lack of supportive fiscal and regulatory institutions at the European level—which require making additional steps in political integration—is behind the markets’ continued anxiety surrounding the common European currency.

Global Crisis — Top Links from the IMF for Economics and Finance

Top economic and financial links from the IMF for June 2012 on the global economic crisis and beyond.

Economics – New Links for Students from the IMF

The IMF's Finance & Development magazine has recently published two helpful online compilations of articles that may be useful to students and those interested in economic issues. They are rich collections of material that are totally free!! They are a collection of profiles of leading economists and some clearly written explanations of fundamental economic terms.

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