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

2 WHY RICARDO AND I KEEP COMING BACK

3 SERIOUSLY…MAIN COMMENTS 1.WHAT I LIKE: 1.WHAT I LIKE: THOROUGH AND COMPELLING CASE STUDY OF DOING WASH. CONSENSUS RIGHT 2.WHAT I QUESTION(OR SUGGEST): 2.WHAT I QUESTION(OR SUGGEST): SOME UNCLEAR POINTS ON PERU 3.WHAT CAN I ADD? 3.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 >>>>>>

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6 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?

7 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 / 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 >>> >

8 3.WHAT CAN I ADD? a.MOST DC’S PERFORMED WELL GLOBAL CRISIS 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]

9 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

10 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?