nep-mac New Economics Papers
on Macroeconomics
Issue of 2021‒01‒18
163 papers chosen by
Soumitra K Mallick
Indian Institute of Social Welfare and Business Management

  1. The Interplay between Monetary and Fiscal Policies in the EU By António Afonso; Alexandre Sousa
  2. Imported or Home Grown? The 1992-3 EMS Crisis By Duquerroy Anne; Adrien Matray; Saidi Farzad
  3. Fiscal DSGE Model for Latvia By Patrick Grüning; Ginters Buss
  4. Estimation of a Small Open Economy DSGE Model for Kazakhstan By Erlan Konebayev
  5. Ramsey Optimal Policy in the New-Keynesian Model with Public Debt By Chatelain, Jean-Bernard; Ralf, Kirsten
  6. Funding for lending schemes should prioritize SME lending By Barnabás Székely
  7. The Recovery from the Great Recession: A Long, Evolving Expansion By Shambaugh, Jay C.; Strain, Michael R.
  8. Uncovering the Mechanism(s): Financial Constraints and Wages By Arabzadeh, Hamzeh; Balleer, Almut; Gehrke, Britta
  9. (Non-) Keynesian Effects of Fiscal Austerity: New Evidence from a large sample By António Afonso; José Alves; João Tovar Jalles
  10. From interaction to business fluctuations: How credit network explain cycles By Emanuele Ciola; Gabriele Tedeschi
  11. International transmission of interest rates: the role of international reserves and sovereign debt By António Afonso; Florence Huart; João Tovar Jalles; Piotr Stanek
  12. Lending Relationships and Optimal Monetary Policy By Zachary Bethune; Guillaume Rocheteau; Russell Wong; Cathy Zhang
  13. Central Bank Independence: Metrics and Empirics By Donato Masciandaro; Jacopo Magurno; Romano Tarsia
  14. The Economic Consequences of the Covid-19 Pandemic in Nigeria By Adesoji O. Farayibi; Simplice A. Asongu
  15. American Business Cycles 1889-1913: An Accounting Approach By Dou Jiang; Mark Weder
  16. Entrepreneurs are exposed to large uninsured risks. The risks may discourage them from creating productive assets. This may generate a productive asset shortage and stimulate demand for speculative bubbles. We introduce entrepreneurial risks into a textbook growth model with infinitely lived agents. In our model, entrepreneurs face no credit constraints. If the degree of entrepreneurial risks is in the middle range, bubbles are likely to emerge. If the degree of entrepreneurial risks is high, bubbles promote growth because bubbles work as a buffer for the risks. Otherwise, bubbles lower growth. The effect of the collapse of bubbles also depends on the degree of the risks. Moreover, asset bubbles amplify fundamental shocks. By Takeo Hori; Ryonghun Im
  17. On the Drivers of Inflation in Different Monetary Regimes By Daniel Garcés Díaz
  18. Global Impacts of US Monetary Policy Uncertainty Shocks By Povilas Lastauskas; Anh Dinh Minh Nguyen
  19. The Quantification of Structural Reforms: Taking Stock of the Results for OECD and Non-OECD Countries By Balazs Egert
  20. Semi-Structural VAR and Unobserved Components Models to Estimate Finance-Neutral Output Gap By Kátay Gábor; Kerdelhué Lisa; Lequien Matthieu
  21. New Zealand; 2019 Article IV Consultation-Press Release and Staff Report By International Monetary Fund
  22. Redistribution and the Monetary-Fiscal Policy Mix By Saroj Bhattarai; Jae Won Lee; Choongryul Yang
  23. Heterogeneous response of consumers to income shocks throughout a financial assistance program By Fátima Cardoso; Manuel Coutinho Pereira; Nuno Alves
  24. Financial development and macroeconomic performance: a cointegration approach By Cândida Ferreira
  25. Pandemic payment patterns By Nicole Jonker; Carin van der Cruijsen; Michiel Bijlsma; Wilko Bolt
  26. Household Financial Distress and the Burden of 'Aggregate' Shocks By Kartik B. Athreya; Ryan Mather; Jose Mustre-del-Rio; Juan M. Sanchez
  27. Chad; Staff Report for the 2019 Article IV Consultation, Fourth Review under the Extended Credit Facility Arrangement, Request for Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Chad By International Monetary Fund
  28. The Role of Nonlinearity in Indeterminate Models: An Application to Expectations-Driven Liquidity Traps By Yoichiro Tamanyu
  29. Inflation Expectations in the U.S.: Linking Markets, Households, and Businesses By Peter D. Williams
  30. Republic of Congo; Staff Report-Press Release; Staff Report; Debt Sustainability Analysis, and Statement by the Executive Director for the Republic of Congo By International Monetary Fund
  31. Tributación en Colombia: Una aproximación teórica y empírica de la Curva de Laffer By Herrera Saavedra, Juan Pablo; Villar Otálora, Juan Camilo; Campo-Robledo, Jacobo
  32. Cameroon; Fourth Review under the Extended Credit Facility Arrangement and Requests for Waivers of Nonobservance of Performance Criteria and Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Cameroon By International Monetary Fund
  33. Barbados; Fourth Review Under the Extended Arrangement, Requests for Augmentation of Access, and Modification of Performance Criteria-Press Release; Staff Report; and Statement by the Executive Director for Barbados By International Monetary Fund
  34. The New Keynesian Model and Bond Yields By Martin M. Andreasen
  35. A Semiparametric Model for Bond Pricing with Life Cycle Fundamental By Zongwu Cai; Jiazi Chen; Linlin Niu
  36. Romania; 2019 Article IV Consultation-Press Release; Staff Report; Staff Supplement; and Statement by the Executive Director for Romania By International Monetary Fund
  37. Financial Sector Development and Investment in Selected ECOWAS Countries: Empirical Evidence using Heterogeneous Panel Data Method By Chimere O. Iheonu; Simplice A. Asongu; Kingsley O. Odo; Patrick K. Ojiem
  38. Cabo Verde; Staff Report for the 2019 Article IV Consultation and Request for an Eighteen-Month Policy Coordination Instrument-Press Release; Staff Report; and Statement by the Executive Director for Cabo Verde By International Monetary Fund
  39. Caught in the Crosswinds: The Experiences of Selected Economies Responding to External Volatility with Multiple Policy Levers By Ghada Fayad; Helene Poirson Ward
  40. Morocco; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Morocco By International Monetary Fund
  41. Republic of Lithuania; 2019 Article IV Consultation-Press Release; Staff Report By International Monetary Fund
  42. Household Finance and Consumption Survey 2017 in Latvia By Ludmila Fadejeva; Anete Migale; Mikelis Zondaks
  43. Positive or negative real balance effects, involuntary unemployment, three-generations overlapping generations model By Tanaka, Yasuhito
  44. Evaluating effectiveness of price level targeting in the presence of increasing uncertainty By Engin Kara; Ahmed Pirzada
  45. Germany; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Germany By International Monetary Fund
  46. Confinement et chômage en France By Malak Kandoussi; François Langot
  47. Indonesia; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Indonesia By International Monetary Fund
  48. Labor Market Indicator for Colombia (LMI) By Deicy J. Cristiano-Botia; Manuel Dario Hernandez-Bejarano; Mario A. Ramos-Veloza
  49. Sovereign Default Risk, Macroeconomic Fluctuations and Monetary-Fiscal Stabilization By Markus Kirchner; Malte Rieth
  50. Monetary and macroprudential policy complementarities: evidence from European credit registers By Altavilla, Carlo; Laeven, Luc; Peydró, José-Luis
  51. Mongolia; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Mongolia By International Monetary Fund
  52. Economic Policy Uncertainty index meets ensemble learning By Ivana Loli?; Petar Sori?; Marija Logaru?i?
  53. The Geography of the Effectiveness and Consequences of Covid-19 Measures: Global Evidence By Simplice A. Asongu; Samba Diop; Joseph Nnanna
  54. COVID-19: socioeconomic impacts and recovery in Ethiopia By Victor Nechifor; Ole Boysen; Emanuele Ferrari; Kidanemariam Hailu; Mohammed Beshir
  55. Republic of Serbia; Staff Report for the 2019 Article IV Consultation and Second Review under the Policy Coordination Instrument-Press Release; Staff Report; Information Annex; Staff Statement; and Statement by the Executive Director for Republic of Serbia By International Monetary Fund
  56. Endogenous Product Scope: Market Interlacing and Aggregate Business Cycle Dynamics By Oscar Pavlov; Mark Weder
  57. Output Distortions and the Choice of Legal Form of Organization By Katarzyna Anna Bilicka; Sepideh Raei
  58. New Zealand; Selected Issues By International Monetary Fund
  59. Lao People’s Democratic Republic; 2019 Article IV Consultation-Press Release; Staff Report; Statement by the Executive Director for Lao People's Democratic Republic By International Monetary Fund
  60. Capital Gaps, Risk Dynamics, and the Macroeconomy By Fabian Lipinsky; Mirela S. Miescu
  61. COVID-19 and Inequality in Asia: Breaking the Vicious Cycle By Emilia M Jurzyk; Medha Madhu Nair; Nathalie Pouokam; Tahsin Saadi Sedik; Anthony Tan; Irina Yakadina
  62. Republic of Armenia; Third Review under the Stand-By Arrangement and Modification of Performance Criteria-Press Release; Staff Report; Staff Supplement; and Statement by the Alternate Executive Director for the Republic of Armenia By International Monetary Fund
  63. Bangladesh; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bangladesh By International Monetary Fund
  64. Republic of Moldova; Fourth and Fifth Reviews Under the Extended Credit Facility and Extended Fund Facility Arrangements, Completion of the Inflation Consultation, and Request for Extension of the Arrangements and Rephasing of Access-Press Release; Staff Report; and Statement by the Executive Director for the Republic of Moldova By International Monetary Fund
  65. Allocative Efficiency and Aggregate Productivity Growth in Canada and the United States By Lin Shao; Rongsheng Tang
  66. The 'new normal' during normal times - liquidity regulation and conventional monetary policy By Sînziana Kroon; Clemens Bonner; Iman van Lelyveld; Jan Wrampelmeyer
  67. Democratic Republic of the Congo; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Democratic Republic of the Congo By International Monetary Fund
  68. Iraq; 2019 Article IV Consultation and Proposal for Post-Program Monitoring-Press Release; Staff Report; and Statement by the Executive Director for Iraq By International Monetary Fund
  69. Union of Comoros; Request for Disbursement Under the Rapid Credit Facility and Purchase Under the Rapid Financing Instrument-Press Release; Staff Report; and Statement by the Executive Director for the Union of Comoros By International Monetary Fund
  70. Saudi Arabia; 2019 Article IV Consultation-Press Release; and Staff Report By International Monetary Fund
  71. India’s Inflation Process Before and After Flexible Inflation Targeting By Patrick Blagrave; Weicheng Lian
  72. Albania; Technical Assistance Report–Monetary and Financial Statistics and Financial Accounts Mission By International Monetary Fund
  73. Guyana; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Guyana By International Monetary Fund
  74. Republic of Madagascar; Fifth Review Under the Extended Credit Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Republic of Madagascar By International Monetary Fund
  75. Equalizing growth: The case of Peru By Nelson R. Ramírez- Rondán; Marco E. Terrones; Diego Winkelried
  76. The Contribution of Human Capital and Its Policies to Per Capita Income in Europe and the OECD By Balazs Egert; Jarmila Botev; David Turner
  77. Allocation problems in child benefit programs using a microeconomic theory approach By Tomas Artemio Marinozzi
  78. COVID-19 and SME Failures By Sebnem Kalemli-Ozcan; Pierre-Olivier Gourinchas; Veronika Penciakova; Nick Sander
  79. Myanmar Economic Monitor, December 2019 By World Bank
  80. Maldives; 2007 Article IV Consultation-Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives By International Monetary Fund
  81. Somalia; 2019 Article IV Consultation-Second Review Under the Staff-Monitored Program, and Request for New Staff-Monitored Program-Press Release; Staff Report; and Statement by the Executive Director for Somalia By International Monetary Fund
  82. The Long-Term Impact of the COVID-19 Unemployment Shock on Life Expectancy and Mortality Rates By Francesco Bianchi; Giada Bianchi; Dongho Song
  83. Maldives; 2005 Article IV Consultation-Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives By International Monetary Fund
  84. Social Security Reform with Heterogeneous Mortality By John Bailey Jones; Yue Li
  85. A Simple Macrofiscal Model for Policy Analysis: An Application to Cambodia By Daniel Baksa; Ales Bulir; Dyna Heng
  86. Federated States of Micronesia; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Federated States of Micronesia By International Monetary Fund
  87. Fiscal Vulnerability and Transport Infrastructure Development in Nigeria By Isiaq O. Oseni; Ibrahim A. Adekunle; Ayomide O. Ogunade
  88. Tax Policy and Foreign Direct Investment: A Regime Change Analysis. By Onome Christopher Edo
  89. Occasional paper on crypto-assets By Banco de Portugal working group on crypto-assets
  90. CAN FOUNDATIONAL ECONOMY SAVE REGIONS IN CRISIS? By Mikhail Martynovich; Teis Hansen; Karl-Johan Lundquist; ;
  91. The decline in labour mobility in the United States: Insights from new administrative data By Damien Azzopardi; Fozan Fareed; Mikkel Hermansen; Patrick Lenain; Douglas Sutherland
  92. Term Premium Dynamics and its Determinants: The Mexican Case By Ana Aguilar-Argaez; María Diego-Fernández; Rocío Elizondo; Jessica Roldán-Peña
  93. Kyrgyz Republic Economic Update, No.9, Fall 2019 By World Bank Group
  94. Namibia; 2019 Article IV Consultation-Press Release and Staff Report By International Monetary Fund
  95. The Covid-19 crisis and consumption: survey evidence from six EU countries By Christelis, Dimitris; Georgarakos, Dimitris; Jappelli, Tullio; Kenny, Geoff
  96. Russian Federation; 2019 Article IV Consultation-Press Release; Staff Report By International Monetary Fund
  97. Vietnam; 2019 Article IV Consultation; Press Release; Staff Report; and Statement by the Executive Director for Vietnam By International Monetary Fund
  98. Maldives; 2001 Article IV Consultation-Staff Report; and Statement by the Executive Director for Maldives By International Monetary Fund
  99. Trade-induced Local Labor Market Shocks and Asymmetrical Labor Income Risk By Ursula Mello; Tomas Rodriguez Martinez
  100. Argentina; Fourth Review under the Stand-By Arrangement, Request for Waivers of Applicability and Modification of Performance Criteria, and Financing Assurances Review-Press Release; Staff Report; and Staff Supplement By International Monetary Fund
  101. Mali; Request for Three-Year Arrangement Under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Mali By International Monetary Fund
  102. Mozambique Economic Update, December 2019 By World Bank
  103. The economic consequences of major tax cuts for the rich By Hope, David; Limberg, Julian
  104. Portugal; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Portugal By International Monetary Fund
  105. Guinea; Third Review Under the Extended Credit Facility Arrangement, Request for Modification of Performance Criterion and Financing Assurances Review-Press Release; Staff Report; Supplementary Information; and Statement by the Executive Director for Guinea By International Monetary Fund
  106. Dominican Republic; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for the Dominican Republic By International Monetary Fund
  107. Montenegro; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Montenegro By International Monetary Fund
  108. Dynamic Banking and the Value of Deposits By Patrick Bolton; Ye Li; Neng Wang; Jinqiang Yang
  109. The impact of monetary policy on expectations along the yield curve By Böck, Maximilian; Feldkircher, Martin
  110. Financial Frictions and Firm Informality: A General Equilibrium Perspective By Luis Franjo; Nathalie Pouokam; Francesco Turino
  111. Iraq; Selected Issues By International Monetary Fund
  112. Is British Output Growth Related to its Uncertainty? Evidence using Eight Centuries of Data By Don Bredin; Stilianos Fountas; Christos Savva
