Is the Asian Market Slump Due to China´s Monetary Policy?

The prospect of the ebbing of easy liquidity has exposed many emerging market economies’ vulnerabilities this summer, with India and Indonesia as epicenters of recent currency, stock and bond market losses in Asia. Despite ongoing sharp correction in the asset markets of those countries, the short-term pain may not be over yet: When it rains, it pours in emerging markets. With foreign flows becoming scarce, inevitable and painful current account adjustment is underway, with interest rates rising, consumption and imports falling, and GDP growth rate decelerating.

 

Usually, the current travails in emerging markets are blamed on expectations of slowing open market purchases by the US Federal Reserve System. Lars Christensen, head of emerging market research at Danske Bank, however, blames China´s monetary tightening as at least as important as the expected US Fed ´tapering´.  I have myself, with former colleagues, pointed to the growing impact that China´s growth has exerted since the last decade on GDP growth in middle- and low-income countries[1], pointing to the growing raw material, trade and production links of increasingly China centric emerging countries. So I shall have a lot of sympathy for Lars Christensen´s earlier proposition that China has also grown into a monetary superpower in a Sino monetary transmission mechanism with the rest of Asia. China´s monetary tightening, however, can hardly explain the current slump in Asian markets, on closer inspection.

Graph 1: US 10y Treasuries, Futures

Source: finanztreff.de, 20/08/2013

 

First, let us consider  the expected monetary stance in the US and in China. Graph 1 clearly shows that the market has formed expectations since May that the Fed would not continue open market purchases at the pace witnessed over the last years, partly fueled by Bernanke´s taper talk that month to US Congress. China´s monetary tightening, by contrast, occurred during late 2010 to early 2012 from when the Bank of China started to ease again[2]. Since then, minimum reserve requirements were repeatedly reduced. Further, the PBC reduced its benchmark deposit and loan rates in June 2012. In addition, the PBC has also used a mix of monetary policy instruments to appropriately increase market liquidity. Between Q1 2012 and Q2 2013, China´s M1 aggregates rose by more than 13%. Even considering huge time lags, the current turmoil of Asia stock and bond markets cannot be blamed on China´s monetary tightening prior to end 2011. Nor can the current drop in raw material prices, which is also related to rising bond yields in the US.

 

Second, both emerging bond markets (Graph 2) and equity outflows (Graph 3) from the emerging market space (to which China belongs) back to the safe heaven developed markets display a very close connection to the US 10y Treasuries futures prices displayed above in Graph 1. Virtually no time lag seems involved, confirming the validity of the 1990s literature on push (v pull) factors which had emphasized the importance of US interest rates for emerging-market flows[3].

 

 

Graph 2: SPDR Barclays Capital Emerging Market Local Bond ETF

Source: finanztreff.de, 20/08/2013

 

Graph 3: Net Flows EM Equity Funds, 2013

Source: ft.com, 20/08/2013

 

End of story. But let´s go on, for the sake of learning.

 

Third, monetary transmission from China to Asian markets would imply, as correctly emphasized by Christensen, some sort of renminbi peg by the affected countries. Indeed, the ever closer integration of global value chains in Asia, with China replacing Japan as the major hub,  arguably creates  (and partly justifies) “Fear of Floating” more than anywhere else in the world. But closer inspection of the recent literature on effective (as opposed to merely proclaimed) currency regimes in Asia reveals that the two countries most affected by the current slump – India and Indonesia – did mostly not show a strong weight of the renminbi in their effective (trade weighted) exchange rates. Randall Henning[4] finds that during 2010-11 the Indonesian rupiah was strongly pegged to the US dollar. As for India, Cavoli and Rajan[5] find evidence of moving from a quasi-peg to the US dollar to more flexibility over recent years.

 

Cheap advice to the Asian victims of US monetary policy comes easy – from abroad. Most observers today recommend that the countries float (rather than impose outflow controls). This advice ignores the growing production and trade integration within Asia. It also ignores that those who suffer most these days were found to run the most flexible currency regimes among Asian peers.

 

To link Asia´s current asset market slump to China´s monetary stance is a red herring, perhaps an attempt to deflect responsibility from the US Fed for cyclical in- and outflows into emerging markets and return the blame to China. (In a way, a variation ofthe disapproved Bernanke hypothesis that the Asian saving glut caused globalimbalances in the past.)

