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Ricardo Lago “PERU’S RESILIENCE IN 2008-9 CRISIS: LESSONS FOR DEVELOPING COUNTRIES”

Ricardo Lago “PERU’S RESILIENCE IN 2008-9 CRISIS: LESSONS FOR DEVELOPING COUNTRIES”. Comments of Oleh Havrylyshyn “.. and also lessons for developed countries??”. WHY RICARDO AND I KEEP COMING BACK. SERIOUSLY…MAIN COMMENTS.

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Ricardo Lago “PERU’S RESILIENCE IN 2008-9 CRISIS: LESSONS FOR DEVELOPING COUNTRIES”

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  1. Ricardo Lago“PERU’S RESILIENCE IN 2008-9 CRISIS: LESSONS FOR DEVELOPING COUNTRIES” Comments of Oleh Havrylyshyn “..and also lessons for developed countries??”

  2. WHY RICARDO AND I KEEP COMING BACK

  3. SERIOUSLY…MAIN COMMENTS • WHAT I LIKE: THOROUGH AND COMPELLING CASE STUDY OF DOINGWASH. CONSENSUS RIGHT • WHAT I QUESTION(OR SUGGEST):SOME UNCLEAR POINTS ON PERU • WHAT CAN I ADD?BEYOND LAGO PAPER AND PERU: WHY DID MOST DEVELOPING COUNTRIES DO BETTER THAN DEVELOPED?

  4. 1.WHAT I LIKE MOST… • LAGO QUESTIONS TODAY’S P.C. VIEWS THAT WC IS DEAD BECAUSE IT WAS THE CAUSE OF GLOBAL CRISIS…I AGREE • IT WORKED IN PERU BECAUSE IT WAS STRICTLY APPLIED ( cf. Gaidar :Russia big-bang failed not because too much reform but TOO LITTLE) • GOOD USE OF NEW DATA BASES ON GOVERNANCE, INSTITUTIONS (DB,GOV) • LAGO CORRECTLY EMPHASIZES THAT WC IS DIFFERENTLY INTERPRETED AS EACH ANALYST WISHES– in fact a clear template exists which most critics conveniently ignore >>>>>>

  5. 2a. WHAT I QUESTION… • PERU POLICY OF ER STABILITY BETTER THAN OTHER LA (float, devalue)? MAYBE , BUT TO CONVINCE, WOULD NEED COUNTERFACTUAL ANALYSIS • CREDIT GROWTH MUCH HIGHER--- IS THIS NOT CONTRARY TO WC?? More explanation pls? ARE THERE LESSONS ABOUT BANK REGULATION ? IS PERU MORE LIKE CANADA THAN US?

  6. 2b. WHAT I SUGGEST… • P.29 LAGO SEEMS TO DOUBT STANDARD (AND IMF ) VIEW THAT HIGH RESERVES “BAD”, MERCANTILIST: MAYBE RIGHT?EVEN IMF STUDY OF CRISIS SBA CASES (Sep.14.2009/ SPR Dept)says: “reserve coverage 2007 significantly lower in SBA countries”. THIS TOO DESERVES FURTHER INVESTIGATION—HOW HIGH IS TOO HIGH ?HOW MUCH IS ENOUGH ? • FREQUENT CONCL. PERU “AMONG TOP” OF DC’S NEEDS MORE COMPARISON WITH OTHERS, NOT JUST LA. Which leads to >>> >

  7. 3.WHAT CAN I ADD?a.MOST DC’S PERFORMED WELL • GLOBAL CRISIS 2008-9 UNIQUE: IN PAST DC’S HIT HARDER THAN AE’S- CONTRARY TRUE TODAY [Reinhart and Rogoff , 2009] • GDPr 2009: AE=-3.2/DC=+2.4 (over 3 if transition econ excl)/low-income AFR=4.3. Over 40 countries had gdpr> 0 [WEO.Apr.2010 ] • ONE REASON IS ,LIKE PERU, GENERALLY GOOD POLICIES i.e. WC well implemented [ see IMF “Review of Recent Crisis” Sep.14.09]

  8. 3.WHAT CAN I ADD?b. DC export dependence on AE declined • LESS RECOGNIZED REASON FOR BETTER PERFORMANCE:DC EXPORTS FAR LESS DEPENDENT ON AE MARKETS • DC EXPORTS TO OTHER DC’S: 1968=about 20%// 2008=about 50% • THIS DUE NOT ONLY TO HIGHER GDP SHARE BUT TO SHIFT BY MANY DC TO MID-LEVELS OF COMP.ADV.LADDER

  9. BOTTOM LINE • PERU MAY BE THE TOP OF THE CLASS IN WC SCHOOL , HOWEVER MANY DC’S ALSO DID WELL- GENERALLY BETTER THAN MANY AE’S • LAGO PAPER POINTS TO SEVERAL ISSUES DESERVING MORE ANALYSIS: WHY TRANSITION ECON.HIT HARDER? IS A LITTLE BIT OF MERCANTILISM (RESERVES>3MOS. ) PERHAPS A GOOD THING? WHAT REGULATORY LESSONS FROM COUNTRIES WITHOUT BANK CRISES?

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