  113. Income and vehicular growth in India: A time series econometric analysis By Vijayalakshmi S; Krishna Raj
  114. Business Cycles as Collective Risk Fluctuations By Victor Olkhov
  115. Singapore; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Singapore By International Monetary Fund
  116. Republic of Azerbaijan; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Republic of Azerbaijan By International Monetary Fund
  117. Self-employment as a solution for increasing employment By Etleva Bajrami
  118. Imported Food Price Shocks and Socio-Political Instability: Do Fiscal Policy and Remittances Matter? By Carine Meyimdjui
  119. Remittances and Value Added across Economic sub-sectors in Sub-Saharan Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  120. Russia Economic Report, No. 42, December 2019 By World Bank Group
  121. The Openness Hypothesis in the Context of Economic Development in Sub-Saharan Africa: The Moderating Role of Trade Dynamics on FDI By Simplice A. Asongu; Joseph Nnanna; Paul N. Acha-Anyi
  122. Rousseau's social contract or Machiavelli's virtue? A measure of fiscal credibility By Nicolas End
  123. The rise of digital watchers By Till Ebner; Thomas Nellen; Jörn Tenhofen
  124. Climate Change Mitigation Policies: Aggregate and Distributional Effects By Cezar Santos; Tiago Cavalcanti; Zeina Hasna
  125. Brazil; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Brazil By International Monetary Fund
  126. Republic of Latvia; 2019 Article IV Consultation-Press Release; and Staff Report By International Monetary Fund
  127. COVID-19 Impact and Mitigation Policies: A Didactic Epidemiological-Macroeconomic Model Approach By John P. Ansah; Natan P. Epstein; Valeriu Nalban
  128. Labor Market Informality and the Business Cycle By Frederic Lambert; Andrea Pescatori; Frederik G Toscani
  129. Why are some U.S. cities successful, while others are not? Empirical evidence from machine learning By Damien Azzopardi; Fozan Fareed; Patrick Lenain; Douglas Sutherland
  130. Maldives; 2012 Article IV Consultation-Public Information Notice; Staff Report; and Statement by the Executive Director for Maldives By International Monetary Fund
  131. Euro Area Policies; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Member Countries By International Monetary Fund
  132. Zambia; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Zambia By International Monetary Fund
  133. France; 2019 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for France By International Monetary Fund
  134. Analysis of the Relationship Between Intellectual Capital and Firm Performance: An Empirical Research on Borsa Istanbul By Dogan, Mesut; Kevser, Mustafa
  135. Revising the Impact of Global Commodity Prices and Global Stock Market Volatility Shocks: Effects across Countries* By Wensheng Kang; Ronald Ratti Bd; Joaquin Vespignani
  136. Government Bonds, Bank Liquidity and Non-Neutrality of Monetary Policy in the Steady By Wang, Tianxi
  137. Globalization and Female Economic Participation in MINT and BRICS countries By Tolulope T. Osinubi; Simplice A. Asongu
  138. Slovak Republic; 2019 Article IV Consultation-Press Release; Staff Report By International Monetary Fund
  139. Interbank relationship lending revisited: Are the funds available at a similar price? By Carlos León; Javier Miguélez
  140. People’s Republic of China; 2019 Article IV Consultation-Press Release; Staff Report; Staff Statement and Statement by the Executive Director for China By International Monetary Fund
  141. To change or not to change: the impact of the law on mortgage origination By Ana Isabel Sá
  142. Chad; Selected Issues By International Monetary Fund
  143. Russian Federation; Selected Issues By International Monetary Fund
  144. Tradable Spillovers of Fiscal Policy: Evidence from the 2009 Recovery Act By McCrory, Peter B
  145. Guinea; Technical Assistance Report-External Sector Statistics By International Monetary Fund
  146. Government Insurance Against Natural Disasters: An Application to the ECCU By Alejandro D Guerson
  147. Singapore; Financial Sector Assessment Program; Technical Note-Macroprudential Policy By International Monetary Fund
  148. Managing Fiscal Risks from State-Owned Enterprises By Anja Baum; Paulo Medas; Alberto Soler; Mouhamadou Sy
  149. Consumer Sentiment During the COVID-19 Pandemic By Bui, Dzung; Dräger, Lena; Hayo, Bernd; Nghiem, Giang
  150. Seizing the productive potential of digital change in Estonia By Damien Azzopardi; Patrick Lenain; Margit Molnar; Natia Mosiashvili; Jon Pareliussen
  151. Pushing One’s Luck: Petroleum ownership and discoveries By Christa N. Brunnschweiler; Steven Poelhekke
  152. Industrial Impact of Economic Uncertainty Shocks in Australia By Hamish Burrell; Joaquin Vespignani
  153. France; Selected Issues By International Monetary Fund
  154. Inequality in models with a competition for market shares By Andreas Hefti; Julian Teichgräber
  155. International Taxation and Luxembourg’s Economy By Ruud A. de Mooij; Dinar Prihardini; Antje Pflugbeil; Emil Stavrev
  156. Contagion of Fear: Is the Impact of COVID-19 on Sovereign Risk Really Indiscriminate? By Serhan Cevik; Belma Öztürkkal
  157. Nowcasting in a pandemic using non-parametric mixed frequency VARs By Huber, Florian; Koop, Gary; Onorante, Luca; Pfarrhofer, Michael; Schreiner, Josef
  158. Should European integration go further? A survey of French, German and Italian members of national parliaments By Pierre Boyer; Elie Gerschel; Anasuya Raj
  159. Togo By World Bank
  160. Digital technology adoption, productivity gains in adopting firms and sectoral spill-overs: Firm-level evidence from Estonia By Natia Mosiashvili; Jon Pareliussen
  161. The complementary nature of trust and contract enforcement By Björn Bartling; Ernst Fehr; David Huffman; Nick Netzer
  162. Macroeconomic determinants of software services exports and impact on external stabilisation for India: An empirical analysis By Aneesha Chitgupi
  163. On the long-run fluctuations of inheritance in two-sector OLG models By Florian Pelgrin; Alain Venditti

  1. By: António Afonso; Alexandre Sousa
    Abstract: We study the interactions between monetary and fiscal policiesin the EU countries, for the period 1995-2019. Our results show notably that: i) the inflation rate has a relevantimpact over the central banks’ decision making; ii) the cyclically adjusted primary balance reacts positively to increases in the level of government debt; iii) monetary policy reaction functions do not seem to take into consideration the cyclically adjusted primary balance; iv) fiscal policy, via the cyclically adjusted primary balance, seem to be affected by the short-term interest rate in a negative way.The global economic and financial crisis impacted negatively both the short-term nominal interest rates and the cyclically adjusted primary balance, however with a higher degree in the euro area.
    Keywords: Monetary Policy, Fiscal Policy; Reaction Functions; Great Recession
    JEL: E52 E62 E63 E65 H62
    Date: 2020–12
  2. By: Duquerroy Anne; Adrien Matray; Saidi Farzad
    Abstract: This paper documents that monetary policy affects credit supply through banks’ cost of funding. Using administrative credit-registry and regulatory bank data, we find that banks can incur an increase in their funding costs of at least 30 basis points before they adjust their lending. For identification, we exploit the existence of regulated-deposit accounts in France whose interest rates are set by the government and are, thus, not directly affected by the monetary-policy rate. When banks’ funding cost increases and they contract their lending, we observe portfolio reallocations consistent with risk shifting: banks that depend on regulated deposits lend less to large firms, and relatively more to small firms and entrepreneurs.
    Keywords: Sticky Deposit Rates and Allocative Effects of Monetary Policy
    JEL: E23 E32 E44 G20 G21 L14
    Date: 2020
  3. By: Patrick Grüning (Bank of Lithuania & Vilnius University); Ginters Buss (Latvijas Banka)
    Abstract: We develop a fiscal dynamic stochastic general equilibrium (DSGE) model for policy simulation and scenario analysis purposes tailored to Latvia, a small open economy in a monetary union. The fiscal sector elements comprise government investment, government consumption, government transfers that are asymmetrically directed to both optimizing and hand-to-mouth households, cyclical unemployment benefits, foreign ownership of government debt, import content in public consumption and investment, and fiscal rules for each fiscal instrument. The model features a search-and-matching labour market friction with pro-cyclical labour costs, a financial accelerator mechanism, and import content in final goods. We estimate the model using Latvian data, study the new channels in the model, and provide a comprehensive analysis on the macroeconomic effects of the fiscal elements. A particular finding is that having foreign ownership of government debt generally breaks the Ricardian equivalence paradigm.
    Keywords: Small open economy, Fiscal policy, Fiscal rules, Bayesian estimation
    JEL: E0 E2 E3 F4 H2 H3 H6
    Date: 2020–12–14
  4. By: Erlan Konebayev (NAC Analytica, Nazarbayev University)
    Abstract: This paper adapts the DSGE (dynamic stochastic general equilibrium) model of Medina and Soto (2007) in the context of Kazakhstani economy, and fully estimates it using Bayesian methods. The main goal of the paper is to contribute to the scarce macroeconomic modeling literature on Kazakhstan. Overall, we find that the oil price shock is key in explaining the variance of virtually all the variables of interest - in particular, it accounts for more than 40% of variance in real exchange rate over the long-term horizon. Furthermore, while the oil price and commodity (oil) production shocks contributed positively to the country's GDP growth in real terms before the Great Recession, their effects have been primarily negative during the two major economic crises of 2007 and 2015, and the fiscal policy has had mixed success in counteracting them.
    Keywords: DSGE; Bayesian analysis; small open economy
    JEL: C11 E30 E32 E37
    Date: 2020–09
  5. By: Chatelain, Jean-Bernard; Ralf, Kirsten
    Abstract: In the discrete-time new-Keynesian model with public debt, Ramsey optimal policy eliminates the indeterminacy of simple-rules multiple equilibria between the fiscal theory of the price level versus new-Keynesian versus an unpleasant equilibrium. If public debt volatility is taken into account into the loss function, the interest rate responds to public debt besides inflation and output gap. Else, the Taylor rule is identical to Ramsey optimal policy when there is zero public debt. The optimal fiscal-rule parameter implies the local stability of public-debt dynamics ("passive" fiscal policy).
    Keywords: Fiscal theory of the Price Level, Ramsey Optimal Policy, New-Keynesian model, Fiscal Rule, Taylor Rule, Multiple Equilibria.
    JEL: C61 C62 E43 E52 E61 E62 E63
    Date: 2020–12–12
  6. By: Barnabás Székely (Magyar Nemzeti Bank (Central Bank of Hungary))
    Abstract: In the aftermath of the sovereign debt crisis the Central Bank of Hungary implemented a great-scale funding for lending scheme designed specifically to subsidize SME finance. This creates a unique opportunity to identify this policy in the SVAR framework as asymmetric credit supply shocks specific to SME lending. I find that during the post-crisis recovery, such disturbances had a substantial effect on lending conditions and the real economy. Moreover, rather than supplanting lending to large enterprises, the program had considerable positive spillover effects to this sector. Finally, for a unit of lending, these shocks had larger and more persistent effect on output than general credit supply shocks. These results are robust to different proxies of economic performance and alternative identification strategies. I conclude that under tight lending conditions funding for lending schemes are more effective if concentrated to SMEs.
    Keywords: Bayesian SVARs, Credit supply shocks, Funding for lending scheme, SME finance
    JEL: C11 E32 E44 E58
    Date: 2020
  7. By: Shambaugh, Jay C. (George Washington University); Strain, Michael R. (American Enterprise Institute for Public Policy Research)
    Abstract: Prior to 2020, the Great Recession was the most important macroeconomic shock to the United States economy in generations. Millions lost jobs and homes. At its peak, one in ten workers who wanted a job could not find one. On an annual basis, the economy contracted by more than it had since the Great Depression. A slow and steady recovery followed the Great Recession's official end in the summer of 2009, but because it was slow and the depth of the recession so deep, it took years to reduce slack in labor markets. But because the slow-and-steady recovery lasted so long, many pre-recession peaks were exceeded, and eventually real wage growth began to accumulate for workers across the distribution. In fact, the business cycle (including recession and recovery) beginning in December 2007 was one of the better periods of real wage growth in many decades, with the bulk of that coming in the last years of the recovery. We place the Great Recession in historical context and trace the path of the recovery, studying its different phases and how different groups of workers were impacted in each phase. We also discuss the response of fiscal and monetary policy to the Great Recession, and draw lessons for the future.
    Keywords: Great Recession, economic recovery, wage growth, labor force participation, fiscal policy, monetary policy
    JEL: E00 E24 E3 E6 J21 J31
    Date: 2021–01
  8. By: Arabzadeh, Hamzeh (RWTH Aachen University); Balleer, Almut (RWTH Aachen University); Gehrke, Britta (University of Rostock)
    Abstract: How do wages respond to financial recessions? Based on a dynamic macroeconomic model with frictions in the labor and the financial market, we address two prominent mechanism through which firms' financial constraints amplify unemployment and explore their effect on wages. First, the financial labor wedge reduces wages. Second, financial constraints may interact with aggregate labor market conditions in various ways putting upward or downward pressure on wages. We test partial-equilibrium implications of these theoretical mechanisms based on a large data set for Germany for 2006 to 2014 that combines administrative data on workers and wages with detailed information on the balance sheets of firms. Both mechanisms play a role empirically. Using our estimates as central calibration targets in our model, we document that financial recessions are associated with a substantial decline in both unemployment and wages. Financial constraints therefore weaken the direct link between wage rigidity and unemployment volatility.
    Keywords: financial frictions, wages, search and matching, unemployment, business cycles
    JEL: E32 E44 J63 J64
    Date: 2020–12
  9. By: António Afonso; José Alves; João Tovar Jalles
    Abstract: We empirically assess whether ausually expected negative response of private consumption and private investment to a fiscal consolidation is reversed. We focus on a large sample of 174 countries between 1970 and 2018. We also employ three alternative measures of the Cyclically Adjusted Primary Balance used to determine fiscal episodes: i) the IMF-WEO based; ii) the HP-based; and iii) the Hamilton(2018)-based.We find that: i)increases in government consumption have a Keynesian effect on real per capita private consumption; ii)there is a positive effect of tax increases on private consumption when there is a fiscal consolidation; iii) there is a crowding-in effect for private investment, from fiscal contractions. Moreover, expansionary fiscal consolidation soccur particularly in highly indebted advanced economies following an increase in taxes. Finally,the negative effect of taxation on private consumption is larger when an economy is experiencing a financial crisis but it is not consolidating.
