Source: World Bank, DECPG

A Mystery: the trends shown in these slides are related and result partly from the strong dollar, but also from 1990s currency crises and liberalization in Asia, LatAm and Russia… use the Tornell et. al. (2004) paper lecture notes to make as many connections as you can… Source: most of these slides are from the World Bank Global Development Finance 2004 report and presentation

Commodity prices are soaring Petroleum and non-energy weighted price indices, current US dollars, 1990=100. Petroleum Non-energy Source: World Bank, DECPG

…yet inflation remains subdued Consumer price inflation, median for Developing- and GDP weighted mean for High-income. Developing High-income Source: World Bank, DECPG

Trade: Developing countries outperform OECD Exports and imports (GNFS), 2003, percentage change Percent Source: World Bank

Interest rates continue to be low Central bank policy rates Percent Euro Zone United States Japan Source: National Agencies

Falling 0 and 1% 1% and 2% 2% and 3% 3% and 4% Above 4% Number of countries (16) (16) (14) (8) (14) (16) Per capita income growth rate (%), 1998-2003 Per capita income growth and population in developing countries (1998 – 2003).

Foreign exchange reserves have risen sharply, especially in East Asia $ billion

Private capital flows recovered in 2003 …but remain well below 1997 peak $ billion $286 in 1997 Net private flows $200 in 2003

The risk premium on developing country debt has declined steadily 938 points (Sep., 2002) Basis points EMBIG spreads 424 points (Mar., 2004) Mar-04

Bond issuance and ST bank lending lead the recovery $ billion Net private equity flows Net private debt flows

Source: World Bank, DECPG