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Comments of Oleh Havrylyshyn

“..and also lessons for developed countries??”

Ricardo Lago“PERU’S RESILIENCE IN

2008-9 CRISIS: LESSONS FOR DEVELOPING COUNTRIES”

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WHY RICARDO AND I KEEP COMING BACK

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SERIOUSLY…MAIN COMMENTS

1.1. WHAT I LIKE: WHAT I LIKE: THOROUGH AND COMPELLING CASE STUDY OF DOING WASH. CONSENSUS RIGHT

2.2. WHAT I QUESTIONWHAT I QUESTION((OR SUGGESTOR SUGGEST):): SOME UNCLEAR POINTS ON PERU

3.3. WHAT CAN I ADD?WHAT CAN I ADD? BEYOND LAGO PAPER AND PERU: WHY DID MOST DEVELOPING COUNTRIES DO BETTER THAN DEVELOPED?

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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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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?

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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 >>> >

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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]

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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

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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?