    Keywords: non-Keynesian effects, fiscal consolidation, filtering, consumption, investment, financial crises, panel data, endogeneity
    JEL: C23 E21 E62 H5 H62
    Date: 2021–01
  10. By: Emanuele Ciola (Department of Economics, Universitat Jaume I, Castellón, Spain and Department of Economics and Social Sciences, Università Politecnica delle Marche, Ancona-Italy); Gabriele Tedeschi (Department of Economics, Universitat Jaume I, Castellón, Spain)
    Abstract: In this paper, we develop a macroeconomic model with heterogeneous interacting agents to study the effects of different configurations of the interbank network on the overall performance of the economy. Specifically, we implement a simple decentralized matching model in which deposit, credit and interbank relations evolve endogenously via a fitness measure. Our findings confirm the importance of the interbank market as an indisputable source of economic stability able to counterbalance deposit withdrawal and stabilize the credit allocation. However, when highly centralized, this market can amplify the effects of shocks in the economy due to coordination failures of core banks.
    Keywords: Interbank network; Business Fluctuations; Financial crises
    JEL: C63 E44 E32 G01
    Date: 2021
  11. By: António Afonso; Florence Huart; João Tovar Jalles; Piotr Stanek
    Abstract: We analyse the international transmission of interest rates by focusing onthe role of the accumulation of international reserves and on the financing of sovereign debt. An increase in foreign exchange reserves is expected to moderate the influence of U.S. interest rates.However,a high level of government debt raises the sovereign risk premium. Moreover, an increase in the stock ofgovernment debt denominated in foreign currency may increasethe expected rate of depreciation of the domestic currency. We explain the theoretical mechanisms in a model, which describes the money market equilibrium in an economy with capital account openness. Then, we test the predictions of the model for a panel of advanced and developing economies over the period 1970-2018. Our main findings are: i) significant spillovers from the U.S. interest rates to other countries, mostly for Advanced Economies; ii) a dampening effect of the share of external liabilities in the domestic currency, clearly a determinant of risk premium; iii)a negative effect of international reserves on interest rates, as expected; iv) higher reserves decrease risk premia, for long-term interest rates; v)the significanceof spilloversfades once the sovereign debtreaches100% of GDPin developed countries.
    Keywords: interest rates, international reserves, government debt, spillover effects, monetary policy, fiscal policy, panel analysis
    JEL: C23 E43 E63 F31 F34 G15 H60
    Date: 2021–01
  12. By: Zachary Bethune; Guillaume Rocheteau; Russell Wong; Cathy Zhang
    Abstract: We construct and calibrate a monetary model of corporate finance with endogenous formation of lending relationships. The equilibrium features money demands by firms that depend on their access to credit and a pecking order of financing means. We describe the mechanism through which monetary policy affects the creation of relationships and firms' incentives to use internal or external finance. We study optimal monetary policy following an unanticipated destruction of relationships under different commitment assumptions. The Ramsey solution uses forward guidance to expedite creation of new relationships by committing to raise the user cost of cash gradually above its long-run value. Absent commitment, the user cost is kept low, delaying recovery.
    Keywords: Credit relationships; banks; corporate finance; optimal monetary policy
    JEL: D83 E32 E51
    Date: 2020–09–25
  13. By: Donato Masciandaro; Jacopo Magurno; Romano Tarsia
    Abstract: This paper reviews the evolution of the literature on Central Bank Independence (CBI) focusing on its metrics as well as on its empirical association with macroeconomic variables. Part One describes the evolution of the CBI indicators, while Part Two analyses the econometric studies devoted to shed light on the relationships between CBI and macroeconomic performances.
    Keywords: Monetary Policy, Central Bank Independence, Inflation, Growth, Sacrifice Ratio, Public Finance, Financial Stability
    JEL: E50 E52 E58
    Date: 2021
  14. By: Adesoji O. Farayibi (University of Ibadan, Ibadan, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The Covid-19 pandemic has generated shocks that have caused economic fluctuations globally, calling for an understanding of the behaviour of macroeconomic variables. This study presents an early review of the macroeconomic impact of the Covid-19 pandemic in Nigeria. The aggregate supply and aggregate demand (AS-AD) model provides the theoretical motivation for the study. From the findings, while the number of infected cases reflects significant correlations with economic activity from the perspective of a trend analysis, the estimates from dynamic ordinary least squares (DOLS) show that nexuses between the number of confirmed cases and attendant macroeconomic outcomes are largely insignificant with the expected signs. The study has therefore shown that the Covid-19 pandemic has insignificant negative impacts on basic macroeconomic variables in Nigeria such as inflation, employment, exchange rate, GDP growth, among others. In other words, time is required before the established correlations withstand empirical scrutiny in terms of causality. As the government has engaged the Economic Sustainable Plan (ESP, 2020), which is a post-Covid-19 recovery plan, it is hoped that the attendant policies would be properly implemented so as to provide the critical mass to repositioning the country’s economy on the path towards inclusive and sustained economic development.
    Keywords: Corona virus, Macroeconomics effects, Covid-19, AS-AD Model, Community Transmission, Nigeria
    JEL: E10 E12 E20 E23 I10 I18
    Date: 2020–01
  15. By: Dou Jiang (Nanjing University of Finance and Economics); Mark Weder (Department of Economics and Business Economics, Aarhus University and CAMA)
    Abstract: This paper quantitatively investigates the Depression of the 1890s and the 1907 recession in the United States. Business Cycle Accounting decomposes economic fluctuations into their contributing factors. The results suggest that both the 1890s and the 1907 recessions were primarily caused by factors that affect the efficiency wedge, i.e. slumps in the economy’s factor productivity. Distortions to the labor wedge played a less important role. Models with financial market frictions that translate into the efficiency wedge are the most promising candidates for explaining the recessionary episodes.
    Keywords: Business cycles, Depression of the 1890s, Recession of 1907
    JEL: E32 E44 N11
    Date: 2020–01–06
  16. By: Takeo Hori (Tokyo Institute of Technology); Ryonghun Im (Kyoto University)
    Keywords: asset bubbles, idiosyncratic risks, incomplete insurance, amplification, growth effect, welfare analysis.
    JEL: E21 E23 E44 G01 G11
    Date: 2021–01
  17. By: Daniel Garcés Díaz
    Abstract: This document proposes a general macroeconomic framework to analyze the behavior of inflation. This approach has two characteristics. The first is the distinction of monetary regimes based on the number of shocks that have a permanent effect on the price level. When all shocks have a permanent impact, the regime determines the inflation rate, as in inflation targeting. On the other hand, when there is only one shock with permanent effects, the regime determines the price level. An example of this is a regime with a fixed exchange rate. Even if there is no explicit target for the domestic price level, this becomes determined by the operation of a regime of this type. The second characteristic comes from the factors that Granger cause the rate of inflation or the price level. With this, a new perspective on four different historical cases emerges. One is the German hyperinflation; the second is that of the United States for a very long sample. For Brazil and Mexico, the analysis demonstrates that their inflationary processes' complexity arises from the regime changes they have gone through.
    JEL: C32 E41 E42 E52
    Date: 2020–12
  18. By: Povilas Lastauskas (Bank of Lithuania & Vilnius University); Anh Dinh Minh Nguyen (Bank of Lithuania & Vilnius University)
    Abstract: We build a new empirical model to estimate the global impact of an increase in the volatility of US monetary policy shocks. Specifically, we admit time-varying variances of local structural shocks from a stochastic volatility specification. By allowing for rich dynamic interaction between the endogenous variables and timevarying volatility in the global setting, we find that US interest rate uncertainty not only drives local output and inflation volatility, but also causes declines in output, inflation, and the interest rate. Moreover, we document strong global impacts, making the world move in a very synchronous way. Crucially, spillback effects are found to be significant even for the US economy.
    Keywords: US Monetary Policy, Volatility Shocks, Uncertainty, Global Economy
    JEL: C32 C54 E52 E58 F44
    Date: 2020–12–30
  19. By: Balazs Egert
    Abstract: This paper summarises earlier OECD work aimed at quantifying the impact of structural reforms on economic outcomes. It overviews i.) insights obtained for the linear relationships linking policies and economic outcomes (including multi-factor productivity, capital deepening and employment) for an almost complete set of OECD countries, ii.) non-linear results on how policies interact with each other in OECD countries, and iii.) results extended for emerging-market economies looking at whether policy effects vary across countries depending on the level of economic development and whether institutions have an influence on economic outcomes. The paper lists of policies and institutions that could be used to quantify the effect of reforms. It also gives some guidance on how to quantify reforms in OECD and non-OECD countries. It provides mid-point estimates of the long-run effects on per capita income levels through the three supply-side channels. Finally, it raises the issue of estimation and model uncertainty.
    Keywords: structural reform, product and labour market regulation, institutions, productivity, investment, employment, OECD, emerging market
    JEL: D24 E17 E22 E24 J08
    Date: 2020
  20. By: Kátay Gábor; Kerdelhué Lisa; Lequien Matthieu
    Abstract: The paper assesses the impact of adding information on financial cycles on the output gap estimates for eight advanced economies using two unobserved components models: a reduced form extended Hodrick-Prescott filter, and a standard semi-structural unobserved components model. To complement these models, a semi-structural vector autoregression model is proposed in which only supply shocks are identified. The accuracy of the output gap estimates is assessed based on their performance in predicting recessions. The models with financial variables generally produce more accurate output gap estimates at the expense of increased real-time volatility. While the extended Hodrick-Prescott filter is particularly appealing for its real-time stability, it lags behind the two semi-structural models in terms of forecasting performance. The vector autoregression model augmented with financial variables features the best in-sample forecasting performance, and it has similar real-time prediction capabilities to the semi-structural unobserved components model. Overall, financial cycles appear to be relevant in Japan, Spain, the UK, and – to a lesser extent – in the US and in France, while they are relatively muted in Canada, Germany, and Italy.
    Keywords: Unobserved Components model, semi-structural VAR, output gap, financial cycle, sustainable growth, credit, house prices, advanced economies.
    JEL: C32 E32 E44 G01 O11 O1
    Date: 2020
  21. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with New Zealand discusses that economic growth picked up in early 2019 after slowing in the second half of 2018. The pickup mostly reflected a rebound in private business investment growth. Residential investment also strengthened, notwithstanding cooling housing markets. Bank lending continued to slow across all sectors, growing now broadly in line with nominal gross domestic product. The recent monetary policy easing fits the subdued inflation conditions and near-term risks to the outlook. Economic growth is only expected to remain close to potential on the back of a timely increase in macroeconomic policy support. The proposed higher capital conservation buffers would provide for a welcome increase in banking system resilience. The new requirements would increase bank capital to levels that are commensurate with the systemic financial risks emanating from the banking system. The new framework should also differentiate more between large and small banks. A stronger bank supervision regime would still be needed, to complement the higher capital requirements.
    Keywords: Housing;Housing prices;Inflation;Banking;Fiscal policy;ISCR,CR,stats NZ,financial asset,regime,economic growth,monetary policy
    Date: 2019–09–20
  22. By: Saroj Bhattarai; Jae Won Lee; Choongryul Yang
    Abstract: We show that the effectiveness of redistribution policy in stimulating the economy and improving welfare is directly tied to how much inflation it generates, which in turn hinges on monetary-fiscal adjustments that ultimately finance the transfers. We compare two distinct types of monetary-fiscal adjustments: In the monetary regime, the government eventually raises taxes to finance transfers while in the fiscal regime, inflation rises, effectively imposing inflation taxes on public debt holders. We show analytically in a simple model how the fiscal regime generates larger and more persistent inflation than the monetary regime. In a quantitative application, we use a two-sector, two-agent New Keynesian model, situate the model economy in a Covid-19 recession, and quantify the effects of the transfer components of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. We find that the transfer multipliers are significantly larger under the fiscal regime—which results in a milder contraction—than under the monetary regime, primarily because inflationary pressures of this regime counteract the deflationary forces during the recession. Moreover, redistribution produces a Pareto improvement under the fiscal regime.
    Keywords: household heterogeneity, redistribution, monetary-fiscal policy mix, transfer multiplier, welfare evaluation, Covid-19, CARES Act
    JEL: E53 E62 E63
    Date: 2020
  23. By: Fátima Cardoso; Manuel Coutinho Pereira; Nuno Alves
    Abstract: This paper studies the impact on consumption of the large changes in public wages in Portugal arising in the context of the economic and financial assistance program (2011-2014). We uncover the effects of exogenous public wage changes by exploiting the heterogeneous characteristics of public servants by municipality. The initial wage cuts triggered a marked reduction of private consumption, while the reinstatements in the later years gave rise to an increase, albeit of a smaller magnitude. The consumption response was larger for employees with relatively lower wages. Households smoothed the impact on consumption of negative income shocks by drawing down their deposits. Consumer credit did not play such a role, as households deleveraged as a response to those negative shocks.
    JEL: E21 E62 E65
    Date: 2020
  24. By: Cândida Ferreira
    Abstract: The paper tests the existence of long-term relations, measured through cointegration,between all the IMF financial development indices and some macroeconomic performance indicators applying panel cointegration tests in a panel with 46 countries, and in a panel including only the sub-sample of the 28 EU countriesover the interval 1990-2017. Overall, there are no significant differences between the results obtained for whole sample and the panel including only the EU countries. The results obtained clearly point to the existence of cointegration between the financial development indices and the real GrossDomestic Product, aswell aswith the inflation, the unemployment rate, and very particularly, with the current account, and with the net international investment position. The results also show there are no significant differences between the results obtained for the financial institutions and for the financial markets. Moreover, the results related to the specific aspects addressed by the IMF indices very well demonstrate that much ore mportant han he imple access to or the depth of the financial institutions nd markets is the efficiency of these institutions and markets.
    Keywords: Financial development; IMF Financial development indices; macroeconomic performance; cointegration; panel cointegration tests.
    JEL: E44 E02 F36 O43 C13
    Date: 2020–12
  25. By: Nicole Jonker; Carin van der Cruijsen; Michiel Bijlsma; Wilko Bolt
    Abstract: COVID-19 has temporarily changed the relative cost and benefits of different payment methods: cash has become more costly in terms of health risks, ease of use and likelihood of acceptance, whereas debit card usage has become less costly. As a result, consumers have shifted away from cash. For some, this may speed up the adoption of electronic payment methods, resulting in a permanent change in payment behaviour. Others will return to their preferred payment method once the influence of COVID-19 on our health and daily lives has faded away. Based on unique payment diary survey data collected among a representative panel of Dutch consumers, we study the shift in payment behaviour and payment preferences during the first phase of the COVID-19 pandemic. Since the start of the lockdown in the Netherlands the likelihood of debit card usage at the expense of cash has increased by 13 percentage points. About 60 percent of this shift has persisted seven months after the start of the pandemic in the Netherlands and appears to be longlived. Also, the pandemic has resulted in a shift in payment preferences towards more contactless payments. Both effects are largest for elderly people.