 

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[1] “The Renminbi and Poor-Country Growth”, The World Economy, Vol. 35, 2012.

[2] Wang Yu, The adjustment of China´s monetary stance in the face of global liquidity, BIS Papers No. 70.

[3] See, e.g., Eduardo Fernandez-Arias, „The new wave of private capital inflows: Push or pull?”, Journal of Development Economics, Volume 48, 1996.

[4] C. Randall Henning (2012), „Choice and Coercion in East Asian Exchange Rate Regimes”, Peterson International Institute Working Paper 12-15.

[5] T. Cavoli and R.S. Rajan (2013), „South Asian Exchange Rate Regimes: Fixed, Flexible or Something In-between?”, South Asia Economic Journal, Vol. 14, 2013.

Germany´s Next Aid Model

No, this is not about Heidi Klum. God forbid! Neither it is about the German deputy development minister Gudrun Kopp (see picture for blond hair).

Just seven weeks ahead of Germany´s national election, it is time to think about how German development cooperation should be conceptualised in the forthcoming government. Five years ago, William Easterly and Tobias Putze tried to get a handle at an ´ideal´ aid agency strictly based on empirically observable parameters[1] (rather than negotiated and vetted DAC peer reviews). Their study, covering 38 bilateral and several multilateral aid agencies, was based on criteria derived from the bulging development aid literature:

·         Transparency (a precondition necessary for any meaningful evaluation)

·         Specialisation (avoiding fragmentation of aid supplies costly to recipients)

·         Selectivity (focus on poor countries)

·         Efficient delivery (avoiding tied aid, food aid, and technical assistance)

·         Administrative loss (share of aid bureaucracy cost).

Among the bilateral aid agencies covered in the Easterly/Putze study, Germany´s BMZ occupied the second last rank! German cooperation was seen in particular as fragmented, bureaucratic and nontransparent compared to its DAC peers.

 

Meanwhile, the recalibration of the world economy toward China and the success of large emerging countries in helping lower global poverty (aka Shifting Wealth) have turned some of the cited criteria for evaluating aid agencies doubtful, even obsolete. Shifting Wealth, apart from allowing for a milder assessment of past and present BMZ performance than granted by the Easterly/Putze study, suggests some specific recommendations for Germany´s aid over the next legislation period (2013-17) that actually can be opposite to some of the traditional criteria:

·         The selective focus of aid needs to shift from poor countries to poor people. Only just two decades ago, 93 percent of the world´s poorest people lived indeed in the poorest (least developed) countries; today, three fourth of the world´s poorest people survive in countries now classified as middle-income countries (Ravi Kanbur und Andy Sumner, 2011)[2]. For humanitarian reasons, the aid focus needs to reflect the new geography of poverty, even against populist sentiment at home. In India, half a billion people remain in abject poverty, 200 million in China. Other countries that the BMZ should focus on, according to the selectivity criterion ´number of poor people´, are Nigeria, Bangladesh and Indonesia.

·         The implicit reorientation of development cooperation from Africa to Asia would also change the optimal mix of aid finance, from grants toward soft loans. Often cash rich, emerging countries´ poverty is their own prime responsibility. Western development loans, however, can lever political choices in those countries while they are less burdensome for fragile budgets in DAC countries, potentially more flexible and delivered more speedily (at least if they follow the innovative  Agence Franaise de Développement model) conceived by Cohen, Jacquet and Reisen (2006)[3].

·         China´s and other emerging countries´ proven contribution to global development and poverty reduction, notably in Africa (African Economic Outlook 2011), is forcing Western donors to reexamine their standards and to find ways to merge them with Eastern cooperation modes. The merger of Western standards, which is heavy on declamatory good-governance rhetoric, with project-oriented Eastern cooperation modes, often nontransparent as based on barter deals, is yet to be designed, it seems to me.

·         German bilateral cooperation excels on implementation – and should ´sell´ itself so. Unlike Britain (remember Tony Blair?) and France, Germany has relatively few spin doctors. But it has GIZ (the project implementation agency) and KfW (the development bank). These institutions grant Germany a comparative advantage in project delivery and completion. Germany´s bilateral cooperation is thus defined by close links with programmes and projects, creating high visibility for many German actors and facilitating their financial monitoring. These traits of German cooperation, largely undersold to DAC peers and multilaterals, make it a valuable partner for trilateral South-South-North cooperation, in particular joint with China.

