Roundup: Emerging Economies, College, Counterterrorism and Trade

In the event you missed it, today we are highlighting some research recently produced by the St. Louis Fed. The following articles were published in the Review.

COVID-19: Fiscal Implications and Financial Stability in Developing Countries

During the COVID-19 pandemic, the World Bank and International Monetary Fund put up $1.16 trillion to help emerging economies. This article documents the size of fiscal measures implemented by different countries, the aid they received from the World Bank and IMF to finance those measures, and the resulting changes in their debt and fiscal deficits. The authors found that the pledged amount would not have been enough to preserve financial stability if there had been a rollover crisis among these debtors.

The Changing Role of Family Income in College Selection and Beyond

This article examines the changing role of family income in decisions about college. The author found that family income has remained important at explaining college choice and graduation outcomes, but it has become substantially less important at explaining post-school earnings. In contrast, pre-college academic achievement has become more important at predicting college choice, and a college’s quality has become more important at predicting both graduation outcomes and post-school earnings. These findings, the author argues, is consistent with rising returns to a college education and tighter financial constraints.

The Trade-Offs of Counterterrorism Policies

Governments can deploy two classes of counterterrorism tools: defensive countermeasures and proactive countermeasures. Defensive countermeasures, which make terrorist attacks more costly and less apt to succeed, can shift attacks to less protected targets. Proactive countermeasures, which confront terrorists directly, can lead to backlash resulting in more recruitment and attacks. This article offers a game-theoretic model to understand today’s counterterrorism tools and their trade-offs for curbing terrorist attacks and their consequences.

TFP, Capital Deepening, and Gains from Trade

This article uses a multicountry model with capital accumulation to compute the exact transition paths for 93 countries following unanticipated trade liberalization and to calculate the resulting welfare gains from trade. The authors found that the contribution of capital accumulation to dynamic trade gains was four times that of total factor productivity. While trade gains were different across countries, the authors also concluded that consumption transition paths were similar except for scale and that the trade gains accrued gradually.