    Keywords: COVID-19; consumer payment behaviour; consumption; payment diary data
    JEL: D12 E21 E42 O33
    Date: 2020–12
  26. By: Kartik B. Athreya; Ryan Mather; Jose Mustre-del-Rio; Juan M. Sanchez
    Abstract: The goal of this paper is to show that household-level financial distress (FD) varies greatly, meaning there is unequal exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three facts: (i) regions in the U.S. vary significantly in their "FD-intensity," measured either by how much additional credit households therein can access, or in how delinquent they typically are on debts, (ii) shocks that are typically viewed as "aggregate" in nature hit geographic areas quite differently, and (iii) FD is an economic "pre-existing condition": the share of an aggregate shock borne by a region is positively correlated with the level of FD present at the time of the shock. Using an empirically disciplined and institutionally rich model of consumer debt and default, we show that in the shocks dealt by the Great Recession and in the initial months in the COVID-19 pandemic, FD mattered. Our model implies that the uneven distribution of FD creates widely varying consumption responses to shocks. This is true even when subjecting regions (with differing levels of FD) to the same shocks, which highlights the importance of FD independently of its correlation with shocks.
    Keywords: Geography; Consumption; Credit Card Debt; Reccession; Bankruptcy; Foreclosure; Mortgage; Delinquency; Financial Distress
    JEL: D31 D58 E21 E44 G11 G21
    Date: 2020–09–15
  27. By: International Monetary Fund
    Abstract: This paper discusses Chad’s 2019 Article IV Consultation, Fourth Review Under the Extended Credit Facility (ECF) Arrangement, Request for Modification of Performance Criteria, and Financing Assurances Review. Article IV discussions focused on policy priorities to deal with legacies from the crisis and the longstanding structural weaknesses. Reducing government domestic debt and domestic arrears would address key impediments to growth that persist from the crisis. Sustained efforts are needed to increase non-oil revenues, improve the efficiency and quality of public spending, and reduce the vulnerability of the fiscal position to oil price fluctuations. Performance under the ECF-supported program has been broadly satisfactory with continued improvement in the fiscal position and progress in implementing structural reforms in spite recent delays. Overall economic activity strengthened in 2018; however, further reform efforts are needed to support the recovery in the non-oil sector and improve social conditions. Chad’s program is supported by the implementation of policies and reforms by the regional institutions which are critical to its success.
    Keywords: Oil, gas and mining taxes;Arrears;Public financial management (PFM);External debt;Oil prices;ISCR,CR,Chad,Chadian authorities,authority,ECF arrangement
    Date: 2019–07–31
  28. By: Yoichiro Tamanyu (Graduate School of Economics, Keio University)
    Abstract: This paper proposes a novel methodology to derive nonlinear solutions of an indeterminate DSGE model in which the decision rules are affected by sunspot shocks. We apply the method to an expectations-driven liquidity trap---a liquidity trap that arises because of the zero lower bound constraint on the nominal interest rate and the de-anchoring of economic agents' expectations---and find that the model dynamics exhibit significant nonlinearity. Such nonlinearity arises because the zero lower bound ceases to bind once the inflation rate rises because of a temporary increase in inflation expectations.
    Keywords: Indeterminacy, Nonlinearity, Sunspot, Expectations-Driven Liquidity Traps, Zero Lower Bound
    JEL: C62 C63 E31
    Date: 2020–11–28
  29. By: Peter D. Williams
    Abstract: Inflation has been below the Federal Reserve’s target for much of the past 20 years, creating worries that inflation may be deanchoring from the FOMC’s target. This paper uses a factor model that incorporates information from professional forecasters, household and business surveys, and the market for Treasury inflation protected securities (TIPS) to estimate long-run inflation expectations. These have fallen notably in the past few years (to roughly 1.9 percent for CPI inflation, well below the FOMC’s target). It appears that, even before the covid recession, the private sector viewed the economy as likely to suffer from persistent headwinds to inflation.
    Keywords: Inflation;Return on investment;Oil prices;Liquidity;Inflation targeting;inflation expectations,yield curve,factor modeling,no-arbitrage term structure model,TIPS,surveys,WP,inflation expectation,inflation risk premium,breakeven inflation series,CPI inflation,risk premia
    Date: 2020–11–13
  30. By: International Monetary Fund
    Abstract: This paper discusses Republic of Congo’s Review Under the Extended Credit Facility (ECF). The Republic of Congo’s ECF program supports the authorities’ efforts to restore fiscal sustainability and rebuild regional reserves while improving governance and protecting vulnerable groups. The Congolese authorities have stepped up efforts in 2018 and 2019 to address the economic crisis and the associated governance challenges. The ECF-supported program aims to help the Republic of Congo restore macroeconomic stability, including debt sustainability, and lay the foundations for higher and more inclusive growth. It also seeks to improve governance to achieve greater efficiency and transparency in the management of public resources, especially in the oil sector. The Fund-supported program is expected to contribute positively to the regional strategy and stability efforts of the Central African Economic and Monetary Union. The report also highlights that it is key to promote the productivity of factor inputs by increasing investments in human capital.
    Keywords: Public debt;Arrears;Oil, gas and mining taxes;External debt;Oil prices;ISCR,CR,debt,authority,debt restructuring effort,governance
    Date: 2019–07–24
  31. By: Herrera Saavedra, Juan Pablo; Villar Otálora, Juan Camilo; Campo-Robledo, Jacobo
    Abstract: El documento presenta una estimación de la Curva de Laffer para la economía colombiana mediante la realización de un análisis de estática comparativa y un análisis de tipo econométrico. Respecto al primer análisis, partiendo de un modelo microeconómico se analiza el nivel de distorsión que se generaría al establecer un impuesto indirecto y las implicaciones que en materia de bienestar se originarían al maximizar el recaudo tributario en el mercado. Para el segundo análisis, utilizando datos del ingreso tributario real per cápita y la tasa impositiva, se estima un modelo econométrico con el fin de calcular la tasa impositiva de tributación óptima en Colombia. Los resultados muestran el cumplimiento de los postulados de Laffer, con una tasa impositiva óptima del 37% aproximadamente, y sugieren un espacio fiscal del Gobierno de aproximadamente 12 puntos porcentuales.
    Keywords: Curva de Laffer; Ingreso Fiscal; Impuesto Óptimo; Incidencia Fiscal en Mercados; Tasa Impositiva de Tributación; Colombia
    JEL: C23 D72 E13 E62 H20 H30
    Date: 2021–01
  32. By: International Monetary Fund
    Abstract: This paper discusses Cameroon’s Fourth Review Under the Extended Credit Facility Arrangement and Requests for Waivers of Nonobservance of Performance Criteria and Modification of Performance Criteria. Growth is estimated to have rebounded to 4 percent in 2018, supported by stronger-than-anticipated oil and gas production and Africa Cup of Nations projects. Program implementation has improved from a year ago, however, challenges remain. Refraining from new nonconcessional borrowing and strictly adhering to the disbursement plan for contracted-but-undisbursed loans are essential to preserving debt sustainability. Further project prioritization and enhanced investment efficiency will help address developmental needs while supporting prudent debt management. Cameroon’s program continues to be supported by the implementation of supportive policies and reforms by the regional institutions in the areas of foreign exchange regulations and monetary policy framework and to support an increase in regional net foreign assets, which are critical to the program’s success.
    Keywords: Arrears;Public debt;Fiscal stance;Credit;Debt service;ISCR,CR,May payment,January payment,nonobservance of the continuous performance criterion,January,nonobservance,SNH data reconciliation
    Date: 2019–07–25
  33. By: International Monetary Fund
    Abstract: Barbados has made good progress in implementing its Economic Recovery and Transformation (BERT) plan to restore fiscal and debt sustainability, rebuild reserves, and increase growth—but faces major challenges owing to the global coronavirus pandemic. Since May 2018, international reserves have increased from a low of US$220 million (5-6 weeks of import coverage) to more than US$1 billion at end-October 2020. This, and a successful 2018-19 public debt restructuring, have helped rebuild confidence in the country’s macroeconomic framework. While the local spread of COVID-19 has been successfully contained, allowing for a cautious reopening of the tourism sector in July, economic activity remains severely depressed owing to the global pandemic. Risks to the outlook remain elevated.
    Date: 2020–12–11
  34. By: Martin M. Andreasen (Aarhus University and CREATES and The Danish Finance Institute)
    Abstract: This paper presents a New Keynesian model to capture the linkages between macro fundamentals and the nominal yield curve. The model explains bond yields with a low level of news in expected inflation and plausible term premia. This implies that the slope of the yield curve predicts future bond returns, and that risk-adjusted historical bond returns satisfy the expectations hypothesis. A key implication of the model is that U.S. bond yields are consistent with demand shocks that are three times less inflationary than implied by a standard log-linearized New Keynesian model estimated without bond yields.
    Keywords: Inflation variance ratios, Robust structural estimation, Term premia, The expectations hypothesis, Unspanned macro variation
    JEL: E44 G12
    Date: 2021–01–09
  35. By: Zongwu Cai; Jiazi Chen; Linlin Niu
    Abstract: It is well documented in the literature that individual saving decisions vary with the life cycle and at the macroeconomic level, a changing demographic age structure affects aggregated savings, which then drives a slow movement of interest rates. In this paper, we propose a semiparametric affine arbitrage-free yield curve model with a low-frequency trend structure driven by the entire age distribution through a life cycle impact function. The unified framework not only fully explores the demographic age structure to robustly explain yield trend, but also utilizes efficiently the interest rate term structure to infer the S-shaped age impact function of the whole life cycle. We estimate the model with quarterly U.S. data from 1950s to present. The results show clearly that the model fits U.S. Treasury yields remarkably well in sample and outperforms popular alternative models out of sample. After removing the demography-driven trend especially pertaining to the baby boomer’s life cycle, the remaining term structure component is stationary with counter-cyclical risk premia.
    Keywords: Demographic distribution, Life cycle, Term structure models, Semiparametric model, Functional data analysis
    JEL: E43 G12 J11
    Date: 2021–01–07
  36. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Romania discusses that growth in 2019 is expected to stay above potential at 4 percent, led by continued fiscal stimulus and strong wage growth, and be accompanied by further widening of current account and fiscal deficits. The focus of discussions was on actions required to curb the widening imbalances and to re-orient the economy toward investment and sustainable income convergence. It is recommended that Romania take advantage of strong growth and start durable fiscal consolidation underpinned by high-quality measures to rein in the twin deficits and improve the macroeconomic policy mix. The more fiscal policy tightens, the less monetary tightening is needed. The report also advises to modernize revenue administration and improve expenditure efficiency. Reassessment of the new pension law to balance social needs and fiscal sustainability is also important. Rising vulnerability calls for a balanced macroeconomic policy mix built on durable fiscal consolidation. High-quality fiscal consolidation would reduce the burden on monetary policy for macroeconomic stabilization, mitigate external pressure by containing the current account deterioration, and bolster growth potential by improving the balance between consumption and investment.
    Keywords: Public debt;Current account deficits;Inflation;Expenditure;Fiscal stance;ISCR,CR,GDP expenditure component,deficit,inflation pressure
    Date: 2019–08–30
  37. By: Chimere O. Iheonu (University of Nigeria, Nsukka, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon); Kingsley O. Odo (University of Nigeria, Nsukka, Nigeria); Patrick K. Ojiem (University of Nigeria, Nsukka, Nigeria)
    Abstract: This study investigated the impact of financial sector development on domestic investment in selected Economic Community of West African States (ECOWAS) countries for the years 1985 to 2017. The study employed the Augmented Mean Group procedure which accounts for country specific heterogeneity and cross sectional dependence, and the Granger non-causality test robust to cross sectional dependence. The result reveals that (1) the impact of financial sector development on domestic investment depends on the measure of financial sector development utilised, (2) domestic credit to the private sector has a positive but insignificant impact on domestic investment in ECOWAS while banking intermediation efficiency (i.e. ability of the banks to transform deposits into credit) and broad money supply negatively and significant influence domestic investment, (3) cross country differences exist on the impact of financial sector development on domestic investment in the selected ECOWAS countries, and (4) domestic credit to the private sector Granger causes domestic investment in ECOWAS. The study recommends cautiousness in terms of the measure of financial development which is being utilised as a policy instrument to foster domestic investment as well as the importance of employing country-specific domestic investment policies in order to avoid blanket policy measures. Also, domestic credit to the private sector should be given priority when forecasting domestic investment into the future.
    Keywords: Financial Sector Development; Domestic Investment; Augmented Mean Group; Granger non-causality test; ECOWAS
    JEL: C5 E2 E5 G0
    Date: 2020–01
  38. By: International Monetary Fund
    Abstract: This paper discusses Cabo Verde’s 2019 Article IV Consultation and Request for an Eighteen-Month Policy Coordination Instrument (PCI). The PCI aims at bolstering macroeconomic stability through fiscal consolidation and growth-enhancing reforms to support medium-term fiscal and debt sustainability. Policy discussions and the PCI-supported program focused on achieving medium-term fiscal and debt sustainability; modernizing the monetary policy framework and continuing to build precautionary reserves; bolstering the financial system resilience; restructuring lossmaking State-Owned Enterprises; and advancing structural reforms to support private sector-led growth. The medium-term outlook is positive although risks are tilted to the downside. Economic growth is projected to remain robust while the fiscal and external positions are expected to improve further, underpinned by growth and programmed structural reforms.
    Keywords: Public debt;External debt;Debt sustainability;Debt sustainability analysis;Structural reforms;ISCR,CR,monetary policy transmission mechanism,transmission mechanism,Cabo Verde's risk,debt,outlook
    Date: 2019–07–31
  39. By: Ghada Fayad; Helene Poirson Ward
    Abstract: A case study approach is used to assess the multi-pronged policy response of seven small financially open economies with flexible exchange rate regimes to external shocks following the global financial crisis. FX intervention was frequently used— including during outflow episodes to prevent disorderly depreciation and preserve financial stability. Monetary policy often considered both financial and external stability. Capital flow management measures were sometimes calibrated symmetrically over the cycle while macroprudential measures were mostly deployed during inflow episodes. Assessment of the macroeconomic conditions paints an inconclusive picture on the benefits or costs of such policies, suggesting the need for further analysis.
    Keywords: Inflation;Exchange rates;Financial sector stability;Depreciation;Central bank policy rate;emerging markets,monetary and exchange rate policies,inflation targeting,foreign exchange intervention,capital flows,macroprudential measures.,WP,monetary policy decision,exchange rate volatility,inflation targeting regime,monetary policy independence,FX turnover BIS data
    Date: 2020–11–08
  40. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Morocco discusses that gradually increasing growth, moderate inflation, and stronger external and fiscal buffers are expected over the medium term, benefiting from sustained reform implementation. However, this outlook remains subject to significant domestic and external risks: delays in implementing reforms, lower growth in key partner countries (particularly in the euro area), higher oil prices, geopolitical risks, and volatile financial conditions could weaken Morocco’s resilience and economic prospects. Building on progress achieved in recent years, further fiscal and structural reforms are needed to consolidate gains in macroeconomic resilience and achieve higher and more inclusive growth. The discussions mainly focused on strengthening the resilience of the economy through continued fiscal reforms, greater exchange rate flexibility, and strengthened financial sector soundness. It also highlighted the need for pushing ahead with mutually-reinforcing and properly sequenced reforms to raise growth and inclusion, including by improving public sector governance, promoting private sector development, and reducing inequalities.