·         Help restore core finance for multilateral development cooperation. Where -unlike in Germany - implementation agencies are lacking, there is a tendency to use multilaterals via earmarked funding. Germany has largely refrained from multilateral ´cherry-picking´ and should work hard on its peers to stop this trend, which has weakened the UN system ever since the US called to call the shots there, i.e. since the 1960s when many countries became sovereigns independent from colonial rule. A high share of earmarked finance in multilateral budgets causes permanent ´funds shopping´ by management, thus diverting its attention and time; it raises administrative overhead costs; and it intensifies the bureaucratic tendency for mission creep and fight for mandates. The unproductive struggle among multilaterals for G20 mandates provides a visible warning. Germany´s next government is called for to clean the multilateral donor chaos; due to tutelage problems, this task can´t be let to ministries – the Bundeskanzleramt will have to deal with the problem[4].

It is questionable whether the current BMZ ministry can confront these challenges in its current setup[5]. Where most of the extremely poor people reside today, namely in large emerging countries, development cooperation can only succeed by managing cross-cutting issues, integrating policy fields as diverse as food security, basic welfare systems and green urbanisation.

 

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[1] Easterly, W. und T. Putze (2008), “Where Does the Money Go? Best and Worse Practices in Foreign Aid”, Journal of Economic Perspectives, Vol.22.2, S. 29-52.

[2] Kanbur, R. und A. Sumner (2011), “Poor Countries or Poor People? Development Assistance and the New Geography of Global Poverty”, Cornell University, WP 2011-08.

[3] Cohen, D., P. Jacquet and H. Reisen (2006), “After Gleneagles: What Role for Loans in ODA?”, OECD Development Centre Policy Brief No.31.

[4] H. Reisen (2012), “Herausforderungen an die multilaterale Entwicklungszusammenarbeit“, KfW Meinungsforum Entwicklungspolitik, Nr.4, 4.April 2012.

[5] J. Faust und D. Messner (2012), “Probleme globaler Entwicklung und die ministerielle Organisation der Entwicklungspolitik“, Zeitschrift für Außen- und Sicherheitspolitik“, Vol. 5, S. 165-175.

Exit, Voice and Loyalty in Dual Economies

* A similar entry will be posted today on the OECD Insights blog. I wish all readers a nice summer break. HR

The recalibration of the world economy toward the emerging countries, mostly a result of superior prolonged growth in the Asian giants China and India, has since 1999 helped move roughly half a billion people above 2$ a day, the median income poverty threshold in developing countries. Homi Kharas´ estimates for the OECD Development Centre[1] projected almost 70% of the world´s middle class consumption – 56$ trillion by 2030 - to be outside the OECD. No wonder then that the term ´emerging country middle class´ has been driving big dollar signs into many eyes.

Yet, the urban middle class youth is revolting in Brazil, Turkey and other fast growing countries. The controversy around the Easterlin Paradox, a key concept of happiness economics, suggests that happiness grows more slowly than incomes. Leaders in many emerging countries are today confronted with a dilemma that reflects the dual rural-urban structure of their large societies. While the internet savvy young urban middle class has left poverty behind and demands voice, participation and efficient public services, there still coexist the poor in the rural hinterland striving to leave individual poverty behind.  

 

Exit, voice and loyalty, the late Albert O Hirschman´s intriguing basic categories that drive societal change, can be used to better understand the current conundrum. Loyalty, through adherence to a political unity party or to religion, can block change but is waning. Exit and voice have different potential in a rural-urban context: exit from the rural to the urban sector is a preferred option for the rural poor but is mostly a one-way street; whence voice as the preferred option for the urban middle class.

Much of the emerging-country middle class is fragile. Lousy education, poor health and urban congestion are the biggest risks to the lower strata of the middle class, by way of social and economic exclusion. A higher size of middle-class citizens translates into higher prices for private schools, hospitals and transports or, alternatively, overcrowding. The private provision of quality public services is a socially dividing, hence limited, costly option. In other words, exit to private education and health services - an option for the ´happy few´ - will raise prices to the point that it triggers voice while the size of the middle class rises.

