The Fed Funds Market since Last June

WASHINGTON (MarketWatch) - New construction of U.S. houses plunged to the lowest level in 17 years in March, the Commerce Department estimated Wednesday. Starts fell 11.9% in March to a seasonally adjusted 947,000 annualized units weaker than the 988,000 pace expected by economists surveyed by MarketWatch. This is the lowest level of starts since March 1991. Starts are dpwn 36.5% year-on-year. Starts of new single-family homes fell by 5.7% to 680,000 in March, while starts of large apartment units fell 24.6% to 267,000. Building permits, a leading indicator of housing construction, fell 5.8% to a seasonally adjusted annual rate of 927,000. This is the lowest level of permits since April 1991.

Taking the Temperature of the Current Financial Crisis

Yves Smith has a bigger, better, more colorful graph of the TED Spread--which has become the consensus indicator of the depth of the current financial crunch:

Financial Crisis Could Trap 53 Million More People in Poverty

Vulnerability Fund
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Crisis Hitting Poor Hard in Developing World
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53 million more people could be trapped in poverty as global economic growth slows
Between 200,000 and 400,000 more babies could die each year between now and 2015 if the crisis persists
Some 40 countries are "highly vulnerable" to the effects of the crisis
February 12, 2009—The financial crisis is fast becoming a human crisis.
As many as 53 million more people could be trapped in poverty as economic growth slows around the world, according to new World Bank forecasts.
And in a blow to efforts to reduce infant mortality, between 200,000 and 400,000 more babies could die each year between now and 2015 if the crisis persists, the Bank predicts.
The new forecasts precede a meeting of the G7 finance ministers this weekend in Rome.
World Bank President Robert B. Zoellick will be at the meetings. He has urged developed countries to set aside 0.7 percent of their economic stimulus packages for a special Vulnerability Fund for developing countries.
“While much of the world is focused on bank rescues and stimulus packages, we should not forget that poor people in developing countries are far more exposed if their economies falter,” Zoellick said.
Some 40 countries are “highly vulnerable” due to pre-existing high rates of poverty and expected drops in growth.
Millions already living below the poverty line “will be pushed further below the poverty line” as a result of the global financial crisis, according to the new policy note, “The Global Economic Crisis: Assessing Vulnerability with a Poverty Lens.”
“We know that after the food and fuel crisis of a year ago, the estimates were that we could see an addition of about 100 million people to the ranks of the poor, and we think this crisis, in its severity, will top that,” says World Bank Vice President for Poverty Reduction and Economic Management Danny Leipziger.
Almost one-third (29 percent) of all developing countries are “highly exposed” to the poverty effects of the crisis. Another 62 percent are moderately exposed and face decelerating growth or high poverty levels. Less than one tenth have relatively low exposure, according to the policy note.
“While in the short-run, the nonpoor may be the most affected by the crisis, the adverse impacts are likely to spread in the medium-term to poor households,” the paper says.

Fiscal Policy

Fiscal sustainability is a good starting point for the discussion of growth-oriented fiscal policy because unsustainable public finances inevitably lead to crises. This being said, the work program on growth-oriented fiscal policy goes beyond fiscal sustainability: it also includes issues of tax policy and development, composition of public expenditure, sub-national finance, and the role of fiscal policy in dealing with climate change.
Fiscal Policy: PRMED undertakes work on debt, fiscal policy and growth in Middle-Income Countries (MICs); tax policy and the efficiency of public expenditure policy; climate change, and the role of fiscal policy in managing volatile oil revenues.
Fiscal Sustainability, Risks and Vulnerabilities: PRMED has developed a comprehensive toolkit for fiscal sustainability in the context of uncertainty. The tool has its roots in traditional fiscal-sustainability analysis, but incorporates several new features that reflect modern developments. It allows for explicit analysis of the effects of uncertainty not just through scenario analysis, but also through full stochastic analysis allowing Value-at-Risk assessments. Given the uncertainty and risks posed by the current oil shock, the tool was extended to account for commodity price risks and possible risks stemming from declining production volumes.
Subnational Finance: With worldwide decentralization, the sustainability of sub-national finance is vital. The sub-national finance work covers: sustainability frameworks for analyzing how sub-national fiscal adjustment responds to reforms, shocks, and the interplay of national and sub-national policies; sub-national taxation and transfer systems; ex-ante legislative frameworks, including fiscal responsibility legislation regulating sub-national borrowing; and sub-national insolvency mechanisms for debt workout and restructuring.

Growth Analytics

PRMED pilots country growth studies and works in collaboration with Country Economists to incorporate growth strategies in Country Assistance Strategies (CASs), Country Economic Memorandums (CEMs), and lending products. PRMED also develops tools, and adapts state-of-the-art methodologies for growth analysis.
Inclusive Growth:What is the Inclusive Growth program about? There is widespread agreement that economic growth is a necessary and crucial condition for poverty reduction, as well as evidence that the pattern of growth—how growth is generated and distributed—is critical for accelerating poverty reduction. Inclusive growth is growth in which economic actors from all parts of the income distribution increase their well-being by contributing and benefitting from the growth process. While there is broad agreement on the basic policies that are important for growth and inclusive growth, the need for strong country specific diagnostics has been underscored as critical for prioritizing and shaping these policies to fit country needs.
Country Growth Analyses: PRMED applies a variety of innovative frameworks for growth analysis to identify bottlenecks to growth and inclusive growth. It also offers tools for growth analysis including:
Long-run growth forecasting and accounting toolkit
Growth and export processing arrangements toolkit for assessing the economy-wide implications of duty drawback reform.
Growth in Emerging Markets: Economic growth of China and India has been accompanied by rapid growth in world trade and increase in commodity prices. PRMED – in partnership with the Development Economics Vice Presidency (DEC) – has initiated a project analyzing the implications of these economies’ rise for other developing countries.
Economic Diversification and Sustainable Growth: This project studies how countries can explore options for structural transformation by diversifying their exports in a competitive world. With the use of a new database and constructs based on product-space and income-based diversification concepts, a variety of country-specific and regional papers analyze this theme for Economic and Sector Work (ESW) as well as CEMs. A web-based tool is available for country economists to do their own analysis.
Examples of flagship products:
Technology, Adaptation and Exports: How Some Developing Countries Got it Right documents the success of several developing countries in devising institutions to adapt technologies for sustained economic/export growth in 10 sector-specific case studies.
Small States, Smart Solutions Flagship studies whether small states warranted special treatment by the Bank and the international community.