    Keywords: Public debt;External debt;Banking;Credit;Exchange rate flexibility;ISCR,CR,exchange rate,deficit,authority,ana IMF,governance
    Date: 2019–07–16
  41. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation highlights that the Lithuanian economy has continued to enjoy a strong macroeconomic and fiscal performance, but long-term challenges remain largely unaddressed. The continued strong economic performance suggests that a neutral fiscal stance would have been preferable in the year 2019. The report discusses that Lithuania needs sustained productivity gains to ensure higher living standards and convergence with Western Europe. Macroeconomic and financial stability is a prerequisite for sustained growth and has been achieved through prudent policies and labor market flexibility. Nevertheless, significant and well-identified structural challenges have yet to be addressed with ambitiously designed and decisively implemented productivity-enhancing reforms. The current expansionary cyclical environment and strong fiscal and external positions provide an ideal opportunity to address these challenges. Fintech provides big opportunities to improve financial services and produce high-skill jobs; however, it also brings challenges, particularly related to antimoney laundering. The authorities’ efforts to promote fintech are already delivering results.
    Keywords: Labor markets;Wages;Banking;Loans;Employment;ISCR,CR,potential GDP,debt,center,foreign currency
    Date: 2019–07–31
  42. By: Ludmila Fadejeva (Bank of Latvia); Anete Migale (Bank of Latvia); Mikelis Zondaks (Bank of Latvia)
    Abstract: This paper presents Latvia's results from the third wave of the Eurosystem's Household Finance and Consumption Survey (HFCS) conducted in 2017. The paper focuses on the wealth components of the household balance sheet – real and financial assets, liabilities, as well as income and consumption. The HFCS questionnaire includes an extensive list of quantitative and qualitative questions; therefore, our paper presents changes in the household balance sheet taking into account both numeric and self-assessment aspects. The results are compared to the HFCS 2014 results in Latvia and the HFCS 2014 and the HFCS 2017 results in the euro area.
    Keywords: household finance and consumption survey, Latvia, assets, liabilities, net wealth, financial vulnerability, income, consumption
    JEL: D14 D31 E21
    Date: 2020–12–31
  43. By: Tanaka, Yasuhito
    Abstract: We examine positive or negative real balance effect (or so-called Pigou effect) by falls in the nominal wage rate and the prices of the goods in situations where there is involuntary unemployment using a three-generations overlapping generations model with childhood period and pay-as-you go pension system for the older generation consumers. We will show that if the net savings of the younger generation consumers are larger than their debts due to consumption in their childhood period, there exists positive real balance effect and the employment increases by a fall in the nominal wage rate; on the other hand, if the net savings of the younger generation consumers are smaller than their debts, there exists negative real balance effect and the employment decreases by a fall in the nominal wage rate.
    Keywords: Positive or negative real balance effects, involuntary unemployment, three-generations overlapping generations model.
    JEL: E12 E24
    Date: 2020–11–24
  44. By: Engin Kara; Ahmed Pirzada
    Abstract: We argue that understanding the macroeconomic effects of increasing economic uncertainty requires understanding nominal rigidities. In the standard new Keynesian model where all firms face the same degree of nominal rigidity, heightened uncertainty leads to higher inflation and lower output. Introducing heterogeneity in price stickiness, suggested by micro-evidence on prices, changes this prediction of the model. In the new model, increased uncertainty leads to decrease in both inflation and output. These effects are more pronounced with higher trend inflation. We find that price-level targeting is more effective in dealing with the consequences of increasing uncertainty than inflation targeting.
    Date: 2021–01–07
  45. By: International Monetary Fund
    Abstract: Germany’s economic performance has been strong for the past decade, but external factors and structural challenges are now weighing on growth. The export-dependent economy has been hit by the recent slowdown in global demand, while medium-term growth is expected to fall due to low productivity growth and adverse demographics. External imbalances remain large, partly reflecting rising top income inequality, macro-financial vulnerabilities are rising, and the financial sector continues to suffer from weak profitability. Still, fundamentals are sound, with public and private balance sheets remaining healthy, and the unemployment rate at record lows. Inflation is subdued, but wage growth is continuing to pick up, reflecting the strength of the labor market and increasingly binding capacity constraints.
    Keywords: Income;Commercial banks;Cooperative banks;Income inequality;Wages;ISCR,CR,IMF staff calculation,staff,labor market,Bundesbank,tax credit
    Date: 2019–07–10
  46. By: Malak Kandoussi; François Langot
    Abstract: Nous développons un modèle d’appariement multisectoriel qui reproduit l’impact du pre-mier confinement sur le chômage français, en tenant compte des impacts contrastés entre divers typesd’emplois. Nous identifions la taille des restrictions sur les ventes qui ont frappées chaque segment dumarché du travail, mais également les recours hétérogènes aux mesures de chômage partiel, mettantainsi en évidence l’impact inégal du confinement. Ces résultats sont obtenu grâce à un modèle originald’appariement intégrant (i) des risques microéconomiques variants dans le temps, (ii) des externalitésde congestion dans le processus de recrutement et (iii) des rigidités de salaires. La persistance généréepar notre modèle, nettement plus importante que dans le modèle de Diamond-Mortensen-Pissaridessuggère qu’un retour au niveau de chômage d’avant la crise pourrait être atteint en 2023 (2024) dansun scénario à une (double) vague, alors que les mesures de chômage partiel permettent de diviser pardeux ces durées d’ajustement.
    Keywords: COVID-19, chômage, appariement, hétérogénéité des travaileurs, E24, E32, J64
    Date: 2020–12
  47. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation discusses that the Indonesian economy performed well in 2018, despite external headwinds, including capital flow reversals. Growth stabilized above 5 percent and inflation eased to around 3 percent. A surge in imports and weak export growth contributed to a higher current account deficit. Growth is projected to remain stable over the medium term. Inflation is expected to remain within the target band and the current account deficit is expected to narrow gradually on lower imports. Risks are tilted to the downside and are mainly external. Reliance on portfolio inflows to finance the twin deficits leaves Indonesia vulnerable to capital flow reversals. Creating quality jobs for the young and growing population to harness Indonesia’s demographic dividend requires a stronger impetus to growth, which has been constrained by structural weaknesses, including low tax revenues, shallow financial markets, and labor and product market rigidities.
    Keywords: Current account deficits;Financial sector stability;Public debt;Financial crises;Tax administration core functions;ISCR,CR,food price inflation,price,headline inflation,core inflation,deficit
    Date: 2019–07–31
  48. By: Deicy J. Cristiano-Botia; Manuel Dario Hernandez-Bejarano; Mario A. Ramos-Veloza
    Abstract: We construct the Labor Market Indicator (LMI) focusing on the cyclical similarities of eighteen time series from household, industrial, and opinion surveys between 2001 and 2019. The LMI summarizes the growth cycle of the labor market as defined by Mintz (1972) and is connected to the evolution of the traditional business cycle indicators as well as to that of the GDP and the Unemployment rate GAP. The evolution of the indicator provide useful information to policy makers, as it complements the characterization of expansions and turning points. Thus, improving the analysis of the current momentum of the labor market. **** RESUMEN: En este documento construimos el Indicador del Mercado Laboral (LMI) con base en las similitudes entre los componentes cíclicos de 18 series de tiempo que incluyen Encuestas de hogares, industrial y de opinión entre 2001 y 2019. El LMI resume el ciclo de crecimiento del mercado laboral tal como lo define Mintz (1972) y su evolución esta relacionada con la indicadores tradicionales del ciclo de los negocios así como a la de las brechas del PIB y de la tasa de desempleo. La evolución del indicador brinda información útil a los hacedores de política dado que complementa la caracterización de las expansiones y los puntos de quiebre. De esta manera, se obtiene un análisis más completo del momentum del mercado laboral.
    Keywords: LMI, Mercado Laboral, Modelo de factores dinámicos, Tasa de desempleo
    JEL: E24 E66 J6 J20
    Date: 2021–01
  49. By: Markus Kirchner; Malte Rieth
    Abstract: This paper examines the role of sovereign default beliefs for macroeconomic fluctuations and stabilization policy in a small open economy where fiscal solvency is a critical problem. We set up and estimate a DSGE model on Turkish data and show that accounting for sovereign risk significantly improves the fit of the model through an endogenous amplification between default beliefs, exchange rate and inflation movements. We then use the estimated model to study the implications of sovereign risk for stability, fiscal and monetary policy, and their interaction. We find that a relatively strong fiscal feedback from deficits to taxes, some exchange rate targeting, or a monetary response to default premia are more effective and efficient stabilization tools than hawkish inflation targeting.
    Date: 2020–12
  50. By: Altavilla, Carlo; Laeven, Luc; Peydró, José-Luis
    Abstract: We document that there are strong complementarities between monetary policy and macroprudential policy in shaping the evolution of bank credit. We use a unique loan-level dataset comprising multiple credit registers from several European countries and different types of loans, including corporate loans, mortgages and consumer credit. We merge this rich information with borrower and bank-level characteristics and with indicators summarising macroprudential and monetary policy actions. We find that monetary policy easing increases both bank lending and lending to riskier borrowers, especially when there is a more accommodative macroprudential environment. These effects are stronger for less capitalised banks. Results apply to both household and firm lending, but they are stronger for consumer and corporate loans than for mortgages. Finally, for firms, the overall increase in bank lending induced by an accommodative policy mix is stronger for more (ex ante) productive firms than firms with high ex ante credit risk, except for banks with low capital. JEL Classification: E51, E52, E58, G21, G28
    Keywords: corporate and household credit, euro area, macroprudential policy, monetary policy
    Date: 2020–12
  51. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Mongolia discusses that economy growth accelerated to 8.6 percent in the first quarter of 2019, over fiscal balance turned into surplus in 2018, and gross international reserves have increased by $2 1/2 billion since 2016. The recovery stems from a stronger policy framework, significant official financing and a rebound in external demand. Notwithstanding the progress, Mongolia remains vulnerable to external shocks given its high debt levels and the economy’s dependence on mineral exports. Structural reforms progressed in several key areas: the budget process is more resilient to political pressure and quasi-fiscal activities were curtailed. In order to achieve sustainable and inclusive growth, it is necessary to advance the current reform efforts by strengthening the rule-based fiscal policy framework, ensuring financial sector soundness and improving governance. Risks are tilted toward the downside in the near term. Shocks to mineral demand can lead to sharp fall in exports, weakening growth outlook and fiscal accounts. A slowdown in growth could trigger financial instability given still inadequate capital buffers at some banks and overindebted households.
    Keywords: Public debt;International reserves;External sector statistics;Foreign exchange;Credit;ISCR,CR,growth,consumer price index inflation,EFF program
    Date: 2019–09–17
  52. By: Ivana Loli? (Faculty of Economics & Business, University of Zagreb); Petar Sori? (Faculty of Economics & Business, University of Zagreb); Marija Logaru?i? (Faculty of Economics & Business, University of Zagreb)
    Abstract: We utilize two specific ensemble learning methods (ensemble linear regression model (LM) and random forest (RF)), in a data-rich environment of the Newsbank media database to scrutinize the possibilities of enhancing the predictive accuracy of Economic Policy Uncertainty (EPU) index. LM procedure mostly outperforms both RF-based assessments and the original EPU index. We find that our LM estimate behaves more like an uncertainty indicator that the RF-based uncertainty or the original EPU index. It is strongly correlated to other standard uncertainty proxies, it is more countercyclical, and it has more pronounced leading properties. Finally, we considerably widen the scope of search terms included in the calculation of EPU index. We find that the predictive precision of EPU index can be considerably increased using a more diversified set of uncertainty-related terms than the original EPU framework.
    Keywords: Economic Policy Uncertainty Index; textual analysis; ensemble learning; random forest model
    JEL: C55 E03 E32
  53. By: Simplice A. Asongu (Yaounde, Cameroon); Samba Diop (Alioune Diop University, Bambey, Senegal); Joseph Nnanna (Abuja, Nigeria)
    Abstract: This study has: (i) analysed the economic impact of the Covid-19 pandemic, (ii) evaluated the effectiveness and relevance of different measures against the pandemic and (iii) examined nexuses between the corresponding measures and economic outcomes. The study uses a sample of 186 countries divided into four main regions, notably: Asia-Pacific and the Middle East, Europe, Africa and America. 34 preventing and mitigating measures against the Covid-19 pandemic are classified into five main categories: lockdown, movement restrictions, governance and economic, social distancing, and public health measures. The empirical evidence is based on comparative difference in means tests and correlation analyses. The findings show how the effectiveness and consequences of the Covid-19 measures are different across regions. In adopting the relevant policies to fight the ongoing pandemic, the comparative insights from the findings in the study are worthwhile. Inter alia: (i) from a holistic perspective, only European countries have favourably benefited from the Covid-19 measures; (ii) lockdown measures at the global level have not been significant in reducing the pandemic; (iii) the restriction of movement measure has been relevant in curbing the spread in the American continent; (iv) social distancing has been productive in Europe and counter-productive in Africa; (v) governance and economic measures have exclusively been relevant in Europe and (vi) overall public health measures have not had the desired outcomes in flattening the infection curve probably because most of the underlying measures are awareness decisions or oriented toward people already infected.
    Keywords: Novel Coronavirus, Social Distance, Macroeconomics effects
    JEL: E10 E12 E20 E23 I10 I18
    Date: 2020–01
  54. By: Victor Nechifor (European Commission - JRC); Ole Boysen (European Commission - JRC); Emanuele Ferrari (European Commission - JRC); Kidanemariam Hailu (FDRE Policy Studies Institute); Mohammed Beshir (FDRE Policy Studies Institute)
    Abstract: This technical report assesses the implications of the COVID-19 pandemic for the economic performance and poverty incidence in Ethiopia for 2019/20 and 2020/21. It takes into account the impacts of the pandemic on four channels: a) factor productivity, b) trade costs, c) export demand and tourism, and d) remittances and FDI. Through the inclusion of the Ethiopian government responses of stimulus spending, job protection and business support, the report evaluates the effectiveness of these measures for the economic recovery to pre-COVID-19 pathways. By using a macroeconomic multi-sectoral model, the study includes results at national (GDP, supply, demand, trade), sectoral (output and prices) and household (welfare) levels. The household food expenditure results are then included as income measures in a poverty analysis module to further characterise the effects of the pandemic on poverty headcount, gap and severity. In annualised terms, the modelling results show that the COVID-19 impacts could have been significant across all macroeconomic metrics had the government not intervened. The GDP would have decreased from pre-COVID-19 projections by -11.1% in 2019/20 and -6.7% in 2020/21, with severe implications for employment and household welfare. The government response consisting in increased spending (healthcare and food programmes) and salary payments to prevent job losses may have had an important role in improving the macroeconomic outcomes of the pandemic in 2019/20. Nevertheless, much of the aggregate recovery (GDP, employment and welfare) is driven by agriculture as output in most manufacturing, construction and services sectors continue to be affected by productivity shocks and low demand. Therefore, employment and output outside agriculture could still be below the pre-COVID-19 projections even when additional business support measures are included. Without government intervention, the poverty headcount would have increased by about 5% in total population. The government measures are projected to mitigate that effect to a large extent and to allow national poverty levels to reach pre-COVID-19 values in 2020/21 or to even fall below in case of an enhanced business stimulus package from the government. Nevertheless, poor urban households continue to be negatively affected and would require more targeted support.
    Keywords: covid-19, general equilibrium, public spending, poverty analysis, trade
    JEL: C68 E61 E66 E69 F17 O13
    Date: 2020–12
  55. By: International Monetary Fund
    Abstract: This paper discusses Republic of Serbia’s 2019 Article IV Consultation and Second Review Under the Policy Coordination Instrument. Serbia’s macroeconomic performance, supported by the Policy Coordination Instrument, has been strong. Growth has been robust, public debt is declining, employment is rising, the financial sector is sound, and inflation is low. Strong fiscal performance continues, facilitating higher capital spending and a reduction of the tax burden on labor as well as faster debt reduction. Continued strong program implementation and determined structural reforms are important to address the challenges and accelerate income convergence with the EU. Fiscal performance has been strong, while important reforms took place toward modernization of the tax administration and privatization of the largest state-owned bank. Stronger commitment to the implementation of planned structural reforms is needed to boost potential growth and improve the private investment climate. However, Serbia remains vulnerable to spillovers from external developments, including weaker-than-expected growth in key trading partners.
    Keywords: Public debt;Government finance statistics;Banking;Revenue administration;Exchange rates;ISCR,CR,EU accession chapter,portfolio investor,Serbia's tax administration,dinar
    Date: 2019–07–22
  56. By: Oscar Pavlov (University of Tasmania and CAMA); Mark Weder (Department of Economics and Business Economics, Aarhus University and CAMA)
    Abstract: This paper examines a market interlacing industry configuration in general equilibrium with multi-product firms. In contrast to previous studies which utilize market segmentation, firms produce multiple products even in the complete absence of the love of variety. Product scopes are procyclical and entry and exit of firms generates an endogenous amplification mechanism. When simulated by shocks derived from the efficiency and labor wedges, the model replicates the changes in dynamics between the pre- and post 1983 periods, and explains the hours-productivity puzzle.
    Keywords: Multi-product firms, Business cycles
    JEL: E32
    Date: 2020–01–06
  57. By: Katarzyna Anna Bilicka; Sepideh Raei
    Abstract: We study the distortions to aggregate output created by the differential tax treatment of corporations and pass through entities. We develop an industry equilibrium model in which the legal form of organization is an endogenous choice for firms facing trade off between tax treatment of business income, access to external capital, and the evolution of productivity over time. We match this model to features of the US economy. We find that, relative to the benchmark economy, revenue-neutral tax reform in which legal forms receive the same tax treatments leads to 1.25% increase in the aggregate output.
    Keywords: output distortions, legal form of organization, pass through
    JEL: E62 H32 H25
    Date: 2020
  58. By: International Monetary Fund
    Abstract: This Selected Issues paper discusses interactions between external risks and the New Zealand economy. The current set of external risks has the potential to be extremely damaging to New Zealand, but two factors would likely mitigate the economic impact. First, the flexible exchange rate regime is a reliable shock absorber and automatic stabilizer from the perspective of GDP, although it leads to a rebalancing between the domestic and external sectors in the economy. Second, net migration flows can reduce the negative impact of lower external demand under some circumstances, such as a growth slowdown in Australia. Fiscal policy could also offset some of the short-term costs of adjustment. Fiscal policy can provide stimulus at relatively small and manageable cost to the already-low government debt to GDP ratio. Moreover, at the current juncture, fiscal policy might need to provide the bulk of policy support against negative shocks, as monetary policy might be ineffective if has become constrained by an effective lower bound on the monetary policy interest rate.
    Keywords: Financial sector stability;Consumption;Macroprudential policy;Income;Migration;ISCR,CR,monetary policy,price,welfare advantage,Consumption-equivalent welfare index,wellbeing indicator
    Date: 2019–09–20
  59. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Lao People’s Democratic Republic (P.D.R) analyses that after more than a decade of high growth with low inflation, country is solidifying its progress toward graduating from the Least Developed Country (LDC) status. However, more than one-fifth of the population remains poor, regional disparities are persistent, and recurring natural disasters pose risks for poverty reduction. A large current account deficit, low level of reserves, a high level of debt, managed exchange rate, and a dollarized banking system amplify macro-vulnerabilities. The authorities recognize the current economic challenges and their comprehensive reform programs aim at rebalancing the economy from a resource based to a more diversified growth model by investing in human development and improving competitiveness. Modernizing monetary governance and building reserves supported by greater exchange rate flexibility will help to mitigate external shocks in an uncertain global environment.
    Keywords: Public debt;External debt;Revenue administration;Government debt management;Government finance statistics;ISCR,CR,debt,GFS expert,Includes Bank of Lao P.D.R,rate,deficit,Lao P.D.R.,Lao P.D.R. authorities
    Date: 2019–08–08
  60. By: Fabian Lipinsky; Mirela S. Miescu
    Abstract: Motivated by the increasing interest in analyzing the links between the financial sector and the real economy, we develop a macro-financial structural model with two novel features. First, we include idiosyncratic and aggregate risk in a tractable general equilibrium model. This allows us to capture sectoral dynamics and the probabilities of default of both firms and financial intermediaries, and the feedback between them. Second, we introduce the concept of sticky (observed) versus flexible (agents’ target) capital. The identified differences between realized and optimal values — the capital gaps of firms and banks — lead financial and business cycles, and cause gaps in credit spreads and asset prices. The model can be used as a signaling device for macroprudential intervention, and to gauge whether macroprudential action was successful ex-post (e.g., whether gaps were closed). For illustration, we show how the analysis of gaps can be applied to the U.S. economy using Bayesian estimation techniques.
    Keywords: Nonbank financial institutions;Mutual funds;Financial statements;Credit;Financial crises;WP,capital gap,FIs capital,adjustment cost,cash flow,capital level,risk shock
    Date: 2020–09–25
  61. By: Emilia M Jurzyk; Medha Madhu Nair; Nathalie Pouokam; Tahsin Saadi Sedik; Anthony Tan; Irina Yakadina
    Abstract: The COVID-19 pandemic risks exacerbating inequality in Asia. High frequency labor surveys show that the pandemic is having particularly adverse effects on younger workers, women and people that are more vulnerable. Pandemics have been shown to increase inequalities. As a result, income inequality, which was already high and rising in Asia before the pandemic, is likely to rise further over the medium term, unless policies succeed in breaking this historical pattern. Many Asian governments have implemented significant fiscal policy measures to mitigate the pandemic’s effect on the most vulnerable, with the impact depending on the initial coverage of safety nets, fiscal space, and degree of informality and digitalization. The paper includes model-based analysis which shows that policies targeted to where needs are greatest are effective in mitigating adverse distributional consequences and underpinning overall economic activity and virus containment.
    Keywords: Income inequality;Education;Consumption;Labor;Income;COVID-19,Inequality,Susceptible-Infected-Recovered Macro Model,Fiscal Policy.,WP,IMF staff calculation,pandemic course,government-imposed lockdown,coronavirus disease pandemic,pandemic recession
    Date: 2020–10–16
  62. By: International Monetary Fund
    Abstract: Armenia’s economy has been hit hard by twin shocks: the COVID-19 pandemic (now in its second wave), and the recent military hostilities involving the Nagorno- Karabakh conflict zone. Reflecting these shocks, growth is expected at -7¼ percent this year, with the fiscal deficit and debt rising considerably. Nonetheless, the authorities have responded promptly with healthcare and anti-crisis measures to limit the pandemic’s impact while protecting vulnerable groups and safeguarding macroeconomic stability.
    Date: 2020–12–16
  63. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Bangladesh highlights that economic growth in Bangladesh continues to be strong with stable inflation. Sustained growth in the ready-made garment sector with abundant low-cost labor has helped the economy to diversify away from the agricultural sector to a more manufacturing-based economy. Remittance inflows from Bangladeshis overseas continue to play an important role in promoting private consumption and external stability. While the economy still has significant potential with favorable demographics, to ensure sustainability and resilience of growth, the country needs to keep upgrading its macroeconomic policy framework and advance a range of structural measures. Bangladesh Bank should monitor inflation developments closely and stand ready to adjust its stance as needed. A gradual increase in exchange rate flexibility would help buffer the economy against external shocks and preserve the level of reserves. Continuous improvements in public financial management and frameworks to limit vulnerability to corruption will help the authorities’ goal to reach upper middle-income country status.
    Keywords: External debt;Public debt;Commercial banks;Loans;Nonperforming loans;ISCR,CR,debt,authority,inflation development
    Date: 2019–09–18
  64. By: International Monetary Fund
    Abstract: This paper discusses Republic of Moldova’s Fourth and Fifth Reviews Under the Extended Credit Facility and Extended Fund Facility Arrangements, Completion of the Inflation Consultation, and Request for Extension of the Arrangements and Rephasing of Access. The Moldovan authorities have taken decisive corrective measures to bring the Fund supported program back on track and to achieve its objectives of ensuring macroeconomic stability and advancing reforms. Going forward, it is critical that the authorities continue to pursue prudent policies and structural reforms aimed at strengthening the financial sector, maintaining fiscal sustainability, and creating space for social and infrastructure spending. Policies remain focused on cleansing the financial sector, ensuring growth friendly fiscal policy, and enhancing transparency in the energy sector. The authorities are committed to completing the rehabilitation of the banking system, addressing vulnerabilities in the non-bank sector, promoting predictable energy tariff setting, and maintaining fiscal sustainability to preserve space for social and infrastructure spending.
    Keywords: Public debt;External debt;Banking;Debt sustainability analysis;Public and publicly-guaranteed external debt;ISCR,CR,EFF arrangement,government,energy tariff policy,Executive Board discussion
    Date: 2019–09–25
  65. By: Lin Shao; Rongsheng Tang
    Abstract: This paper evaluates the contribution of allocative efficiency to the aggregate productivity growth in Canada and the US. In particular, we are interested in explaining two puzzling facts: 1) the slowdown in productivity growth during the 1970s and the 2000s in the US, and 2) the widening Canada-US productivity gap since the middle of the 1980s. We extend the framework of Oberfield (2013) to derive sufficient statistics for allocative efficiency and decompose aggregate productivity in an input-output economy à la Jones (2013). The lack of improvement in allocative efficiency can explain two-thirds of the US’s productivity slowdown and more than one-third of the widening Canada-US productivity gap. The allocation of capital, rather than labor, was the main driver behind the overall movement in allocative efficiency. Resources allocated to service sectors were significantly lower than the optimal level. It improved markedly over time, especially in the US before the 2000s.
    Keywords: Economic models; Productivity
    JEL: C67 D4 D57 E23
    Date: 2021–01
  66. By: Sînziana Kroon; Clemens Bonner; Iman van Lelyveld; Jan Wrampelmeyer
    Abstract: We analyze the impact of a requirement similar to the Basel III Liquidity Coverage Ratio (LCR) on conventional monetary policy implementation. Combining unique data sets of Dutch banks from 2002 to 2005, we find that the introduction of the LCR impacts banks' behaviour in open market operations. After the introduction of the LCR, banks bid for higher volumes and pay higher interest rates for central bank funds. In line with theory, banks reduce their reliance on overnight and short term unsecured funding. We do not observe a worsening of collateral quality pledged in open market operations. Thus, to correctly anticipate an open market operation's effect on interest rates, monetary policy requires central banks to consider not only the size of the operation, but also how it impacts banks' liquidity management and compliance with the LCR.
    Keywords: Liquidity regulation; monetary policy implementation; financial intermediation; banks; open market operations
    JEL: G18 G21 E42
    Date: 2021–01
  67. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with the Democratic Republic of the Congo (DRC) highlights that real gross domestic growth reached 5.8 percent in 2018, buoyed by stronger copper and cobalt prices and increased production. The main risks include an escalation of the Ebola epidemic; fiscal loosening leading to monetization of budget deficits; a relapse in copper and cobalt prices; an intensification of ongoing armed conflicts; and resistance to reform from vested interests. Transparency and accountability in the management of natural resources are major challenges facing DRC. It is recommended to step-up revenue mobilization, notably by simplifying taxes and integrating mining revenue into the central government Treasury. It is also important to enhance transparency, including through public tendering for the sale of mining assets, publication of audited financial statements of state-owned enterprises, and greater monitoring of public assets.
    Keywords: Public debt;External debt;Mining sector;Arrears;Expenditure;ISCR,CR,authority,Congolese authorities,debt,Congo
    Date: 2019–09–04
  68. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation and Proposal for Post-Program Monitoring highlights that Iraq’s social conditions remain harsh following the war with ISIS, with slow progress at reconstruction, weak public services and a lack of job opportunities. In the absence of policy changes, a widening budget deficit is expected to divert resources away from essential investment to rebuild the country and improve public services, while eroding reserves and posing risks to medium-term sustainability. Expenditure rigidities and limited fiscal buffers imply a significant vulnerability to oil price shocks in a context of volatile prices. The fiscal and external positions are expected to continue to deteriorate over the medium term absent policy changes—with reserves falling below adequate levels and fiscal buffers eroded. In a context of highly volatile oil prices, the major risk to the outlook is a fall in oil prices which would lower exports and budgetary revenues, leading to an even sharper decline in reserves or higher public debt. Geopolitical tensions, the potential for social unrest in a context of weak public services and lack of progress in combatting corruption pose further risks.
    Keywords: Public debt;Oil prices;Expenditure;Public financial management (PFM);Capital spending;ISCR,CR,government,CBI governance,price,face challenge,debt
    Date: 2019–07–26
  69. By: International Monetary Fund
    Abstract: This paper discusses Union of Comoros’ Request for Disbursement Under the Rapid Credit Facility (RCF) and Purchase Under the Rapid Financing Instrument (RFI). Reflecting the large budgetary and external financing gaps arising from emergency assistance and reconstruction needs, the authorities are seeking financial assistance under the RCF and RFI exogenous shock windows. Comoros’ qualification is based on urgent balance of payments needs following a severe natural disaster. The authorities shared staff’s main policy recommendations. Efforts to address the cyclone’s impact will need to focus on mobilizing external financing, creating fiscal space by containing the wage bill, and spending mobilized resources in a well-targeted and timely manner. The authorities plan to address financial sector weaknesses, including by finding a solution for the critical situation of the postal bank, closely monitoring nonperforming loans, and addressing obstacles in the judicial system to facilitate the use of collateral and promote lending.