“First-world soccer stadiums; third-world schools and hospitals”, was one of the slogans advanced by Brazil´s protesters; Brazil has already spent more than 3bn$, three times South Africa’s total four years earlier, and only half the World Cup stadiums are finished. Public health spending occupies a mere 4 per cent of GDP in Brazil (despite constitutional declaration for universal health care rights), compared to 6 in Turkey and 7 in OECD average. For Mathematics, the latest PISA test scores rank Brazil 57^th out of 65 survey countries, Turkey is ranked 43^rd. These numbers suggest that there is a political and social premium on best practices in the governance and allocation of public spending of tax receipts. Apparently, that premium has not been reached.

Emerging-country leaders might ignore the insights of the OECD Latin American Outlook 2011 at their own peril[2]. The policy recommendations put forth there rightly emphasize the need for ´fiscal legitimacy´. To avoid the emerging middle class blues, public finances need to strengthen the social contract, provide better opportunities for the vulnerable people and better quality public services. Middle-income citizens are more willing to pay taxes for services, such as transport, health care and education, if they perceive them to be of high quality and if ´white elephants´ - trophy public investments with little social value – are avoided.

It is quite likely that the current protests, while destabilizing and weakening the affected governments in the short term, will be the start to stronger democracies and strengthen, rather than weaken, the rise of the emerging countries. Already Aristotle[3] reflected “that the best political community is formed by citizens of the middle class, and that those states are likely to be well-administered in which the middle class is large […]; for the addition of the middle class turns the scale, and prevents either of the extremes from being dominant.”

 

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[1] Kharas, Homi (2010), „The Emerging Middle Class in Developing Countries“, OECD Development Centre Working Paper No. 285.

[2] OECD (2011), Latin American Economic Outlook 2011: How Middle-Class Is Latin America?, OECD Publishing. http://dx.doi.org/leo-2011-en.

 

[3] Vogt, Susanna (2011), “Globalisation from the Bottom Up: The Aspiring Middle Classes in Emerging Economies”, KAS International Reports 12|2011, Berlin: Konrad-Adenauer-Stiftung.

Middle Class Blues?

Brazil and Turkey are these days sharing a thread common to most emerging countries: the ire, voice and power of a newly established young urban middle class. On the face of it, you might have the impression that the young bourgeoisie has been caught by the middle class blues. Almost fifty years ago, at the dawn of the 1960s student revolts in Europe, Hans Magnus Enzensberger – one of my very favorite authors – tried to approach the middle class feelings in a fine poem that reflected WWII memories not so long gone:

 

Middle Class Blues

 

We can't complain.

We're not out of work.

We don't go hungry.

We eat.

The grass grows,

the social product,

the fingernail,

the past.

The streets are empty.

The deals are closed.

The sirens are silent.

All that will pass.

The dead have made their wills.

The rain's become a drizzle.

The war's not yet been declared.

There's no hurry for that.

We eat the grass.

We eat the social product.

We eat the fingernails.

We eat the past.

We have nothing to conceal.

We have nothing to miss.

We have nothing to say.

We have.

The watch has been wound up.

The bills have been paid.

The washing-up has been done.

The last bus is passing by.

It is empty.

We can't complain.

What are we waiting for?

 

Well, they are not waiting any longer. It is quite likely that the current protests, while destabilizing and weakening the affected governments in the short term, will be the start to stronger democracies and strengthen, rather than weaken, the rise of the emerging countries. Already Aristotle reflected “that the best political community is formed by citizens of the middle class, and that those states are likely to be well-administered in which the middle class is large […]; for the addition of the middle class turns the scale, and prevents either of the extremes from being dominant.”[1] We may have concentrated so far too much on the economic implications of the middle class for the emerging markets and the world economy. Yet, since the late 18^th century, Europe´s urban educated bourgeoisie has been ascribed a special political and sociological role in the revolutions away from feudalism toward democratic societies, not least by Karl Marx (Der 18. Brumaire des Louis Bonaparte) and Max Weber (Wirtschaft und Gesellschaft).

 

I am reading them right now…

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[1] Quote from Susanna Vogt, Globalisation from the Bottom Up: The Aspiring Middle Classes in Emerging Economies, KAS International Reports 12|2011, Berlin: Konrad-Adenauer-Stiftung.

Why Riots Now in Brazil?