Economic Policy and Debt

The Economic Policy and Debt Department (PRMED) is the unit within the World Bank's Poverty Reduction and Economic Management (PREM) Network responsible for the Bank's work on economic policy and financing for growth including growth analytics, national and sub-national fiscal policy, strategic debt issues, debt management, and related knowledge dissemination. PRMED also supports the Heavily Indebted Poor Countries (HIPC) Initiative implementation and crafts the Bank's position in the global debate on debt issues.
February 2009
IMF-OECD-WB Seminar on the Response to the Crisis and Exit Strategies - Joint Statement
February 2009
Burundi Reaches Completion Point under the Enhanced HIPC Debt Relief Initiative
February 2009
Inclusive Growth: Key to Identifying Development Priorities
January 2009
How can Korea Raise its Future Growth Rate?
January 2009
The Republic of Cote d'Ivoire - Preliminary Document
January 2009
PRMED Knowledge Brief: What Is Inclusive Growth?
January 2009
B-Span: Debt Relif and Beyond Conference

...More
The debt management work program includes two components: the Debt Management Performance Assessment (DeMPA) tool and technical assistance in designing and implementing Medium-Term Debt Management Strategies (MTDS) ....more
Debt Management Performance Assessment (DeMPA)
Medium-Term Debt Management Strategies (MTDS)
Debt relief work relates to the implementation of the Heavily Indebted Poor Countries (HIPC) Initiative, the Multilateral Debt Relief Initiative (MDRI), and the administration of the Debt Reduction Facility (DRF) for IDA-only countries....more
Debt Relief At-A-Glance
Debt Reduction Facility (DRF) for IDA-Only Countries
Heavily Indebted Poor Countries (HIPC) Initiative
Multilateral Debt Relief Initiative (MDRI)
This joint World Bank-IMF framework aims to support Low-Income Countries’ (LICs) efforts to achieve their development goals without creating future debt problems...more
Debt Sustainability Framework for Low-Income Countries (DSF)
Sovereign Debt and Development in Market Access Countries (MACs)
Fiscal sustainability is a good starting point for the discussion of growth-oriented fiscal policy because unsustainable public finances inevitably lead to crises....more
Fiscal Policy
Fiscal Sustainability, Risks and Vulnerabilities
Subnational Finance
PRMED pilots country growth studies and works in collaboration with Country Economists to incorporate growth strategies in Country Assistance Strategies (CASs), Country Economic Memorandums (CEMs), and lending products....more
Inclusive Growth
Country Growth Analyses
Economic Diversification and Sustainable Growth
Growth in Emerging Markets
Small States
Dissemination of knowledge on economic policies and financing for growth is a critical part of PRMED’s work program activities....more
Knowledge and Learning
Conferences and Events
Contact Information

World Economic Situation and Prospects

World Economic Situation and Prospects is a joint product of the Department of Economic and Social Affairs, the United Nations Conference on Trade and Development and the five United Nations regional commissions. It provides an overview of recent global economic performance and short-term prospects for the world economy and of some key global economic policy and development issues. One of its purposes is to serve as a point of reference for discussions on economic, social and related issues taking place in various United Nations entities during the year. World Economic Situation and Prospects 2009 The world economy is mired in the severest financial crisis since the Great Depression. WESP of 2006, 2007 and 2008 had already warned of the risks for this to happen. All factors analyzed in those reports have now played out and have pushed the world economy into recession. Growth in world gross product (WGP) is expected to slow to 1.0 per cent in 2009, a sharp deceleration from the rate of 2.5 per cent estimated for 2008 and well below the more robust pace in previous years. While most developed economies are expected to be in a deep recession, a vast majority of developing countries is experiencing a sharp reversal in the robust growth registered in the period of 2002-2007, indicating a significant setback in the progress made in poverty reduction for many developing countries over the past few years. The prospects for the Least Developed Countries (LDCs), which did so well on average over the past years, are also deteriorating rapidly. Income per capita for the world as whole is expected to decline in 2009. The report analyzes in detail the evolution of the global financial crisis during 2008 and the more fundamental factors that led to its build-up. It further assesses the impact on global economic activity, especially in developing countries. The synchronized slowdown in both rich and poor countries is further evidence that the until recently widely held belief that developing country growth would have been ‘decoupled’ from that in the United States and Europe was dangerously misleading. The report also reviews the policy actions so far taken worldwide in response to the global financial crisis. The report recommends more forceful fiscal policy stimuli need to be taken in an internationally concerted manner in order to prevent the world economy from falling into a much deeper and more prolonged recession. The WESP further details a number of more fundamental reforms to the international financial system that are needed to reduce risks of a recurrence of such a devastating crisis in the future.