    Keywords: Natural disasters;External debt;Public debt;Revenue administration;Public and publicly-guaranteed external debt;ISCR,CR,financing,authority,cyclone,Comorian authorities
    Date: 2019–08–14
  70. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Saudi Arabia discusses that reforms are starting to yield positive results. Oil prices and production have been volatile, and uncertainties in the global oil market continue. Promoting non-oil growth and creating jobs for Saudi nationals remain key challenges. Non-oil growth is expected to strengthen further this year and over the medium term. Risks to the growth outlook are broadly balanced. The fiscal deficit declined in 2018; however, higher government spending has increased medium-term fiscal vulnerabilities to a decline in oil prices. Fiscal consolidation is needed to reduce these vulnerabilities. The fiscal framework should be further strengthened to help reduce the procyclicality of government spending. Reforms to improve the business environment are proceeding but need to be complemented by efforts to increase the cost competitiveness of Saudi labor. Government support to develop sectors of the economy should crowd in the private sector and be timebound and linked to performance.
    Keywords: Oil prices;Expenditure;Banking;Labor;Budget planning and preparation;ISCR,CR,SDR Department,economy,deficit,growth,private sector
    Date: 2019–09–09
  71. By: Patrick Blagrave; Weicheng Lian
    Abstract: We study the inflation process in India, focusing on the periods before and after the adoption of flexible inflation-forecast targeting (FIT) in India. Our analysis uses several approaches including standard Phillips curve estimation for headline and core inflation, an examination of the sensitivity of medium-term inflation expectations to inflation surprises, and the properties of convergence between headline and core inflation. Results indicate an important role for domestic factors in driving the inflation process, and there is evidence that expectations have become more anchored since 2015. This result could be attributable to FIT adoption, or to persistently low food prices which dominate the post-FIT-adoption period. The policy implications of these structural changes in the inflation process are investigated using a semi-structural model calibrated to the Indian economy.
    Keywords: Inflation;Food prices;Inflation targeting;Emerging and frontier financial markets;Import prices;India,WP,inflation expectation,headline inflation processes,food price inflation,core-inflation process,core-inflation determinant,headline inflation forecast
    Date: 2020–11–13
  72. By: International Monetary Fund
    Abstract: This Technical Assistance report on Albania focuses on: compiling and disseminating flow-based monetary and financial statistics (MFS) for the central bank, other depository corporations (ODCs), and other financial corporations (OFCs); compiling and disseminating quarterly financial accounts by institutional sectors; and developing a from-whom/to-whom matrix for financial instruments. The mission reviewed the quality of Albania’s flow-based MFS, sectoral financial accounts and balance sheets, and provided technical guidance to improve their quality. The Monetary Policy Committee has requested flow-based monetary statistics as an additional vehicle to understand money and credit developments in the Albanian economy. Similarly, financial accounts by sector and financial balance sheets are considered increasingly important for analysis of financial stability and other macroeconomic developments. The mission also recommended that the BOA begins compiling quarterly sectoral financial accounts and balance sheets by mid-2021 starting with data from the first quarter of 2017.
    Keywords: Fiscal accounting and reporting;Financial statements;Financial sector;Currencies;Commercial banks;ISCR,CR,balance sheetaccount,foreign currency
    Date: 2019–10–03
  73. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation highlights that Guyana’s economic growth strengthened in 2018 with broad-based expansion across all major sectors. The medium-term prospects are very favorable as oil production is on schedule to begin in early 2020. Economic growth is projected at 4.4 percent in 2019, extending the broad-based expansion across all major sectors. Policies to fortify the fiscal policy framework to ensure effective use of the new-found oil wealth; develop the necessary infrastructure for a suitable monetary policy framework that facilitates adjustment to oil price shocks while maintaining price stability; and reforms to enhance competitiveness, promote economic diversification, strengthen governance, and achieve inclusiveness. The passage of the Natural Resource Fund legislation is a critical step toward effective management of Guyana’s natural resource wealth. In order to ensure that fiscal discipline is maintained and spending ramps up at a pace in line with absorptive capacity, the fiscal framework should be enhanced to prevent deficits.
    Keywords: Public debt;Oil production;External debt;Oil;Expenditure;ISCR,CR,debt,authority,Guyanese authorities,CARTAC
    Date: 2019–09–17
  74. By: International Monetary Fund
    Abstract: This paper discusses Republic of Madagascar’s Fifth Review Under the Extended Credit Facility (ECF) Arrangement. Madagascar’s performance under its economic program supported by the ECF arrangement has remained generally strong. Discussions focused on the recently adopted 2019 revised budget law, which reflects the priorities of the new government and accommodates additional investment spending without undermining the main program objectives, as well as on the two main challenges relating to fuel pricing and the losses of the public utility JIRAMA. Other issues discussed included the strengthening of social safety nets, reforms in the financial sector, and progress on governance. Growth has been solid, inflation has been moderate, and the external position has remained robust. Going forward, the authorities’ continued commitment to strong policies and an ambitious structural reform agenda will be key to mitigating internal and external risks, strengthening macroeconomic stability, and achieving higher, sustainable, and inclusive growth.
    Keywords: External debt;Debt sustainability analysis;Public debt;Revenue administration;Public and publicly-guaranteed external debt;ISCR,CR,spending,agenda,reform agenda,priority investment spending
    Date: 2019–08–01
  75. By: Nelson R. Ramírez- Rondán (Ministerio de Economía y Finanzas, Perú); Marco E. Terrones (Universidad del Pacífico); Diego Winkelried (Universidad del Pacífico)
    Abstract: Following the economic and political reforms of the 1990s, the Peruvian economy experienced two decades of exceptional growth in the 2000s. How was inequality affected by the strong growth performance of 2004-19? Which were the main factors associated with these inequality changes? The distribution of both income and consumption in Peru was highly unequal in 2004, with important geographic and regional differences. Since then, the degree of economic disparity decreased signifficantly associated with the exceptional growth of 2004-19. This decline in inequality was broad-based, yet it was not homogeneous across geographic areas, regions, or time. A correlate of this reduction in inequality has been a falling polarization. While wages and, to a lesser extent, government transfers accounted for most of the decline in income inequality, food prepared at home played a pivotal role in reducing consumption inequality, particularly in rural areas.
    Keywords: Inequality, distribution, consumption, income, Peru.
    JEL: O15 D31 E24
    Date: 2020–12
  76. By: Balazs Egert; Jarmila Botev; David Turner
    Abstract: This paper studies empirically the effect of education policies on human capital and per capita income. The results suggest for European and OECD countries that higher attendance at pre-primary education, greater autonomy of schools and universities, a lower student-to-teacher ratio, higher age of first tracking in secondary education and lower barriers to funding to students in tertiary education all tend to boost human capital through amplifying the positive effects of greater public spending on education. Benefits from pre-primary education are particularly high for countries with an above-average share of disadvantaged students. School autonomy yields high benefits especially in countries where schools are subject to external accountability. From a policy perspective, improving the quality of the labour force and value-for-money of education policies are of utmost importance in the future, especially in European countries facing population ageing and ever increasing fiscal constraints. Prompt policy action is needed given the very long delay with which the full effect of reforms in education policy materialises on human capital and per capita income.
    Keywords: human capital, economic growth, per capita income, education policies, OECD
    JEL: E24 I20 I25 I26 I28
    Date: 2020
  77. By: Tomas Artemio Marinozzi
    Abstract: This paper intends to illustrate theoretical bases for positive factors as well as major problems associated with UCT and CCT programs. It is important to highlight that there is diverse empirical evidence regarding support schemes and their effects on schooling, health and nutrition. However, literature regarding the allocation of child benefit transfers between household members is rather limited. This paper provides a theoretical explanation of how conventional child benefit programs may have transmission problems, which may prove to be counterproductive in terms of social welfare. The allocation flaws are evident in the model and are very intuitive, however similar schemes have prevailed in practice. It is unclear to what extent these perceptions are borne out of a concern for children's (or individuals') wellbeing or are guided by political interests. For this reason, the last section of the paper offers a different perspective on certain programs, taking into consideration political incentives. The final aim is not necessarily to provide an optimal scheme but instead to draw attention to certain features of child benefit programs under a clear microeconomic scope.
    Keywords: Child Benefit Programs, Family Economics, Conditional Cash Transfer Programs, Unconditional Cash Transfer Programs.
    JEL: D11 E31 E62 I38
    Date: 2021–01
  78. By: Sebnem Kalemli-Ozcan; Pierre-Olivier Gourinchas; Veronika Penciakova; Nick Sander
    Abstract: We estimate the impact of the COVID-19 crisis on business failures among small and medium size enterprises (SMEs) in seventeen countries using a large representative firm-level database. We use a simple model of firm cost-minimization and measure each firm’s liquidity shortfall during and after COVID-19. Our framework allows for a rich combination of sectoral and aggregate supply, productivity, and demand shocks. We estimate a large increase in the failure rate of SMEs under COVID-19 of nearly 9 percentage points, ab-sent government support. Accommodation & Food Services, Arts, Entertainment & Recreation, Education, and Other Services are among the most affected sectors. The jobs at risk due to COVID-19 related SME business failures represent 3.1 percent of private sector employment. Despite the large impact on business failures and employment, we estimate only moderate effects on the financial sector: the share of Non Performing Loans on bank balance sheets would increase by up to 11 percentage points, representing 0.3 percent of banks’ assets and resulting in a 0.75 percentage point decline in the common equity Tier-1 capital ratio. We evaluate the cost and effectiveness of various policy interventions. The fiscal cost of an intervention that narrowly targets at risk firms can be modest (0.54% of GDP). However, at a similar level of effectiveness, non-targeted subsidies can be substantially more expensive (1.82% of GDP). Our results have important implications for the severity of the COVID-19 recession, the design of policies, and the speed of the recovery.
    Keywords: COVID-19 ;Labor;Supply shocks;Labor supply;Wages;WP,bankruptcy rate,cash flow,wage bill,employment decision,ghost firm
    Date: 2020–09–25
  79. By: World Bank
    Keywords: International Economics and Trade - Export Competitiveness International Economics and Trade - Foreign Direct Investment Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Policy, Institutions and Governance Macroeconomics and Economic Growth - Fiscal & Monetary Policy Private Sector Development - Enterprise Development & Reform
    Date: 2019–12
  80. By: International Monetary Fund
    Abstract: This 2005 Article IV Consultation with Maldives discusses that Maldives has rebounded strongly from the tsunami of late 2004. Gross domestic product has grown rapidly, underpinned by a robust increase in tourist arrivals, and by construction activity pertaining to the development of new resorts. Inflation remains low although it is on a rising trend. The exchange rate peg continues to serve the country well. The main challenge for Maldives is to ensure that favorable growth prospects are not undermined by fiscal excesses and consequent macroeconomic instability. The IMF staff urged the authorities to prioritize expenditures in line with more realistic revenue estimates, so as to achieve the stated objective of zero domestic financing of the budget. There has been a recent increase in debt ratios due to construction of new resorts and the government’s ambitious infrastructure program. The new central bank act has separated the positions of finance minister and governor of the central bank and reorganized the governing body of the central bank. Going forward it will be important to entrench central bank independence.
    Keywords: Expenditure;External debt;Public debt;Tourism;Imports;ISCR,CR,government,deficit,staff assessment,fiscal policy
    Date: 2019–09–03
  81. By: International Monetary Fund
    Abstract: This paper discusses Somalia’s 2019 Article IV Consultation, Second Review Under the Staff-Monitored Program (SMP), and Request for New SMP. Program implementation of SMP III has been strong, with all but one structural benchmark and all indicative targets met. The authorities have requested a new 15-month SMP to cement reforms and support reaching the Heavily Indebted Poor Country decision point as soon as the necessary conditions are met. The new national development plan will outline the authorities’ priorities with respect to poverty reduction and inclusive growth. The consultation focused on policies to support higher and more inclusive growth, strengthen the medium-term fiscal framework, deepen the financial sector, increase economic resilience, and improve governance and the business environment. Discussions highlighted the need to implement a durable fiscal federal framework, establish a robust framework for effective natural resource management, and develop the medium-term fiscal framework. However, security and political risks, and climate shocks remain the main sources of risk.
    Keywords: Public financial management (PFM);Public debt;External debt;Anti-money laundering and combating the financing of terrorism (AML/CFT);Banking;ISCR,CR,Somali authorities,authority,U.S. dollar banknote,holding
    Date: 2019–08–01
  82. By: Francesco Bianchi; Giada Bianchi; Dongho Song
    Abstract: We adopt a time series approach to investigate the historical relation between unemployment, life expectancy, and mortality rates. We fit a Vector-autoregression (VAR) for the overall US population and for groups identified based on gender and race. We find that shocks to unemployment are followed by statistically significant increases in mortality rates and declines in life expectancy. We use our results to assess the long-run effects of the COVID-19 economic recession on mortality and life expectancy. We estimate the size of the COVID-19-related unemployment to be between 2 and 5 times larger than the typical unemployment shock, depending on race/gender, resulting in a 3.0% increase in mortality rate and a 0.5% drop in life expectancy over the next 15 years for the overall American population. We also predict that the shock will disproportionately affect African-Americans and women, over a short horizon, while white men might suffer large consequences over longer horizons. These figures translate in a staggering 0.89 million additional deaths over the next 15 years.
    JEL: C32 E32 I14 J11
    Date: 2020–12
  83. By: International Monetary Fund
    Abstract: This 2005 Article IV Consultation with Maldives highlights that the Maldives suffered devastating damage from the December 2004 tsunami. Although human casualties were limited, damage to infrastructure has been extensive, with the cost of reconstruction estimated at nearly a half of gross domestic product. Reconstruction work has progressed slowly in 2005 but the pace is picking up. Recovery work has been slow due to insufficient coordination, problems in local consultation, and limited management capacity. The government and donors have been addressing these problems and the pace of implementation is finally accelerating. The 2006 budget is highly expansionary and threatens sustainability. The government has added to the fiscal deficit through new recruits, expansion of untargeted social programs, and a large domestically funded public investment program while using optimistic revenue projection. Fiscal reforms are of high priority. The report also explains that monetary policy should be geared to sustaining the peg arrangement based on indirect management. The objective of monetary policy should be to support the peg arrangement, which has served well as a credible nominal anchor.
    Keywords: External debt;Public debt;Budget planning and preparation;Exports;Expenditure;ISCR,CR,Multi-Agency Macroeconomic Technical Committee,government,crisis risk,natural disaster assistance
    Date: 2019–09–03
  84. By: John Bailey Jones; Yue Li
    Abstract: Using a heterogeneous-agent, life-cycle model of Social Security claiming, labor supply and saving, we consider the implications of lifespan inequality for Social Security reform. Quantitative experiments show that welfare is maximized when baseline benefits are independent of lifetime earnings, the payroll tax cap is kept roughly unchanged, and claiming adjustments are reduced. Eliminating the earnings test and the income taxation of Social Security benefits provides additional gains. The Social Security system that would maximize welfare in a "2050 demographics" scenario, characterized by longer lifespans and an increased education-mortality gradient, is similar to the one that would maximize welfare today.
    Keywords: Social security; Mortality; Labor Supply; Welfare
    JEL: E21 H24 H55 I38 J11
    Date: 2020–07–17
  85. By: Daniel Baksa; Ales Bulir; Dyna Heng
    Abstract: The paper describes a semistructural macrofiscal approach to simulating and forecasting macroeconomic policies. Our canonical model is adapted to Cambodia and we demonstrate its application with an illustrative scenario of macroeconomic effects of the Covid-19 pandemic. Complemented with near-term forecasting tools and expert judgment, the dynamics of the model helps to inform policymakers about medium-term transmission channels and thus guide policy advice.
    Keywords: Real exchange rates;Exchange rates;Real interest rates;Return on investment;Output gap;WP,nominal exchange rate,potential GDP
    Date: 2020–09–25
  86. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Federated States of Micronesia (FSM) highlights that the economy has performed well in recent years, with relatively high growth and low inflation. Fiscal and current account balances have recorded large surpluses since 2017, owing to the authorities’ decision to save revenue windfalls. Nonetheless, the FSM faces significant medium-term uncertainty as various economic supports under the Compact Agreement with the United States are set to expire in 2023. Unless they are renewed, the FSM is expected to lose access to Compact grants, giving rise to a fiscal cliff in 2023; banking sector oversight by the Federal Deposit Insurance Corporation; and post-disaster rehabilitation assistance. The country is highly vulnerable to climate change, while private sector activity remains anaemic. It is recommended to improve resilience to climate change by strengthening capacity to implement adaptation projects. Over the medium term, disaster risks should be mitigated by using disaster insurance and disaster-contingent foreign financing.
    Keywords: Public debt;Extra-budgetary funds;External debt;Revenue administration;Natural disasters;ISCR,CR,Micronesia,FSM authorities,IMF-World Bank Climate Change Policy Assessment,debt
    Date: 2019–09–06
  87. By: Isiaq O. Oseni (Olabisi Onabanjo University, Ago-Iwoye, Nigeria); Ibrahim A. Adekunle (Olabisi Onabanjo University, Ago-Iwoye, Nigeria); Ayomide O. Ogunade (Olabisi Onabanjo University, Ogun State, Nigeria)
    Abstract: In spite of the massive revenue emanating from oil wealth, the successive government of Nigeria failed to give to its citizenry the dividend of democracy owing in large part to their inability to establish a market clearing situation because of inadequate linkage between the sources and the markets (transport infrastructures). An enquiry into the cause and potential solutions to the problems of transport infrastructure development in Nigeria informed the need to regress indices of fiscal vulnerability on the indicator of transport infrastructure development in Nigeria from 1986 through 2017 using the dynamic ordinary least squares regression technique. Results show that high-levelfiscal vulnerability deters optimal government expenditure on transport infrastructure development in Nigeria. Based on the findings of the study, itis recommended that government should do more to block all leakages of fiscal revenues and subsequently ensure that more allocation is channelled into transporting infrastructure development because of its forward and backward linkages.
    Keywords: Fiscal Vulnerability; Transport Infrastructure Development; Nigeria
    JEL: H5 E44 H12 R4
    Date: 2020–01
  88. By: Onome Christopher Edo (Department of Accounting, University of Benin, Nigeria. Author-2-Name: Anthony Okafor, PhD Author-2-Workplace-Name: Department of Finance, University of Louisville, Kentucky Author-3-Name: Akhigbodemhe Emmanuel Justice Author-3-Workplace-Name: Department of Economics, University of Benin, Nigeria Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:)
    Abstract: Objective - Tax policies play significant role in the direction of foreign direct investments. We investigate the proposition that tax policies enacted by military and democratic regimes differ on the influence the foreign direct investments. Methodology – Our hypotheses are tested using the error correction model as we compare the impact of tax policies on flow foreign direct investments in Nigeria between two dispensations: military rule from 1983 to 1999 and democratic rule from 1999 to 2017. Panel data between 1983 and 2017 were obtained from the databases of the World Bank, Central Bank of Nigeria and the Federal Inland Revenue Services. The explanatory variables include company income tax, value added tax, tertiary education tax and customs and exercise duties. Findings – The study reveals that tax variables during the military regime exerted more explanatory power of 79% compared to the civilian administration of 66% with respect to the impact of corporate taxes on FDI. The effect of company income tax on FDI was more pronounced during the military regime than in the civilian regime. FDI had a higher degree of convergence during the military regime compared to civilian rule, and this is vital for policy assessments and comparison. Novelty – We bring to light new evidences on the effects of taxes polices on FDI. Type of Paper - Empirical
    Keywords: Corporate taxes; Tax Policies; Foreign Direct Investments; Error Correction Model; Military regime; Civilian regime.
    JEL: E22 F21 H2 P33
    Date: 2020–12–31
  89. By: Banco de Portugal working group on crypto-assets
    Abstract: Crypto-assets are digital assets that may depend on cryptography and exist on a distributed ledger or similar technology. In the absence of a common and widely accepted taxonomy, we first try to characterise crypto-assets and differentiate them from goods fulfilling the three essential functions of money: medium of exchange, unit of account and store of value. We then analyse the (lack of) legislation applied to crypto-assets, before concluding with the identification of the associated main risks.
    JEL: E42 G21 G23 O33
    Date: 2020
  90. By: Mikhail Martynovich; Teis Hansen; Karl-Johan Lundquist; ;
    Abstract: We perform an explorative analysis of employment patterns in the foundational economy producing mundane everyday necessities and providing welfare services across Swedish regional labour markets between 2007 and 2016. We focus specifically on hierarchical patterns in spatial distribution of foundational activities and their association – direct and through integration with other economic activities – with regional employment dynamics in times of crisis, recovery, and growth. Our findings suggest the foundational economy plays an important role as employment provider to a substantial number of Swedish workers, particularly in non-metropolitan regions. Besides, it appears to be associated with improved ability of regions to retain employment in the most acute phases of economic crisis, but only if it is well integrated into regional industrial profiles. However, its overall contribution to regional resilience in the long term appears to be rather limited.
    Keywords: foundational economy; everyday economy; employment; regional resilience; crisis; recovery; Sweden
    JEL: E32 J21 L16 R11 R12 R23
    Date: 2020–12
  91. By: Damien Azzopardi; Fozan Fareed; Mikkel Hermansen; Patrick Lenain; Douglas Sutherland
    Abstract: Job mobility is essential for a well-functioning market economy and for individual workers to boost their wages. This paper provides a re-assessment of job mobility in the United States during 2000-2018, based on a novel administrative data source covering almost all workers and job flows. First, aggregate job hire and job separation rates have declined over time, especially in the 2000s. This is mainly driven by flows into and out of nonemployment, while job-to-job hires during 2016-2018 had recovered to their peak levels prior to the global financial crisis. Examination of job mobility across different individual and firm-level characteristics shows comparatively higher job-to-job flows for youth, the less educated, non-whites and individuals working in young firms. In addition, observed job movers in these groups experience the largest earnings gain on average from job-to-job changes. Second, a spatial look at job mobility shows net job-to-job flows towards Western and Southern States. The aggregate rate of interstate job-to-job hires has been stable since 2000 and the observed job-to-job movers on average get a substantial boost to earnings by moving farther away and switching industries. Third, the paper briefly considers the influence of demographic changes on job mobility, one important driver identified in previous work. While ageing may explain around half of the downward trend in job hire and separation rates, other factors matter too.
    Keywords: ageing, geographic mobility, job-to-job flows, labour mobility
    JEL: E24 J11 J60 J61 O51
    Date: 2020–12–18
  92. By: Ana Aguilar-Argaez; María Diego-Fernández; Rocío Elizondo; Jessica Roldán-Peña
    Abstract: We estimate the term premium implicit in 10-year Mexican government bonds from 2004 to 2019, and analyze the main determinants explaining its dynamics. To do so, we decompose the longterm interest rate into its two components: the expected short-term interest rate and the term premium. The results show that the Mexican term premium increased significantly during three episodes: i) the global financial crisis; ii) the "Taper Tantrum"; and iii) the U.S. presidential election of 2016. In contrast, the term premium decreased, to historically low levels, during the U.S. "Quantitative Easing" and the "Operation Twist" programs. Additionally, we find that the main determinants that explain the dynamics of the premium are the compensation for FX risk (as a proxy of inflationary risk premium), the real compensation, and the U.S. term premium.
    JEL: G12 E43 C12 C53
    Date: 2020–12
  93. By: World Bank Group
    Keywords: Public Sector Development - Public Investment Management International Economics and Trade - Export Competitiveness Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth
    Date: 2019–12
  94. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Namibia discusses that with the temporary stimuli now ended, the economy is rebalancing while the government is implementing a significant fiscal consolidation. A likely slow recovery, the need for further fiscal adjustment to bring public debt to a sustainable path, persistent inequalities and structural impediments to growth, point to a challenging outlook. Immediate measures are needed to deliver the authorities’ fiscal adjustment plans and bring public debt to a sustainable path. Policies should combine spending reductions and revenue increases that support long-term growth. Better targeting of cash transfers would protect the poor. Structural reforms are urgently needed to strengthen productivity and external competitiveness and boost long-term growth. Reforms should streamline business regulations, contain public sector wage dynamics, and reduce costs of key production inputs. Over time, it is important to remove non-tariff barriers to exports, foster the adoption of new technologies, and address shortages of skilled workers.
    Keywords: Public debt;Fiscal consolidation;Banking;Fiscal stance;Government debt management;ISCR,CR,reports balance of payments,Namibia,economy,private sector indebtedness
    Date: 2019–09–13
  95. By: Christelis, Dimitris; Georgarakos, Dimitris; Jappelli, Tullio; Kenny, Geoff
    Abstract: Using new panel data from a representative survey of households in the six largest euro area economies, the paper estimates the impact of the Covid-19 crisis on consumption. The panel provides, each month, household-specific indicators of the concern about finances due to Covid-19 from the first peak of the pandemic until October 2020. The results show that this concern causes a significant reduction in non-durable consumption. The paper also explores the potential impact on consumption of government interventions and of another wave of Covid-19, using household-level consumption adjustments to scenarios that involve positive and negative income shocks. Fears of the financial consequences of the pandemic induce a significant reduction in the marginal propensity to consume, an effect consistent with models of precautionary saving and liquidity constraints. The results are robust to endogeneity concerns through use of panel fixed effects and partial identification methods, which account also for time-varying unobservable variables, and provide informative identification regions of the average treatment effect of the concern for Covid-19 under weak assumptions. JEL Classification: D12, D81, E21, G51, H31
    Keywords: consumption, Covid-19, financial concerns, fiscal policies, marginal propensity to consume
    Date: 2020–12
  96. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Russian Federation discusses that growth is projected at 1.2 percent in 2019, reflecting a weak first quarter estimate, lower oil prices and the impact of the higher value-added tax rate on private consumption. At the same time, gross domestic product growth should be supported by an increase in public sector spending in the context of the national projects announced in 2018. Inflation has begun to fall and is expected to return to the 4 percent target by early 2020. The medium-term growth outlook remains modest. Public infrastructure spending under the national projects together with increase labor supply due to pension reform could have a positive effect on the growth rate of potential output. However, absent deeper structural reforms, long-run growth is projected to settle around 1.8 percent. It is recommended that it is imperative to enhance competition by facilitating entry/exit and reforming public procurement.
    Keywords: Expenditure;Correspondent banking;Oil prices;Inflation;Banking;ISCR,CR,inflation expectation,IMF staff estimate,growth outlook,market,holding
    Date: 2019–08–02
  97. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Vietnam highlights that gradual fiscal consolidation, strict limits on government guarantees and robust growth in recent years have led to declining government debt, expected to continue under current policies. But while there is some fiscal space, fiscal needs are large, for infrastructure, social spending and to deal with population aging. The tightening of credit growth continued in 2018; however, liquidity remained ample, aided by the strong balance of payments and tight fiscal policies. The State Bank of Vietnam has initiated plans to modernize its monetary framework with IMF technical support. The authorities’ efforts to improve economic institutions and governance continue and the fight against grand corruption has resulted in significant sentences in recent high-profile cases. Improvements in transparency and statistical systems are underway, with support from the IMF and the Financial Action Task Force’s Asia Pacific Group.
    Keywords: Credit;Government finance statistics;Public investment spending;Banking;External sector statistics;ISCR,CR,state,revenue,lending,U.S. dollar
    Date: 2019–07–16
  98. By: International Monetary Fund
    Abstract: This 2001 Article IV Consultation with Maldives highlights that the economic challenges faced by Maldives are strongly influenced by geography and environment. The government’s overarching development strategy consists of creating new growth centers in the north and the south of the country and massive land reclamation in the vicinity of Male. Notwithstanding a slowdown in growth in 2000, Maldives’ economy has prospered with the rapid expansion of tourism and the modernization of the fisheries. At the conclusion of the last Article IV consultation on November 9, 2000, Executive Directors praised Maldives’ overall performance, however, warned of emerging imbalances. Fiscal slippage, compounded by adverse external developments, has been the main cause of recent imbalances in the Maldivian economy, manifested in rapid monetary expansion and sustained pressure on the exchange rate. The report shows that monetary developments have been dominated by central bank financing of fiscal deficits and excess demand for foreign exchange. The IMF staff team concluded that an adjustment of the exchange rate was not warranted until other options had been explored more fully.
    Keywords: Foreign exchange;Currency markets;Exchange rates;External debt;Real effective exchange rates;ISCR,CR,exchange rate,right,devaluation
    Date: 2019–09–03
  99. By: Ursula Mello; Tomas Rodriguez Martinez
    Abstract: This paper investigates the relationship between international trade and asymmetrical labor income risk. Using the case study of Brazil, we inspect how an increase in import penetration following the China shock impacted the distribution of idiosyncratic earnings changes across the country’s local labor markets, depending on the initial sectoral composition of each region. We find that an increase in import penetration leads to a more disperse and negatively skewed distribution and that these effects can partially be explained by an increase in the volatility of hours worked following job and industry transitions. Moreover, the effect on dispersion grows larger as the lags between periods increase, suggesting a rise in the permanent risk. Through the lens of an incomplete market model, an unborn individual would be willing to forgo up to 4.4% of consumption to avoid the riskier labor market. The welfare cost is half if the higher-order risk is ignored.
    Keywords: labor income risk, international trade, China shock, income process
    JEL: D31 E24 F14 F16 J31
    Date: 2020–12
  100. By: International Monetary Fund
    Abstract: This paper discusses Argentina’s Fourth Review of the Stand-By Arrangement, Request for a Waivers of Applicability and Modification of Performance Criteria, and Financing Assurances Review. The report highlights that with very high inflation and an increase in gross financing needs in coming months, discussions centered on how best to mitigate risks to the program, bolster market confidence, and calibrate monetary policy to continue bringing down inflation. The authorities have revamped their debt management strategy to support higher rollovers and an extension of average maturity of new issuance to the degree permitted by market conditions. The authorities have maintained a cautious approach to expenditure authorization in order to safeguard their program’s fiscal targets. The Argentine authorities’ efforts to increase rollover rates on public debt and to lengthen the maturity of new debt issuance should help mitigate financing risks in the period ahead. