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CGD research explores how international financial institutions such as the International Monetary Fund, World Bank, multilateral development banks, and other international development agencies can become more responsive to the needs of developing countries. The Center’s work concerns itself with the future of these institutions, all of which are facing shifts in demand for their traditional services, the emergence of new institutions, and reform of their leadership selection processes.
While Modi has celebrated India’s rapid rise in the Doing Business rankings, the World Bank’s Chief Economist recently resigned amid controversy over methodological changes. Without those changes, India’s “jump” in the rankings looks much more modest.
The World Bank is reorganizing. Bloomberg reports that president Jim Yong Kim has written staff about a shake-up at the bank’s highest levels in preparation for implementing an as-yet-to-be-announced new institutional strategy. Such can be unsettling for bank employees, some of whom will find their jobs on the line and others who may get new bosses. Is there any reason for the rest of the world to care?
The IMF uses its well-known "financial programming" model to derive monetary and fiscal programs to achieve desired macroeconomic targets in countries undergoing crises or receiving debt relief. Financial programming is based on monetary, balance of payments, and fiscal accounting identities. This paper subjects the identity-based framework to a variety of tests. All of the identities contain large statistical discrepancies, which weakens the case for them as a "consistency check." In addition, the financial programming approach is flawed because it does not take into account the endogeneity of virtually all the variables in each macroeconomic identity, the instability of its simple behavioral assumptions, and the large statistical discrepancies in all the identities. Accounting identities do not a macro model make.