Manabu Nose

Long-term Impacts of Global Food Crisis on Production Decisions : Evidence from Farm Investments in Indonesia

Did the rise in food prices have a long-term impact on agricultural production? Using household-level panel data from seven provinces of Indonesia, this paper finds that the price shock created a forward-looking incentive to invest, which can dynamically enhance productivity in agriculture. It also finds that the impact of the price shock on investment behavior differs by initial wealth. In response to price increases, wealthy farmers invested more in productive assets, while poor farmers increased their financial savings as well as consumption. Price spikes relax liquidity constraints, which increases investments among the richer while do so savings and consumptions among the poor, possibly leading to diverging income inequality in the long run.

Micro Responses to Disaster Relief Aid: Design Problems for Aid Efficacy

This article explores the selection of fishing households into receipt of aid and evaluates the effectiveness of in-kind transfers of fishing boats provided after the 2004 Indian Ocean tsunami in Aceh, Indonesia. First, besides local leaders’ targeting decisions, this article highlights households’ self-selection behaviors under the uncertainty of receiving aid. While the selection process is found to be affected by social capital, aid could be more efficiently targeted to productive fishermen through the community targeting approach. On the basis of this selection rule, I proceed to evaluate the impact of aid programs on recipients’ fishing productivity. As the hasty construction of a homogeneous type of fishing boats created a mismatch with beneficiaries’ heterogeneous fishing skills, aid effectiveness is found to be limited. A counterfactual simulation suggests that tailoring the design of in-kind transfer to recipients’ fishing skills could have been a cost-effective policy to promote fishing industry recovery after the tsunami.

Determinants of the distance between sovereign credit ratings and sub-sovereign bond ratings: Evidence from emerging markets and developing economies

ABSTRACT This article explores factors that affect the distance between sovereign credit ratings and the ratings assigned to new foreign-currency bonds issued by sub-sovereign entities (such as private non-financial corporations, financial firms, and public sector enterprises) in 47 emerging markets and developing economies. Censored and double-hurdle regression models are used to estimate the relative contributions of bond-level, issuer-level, and macroeconomic factors that determine this distance, separately for those rated at or below the sovereign rating and those rated above. For the three quarters or more of sub-sovereign bond ratings that are constrained by the sovereign rating ceiling, a Tobit regression model shows a smaller distance – suggesting stronger sovereign–corporate linkages – for public sector enterprises and financial firms relative to other firms. Riskier global financial conditions are also associated with sub-sovereign bonds being rated closer to the sovereign rating. For the small number of sub-sovereign bonds rated higher than the sovereign rating, a double-hurdle model shows that certain debt features – such as bonds backed by future-flow receivables or other collateral or structured as Special Purpose Vehicles (SPV) – significantly raise the likelihood of piercing the sovereign rating ceiling and also increase the distance above the sovereign ceiling.

Impacts of Sovereign Rating on Sub-Sovereign Bond Ratings in Emerging and Developing Economies

This paper explores factors that affect the distance between sovereign credit ratings and the ratings assigned to new foreign-currency bonds issued by sub-sovereign entities (such as private non-financial corporations, financial firms, and public sector enterprises) in 47 emerging markets and developing economies. Censored and double-hurdle regression models are used to estimate the relative contributions of bond-level, issuer-level, and macroeconomic factors that determine this distance, separately for those rated at or below the sovereign rating and those rated above. For the three-quarters or more of sub-sovereign bond ratings that are constrained by the sovereign rating ceiling, a Tobit regression model shows a smaller distance—suggesting stronger sovereign-corporate linkages—for public sector enterprises and financial firms relative to other firms. Riskier global financial conditions are also associated with sub-sovereign bonds being rated closer to the sovereign rating. For the small number of sub-sovereign bonds rated higher than the sovereign rating, a double-hurdle model shows that certain debt features—such as bonds backed by future-flow receivables or other collateral, or structured as Special Purpose Vehicles (SPV)—significantly raise the likelihood of piercing the sovereign rating ceiling and also increase the distance above the sovereign ceiling.

Long-term Impacts of Global Food Crisis on Production Decisions

ABSTRACT This paper estimates farmers’ investment response to food price spikes using household panel data collected before and after the 2007/08 food price crisis in Indonesia. We found that an increase in farmers’ terms-of-trade allowed relatively large crop-producing farmers to increase their investments at both extensive and intensive margins. Food price spikes had a significant income effect among farmers whose production surplus is large for market sales. During the food price crisis, large farmers particularly increased machine investments, which saved some labour inputs, pointing to the importance of complementarities between land and machine investments.

Road to Industrialized Africa: Role of Efficient Factor Market in Firm Growth

After a decade of rapid growth, industrialization has lost ground with shrinking manufacturing sector and high informality in Sub-Saharan Africa (SSA). This paper explores how land market and labor regulations affect factor allocative efficiency and firm performance in SSA. Using pooled data on firm balance sheets for 40 countries in SSA, the results identify significant land and labor misallocations due to limited market allocation of land and inappropriate regulatory policies. Using variations in ethnic diversity and the intensity of regulatory actions to peer firms at subnational level as instrumental variables, local average treatment effects show large productivity gains from factor reallocations, especially for marginally productive firms. Panel data results for Nigerian firms confirm factor market inefficiency as a principal driver of declining productivity, while showing that the 2011 minimum wage reform increased firm size. The results imply that improving formal regulation is critical to support firm growth at the stage of weak legal capacity, while informal sector monitoring gets effective as legal capacity develops.

Enforcing Public-Private Partnership Contract: How do Fiscal Institutions Matter?

Public-private partnerships (PPPs) have increased rapidly in emerging and developing countries, creating both opportunities and fiscal challenges. One of the main challenges is that while governments have increased commitments in guarantees and direct subsidies to promote PPPs, contractual disputes remain high with significant costs. This paper examines how fiscal institutions affect the selection of PPP contracts and the probability of contract disputes using about 6,000 PPP contract-level data. The analysis shows that larger government financing needs, lower budget transparency and bureaucratic efficiency are associated with higher probability for governments to offer guarantees. Propensity score matching results show that disputes are more common for guaranteed contracts due to adverse selection and contingent liability effects. PPP management quality and budget transparency are found to be key determinants for a longer survival of PPPs.

Impacts of Sovereign Creditworthiness on Sub-Sovereign Debt Ratings in Emerging and Developing Economies

This paper examines key determinants of the distance between the sovereign’s credit rating and the ratings of sub-sovereign foreign currency bonds, such as bond issuers’ type, debt characteristics, and global and country’s economic conditions. Using a comprehensive international bond-level database for emerging and developing economies, the double-hurdle estimation shows that sub-sovereigns appear to be rated higher than the sovereign rating when bonds are structured with securitizations. For bonds constrained below the sovereign ceiling, the Tobit regression shows strong sovereign-corporate linkage especially for financial firms. Among non-financial firms, publicly-owned debt issuers are rated closer to the sovereign than private sector issuers. This relationship remains robust to potential sample selection bias in debt issuance and the inclusion of additional controls for firm-specific balance sheet attributes. International bonds of non-financial entities issued during riskier global condition were correlated more strongly with the sovereign rating. Well-developed domestic financial market makes the distance between sovereign and sub-sovereign ratings tighter due to stronger macro-financial linkages, while a liberalized capital market widens the distance by allowing firms to mobilize more external financing. Finally, despite the recent sovereign ceiling lite policy, the sovereign-corporate relationship became significantly stronger at the peak period of the 2008-09 global financial crisis, which was reversed again due to the quantitative easing in subsequent years.