The Brazil of the 2000s has been a much-admired country until recently. The country was hailed as a role model of pro-poor growth[1] as the incomes of the country´s poorest percentiles improved much faster than those of the richer percentiles. Brazil´s conditional cash transfer policy (Bolsa Familia Programme) was widely advertised as a home-grown policy innovation; that policy should be applied elsewhere, to the advanced countries as well, thus changing the usual direction of North-South policy lessons.

 

Brazil, after Turkey, South Africa and to an extent China now all witness the clashes between a vocal but fragile middle class and authorities that portray themselves as serving first and foremost the needs of those left behind. All the greater is the embarrassment of many academics and commentators who hailed Brazil as a social (democratic) model, while concurrent demonstrators in Turkey were rightly and loudly supported as PM Erdogan responded brutally.

 

At the opening ceremony for the Confederations Cup, Brazil´s President Dilma Rousseff was booed so she could not hold her speech. Brazil, once admired for its soccer skills, now holds revolts in a soccer stade!  Brazil has already spent more than 3bn$, three times South Africa’s total four years earlier, and only half the World Cup stadiums are finished. “First-world stadiums; third-world schools and hospitals”, was one of the slogans advanced.

 

The protests that had started on 6th June over a 20 centavo rise of public bus fares in Sao Paulo have now grown into massive and widespread street demonstrations throughout Brazil´s major cities. Coinciding with the start of the Confederations Cup – a soccer World Cup test event for 2014 – the rallies brought together a wide coalition of people frustrated with the escalating costs and persistently poor quality of public services, lavish investment on international sporting events, low standards of public healthcare and education. There is wide unease about inequality and corruption, made even bitter by the apparent unaccountability of corrupt politicians.

 

Why now? Why Brazil? I have inquired a bit with Brazilians and experts on Brazil[2] on the economic and social background to the unrest.  It appears likely that some features of popular and populist policy are to blame:

·         The public sector offers too little value (quality public goods) for money (with tax ratio at 36% the highest tax burden outside the OECD world). Lack of domestic security in the presence of ubiquitous crime; heavy congestion intra cities and lousy transport infrastructure; deficient public health systems with long waiting lists; bad education achievements in public schools, reinforcing segmentation along class and race lines; an unsustainable pension system unable to cope with Brazil´s ageing population, with a pension replacement rate at 97% (OECD avg 67%), due to a guarantee to pay pensions at least at minimum wages. As rent-seeking in the public sector seems pervasive, with many institutions working as employer of last resort (for family members) and corruption cases multiplying with apparently unaccountable politicians, the low public sector efficiency has made people increasingly angry.

·         Industrial policy dirigism, especially since the Dilma government, has gone along with a decline in industrial production. While National Champions, big conglomerates, are both  pampered and heavily regulated, industry competitiveness in general suffers from high input cost. Lack of finance and of market contestability burden smaller firms. Brazil has become a leading trade protectionist, according to recent WTO data, with average tariff levels at 12% of imports. High taxes, a complex and fragmented tax system and a strong regulatory environment restrain Brazil’s economic potential and curb incentives to invest. In the World Bank’s Doing Business Ranking, which compares the ease of doing business in 183 countries of the world, Brazil is ranked only 126. Extremely high real interest rates further impede investment by limiting credit access for small and medium-sized companies with no access to risk-averse public (BNDES) or foreign finance. Close connection to government, rather than corporate prospects and productivity, seem to guide credit allocation and hence capital misallocation.

·         Inflation is rising, running close to 7% now for consumer prices (although massaged down); it hits especially the poor and the lower middle class as stagnant incomes are hit by higher food prices. While the rise of food prices has exogenous causes (such bad harvests in Brazil and the US), there is a structural reason connected to expansive public bank lending that has spilled into consumption and wages at high employment levels.

 

It seems that the goodwill that the Henrique Cardoso government built 1999-2003 in terms of macroeconomic stabilization, fiscal responsibility and transparency has been used up. Lula was good at distributing the fruits planted by his predecessor; Dilma seems to be destroying them. Although she was quick to condone the protesters (unlike Erdogan in Turkey), military police was brutal in Brazil as well. To be sure, talk is cheap. Eliana Cardoso summarized her views on the current political system on her widely flowed Facebook page as such: " Politicians and political parties have failed to understand how explosive the situation is, because they are guided only by the mechanical maintenance of the spaces of power that they distribute among themselves and, thus, they forgot to feel the social climate of the streets and the initiatives of new emerging groups in virtual networks. It looks as if politicians are now unable to understand and represent the demands of the citizens. Very difficult to say what comes next."

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[1] OECD (2011), Perspectives on Global Development 2012 – Social Cohesion in a Shifting World. The same report pointed already quite clearly to the limits of policy interventions targeted to the extreme poor and to the vulnerability of the lower middle income strata.

[2] My special thanks, without implicating them, go to Prof. Eliana Cardoso (former Deputy Economic Minister under the Henrique Cardoso administration), Dr. Julia von Maltzahn Pacheco (Getulio Vargas U., Sao Paulo) and Jens Arnold (OECD).

Soft Loans and their Enemies

Soft loans, as opposed to commercial loans, carry a grant element which reflects the financial terms of a loan: interest rate, maturity and grace period. The grant element is a measure of the concessionality, or softness, of an ODA loan. High risk spreads imposed on poor countries, the leverage effect of soft loans per dollar of aid money, and the evidence on stimulating tax revenues and growth advocate in favor of soft loans[1].

France, Germany, Japan and also Brazil and China have a long tradition of soft loans and important national development banks that provide them. Neither the US nor the UK have established such institutions, to my knowledge. It is perhaps not too surprising, therefore, that attacks on development loans and banks have originated from there.

In 2000, an influential US Congress Report of the International Financial Institution Advisory Commission (better known as the “Meltzer Commission”), had concluded that that development assistance should be administered through performance-based grants rather than (soft) loans. A year earlier, the heavily indebted poor country (HIPC) initiative had resulted in the cancellation of multilateral debt to a selected group of poor countries. The Meltzer Commission report based its message on the ´equivalence theorem´. In principle, a soft loan can be bought up by a private investor and then sliced into a market loan and a grant; hence the term grant/loan equivalence. The Meltzer Commission intended to weaken the World Bank; its message implied that multilateral development bank could be closed and be replaced by a mix of grants and private loans.

The next attack on (soft) loans was orchestrated by the Western donor cartel as China was accused of “freeriding” on the development efforts deployed by the international community and impairing debt sustainability in low-income countries (notwithstanding the fact that China has also granted debt relief). It was argued that corruption is enhanced, democracy impaired, and debt tolerance weakened by China’s financing practices. All these claims have not withstood empirical evidence as China´s loans have been cheaper than US loans and, most importantly, have been earmarked for infrastructure investment and relieved poor countries´ binding growth constraint[2].

The most recent attack, perhaps unconsciously, comes from former DAC chair Richard Manning and current DCD director John Lomoy. Both seem to agree, Manning in his 9 April letter to the Financial Times in which he reflects that ODA accounting better should move to the UN (!), and Lomoy in OECD Insights blog, that “there is a need to revisit these calculations to ensure that they reflect the current markets terms”. Both would be well advised to familiarise themselves with the CRS directives or the glossary of terms and concepts. Under “Grants Element”, they would have read:

“Reflects the financial terms of a commitment: interest rate, maturity and grace period (interval to first repayment of capital). It measures the concessionality of a loan, expressed as the percentage by which the present value of the expected stream of repayments falls short of the repayments that would have been generated at a given reference rate of interest. The reference rate is 10% in DAC statistics. This rate was selected as a proxy for the marginal efficiency of the domestic investment, i.e. as an indication of the opportunity cost to the donor of making the funds available.”

To be sure, in recent years, long-term interest rates in most OECD Member countries have fallen well below 10 per cent, so the 25 per cent grant element level has become easier to attain. But to qualify as ODA, loans must still be concessional in character, i.e. below market interest rates. The discount rate of 10 per cent has no relation to the current market interest rate, but was chosen as an estimate of the opportunity cost of public investment for donors, which in turn can be approximated by the donors’ social opportunity cost to public spending on ODA[3]. For some heavily stressed donors of the Eurozone, a discount rate of 10% might actually be too low these days.

 

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[1] Cohen, D., P. Jacquet und H. Reisen (2006),   After Gleneagles: What Role for Loans in ODA?, OECD Development Centre Policy Brief No.31.

[2][2] Reisen, H. (2007), “Is China Actually Helping Debt Sustainability in Africa?”,  G-24 Policy Brief. No.9

[3] Young, L. (2002), “Determining the Discount Rate for Government Projects”, New Zealand Treasury Working Paper 02/21, Wellington.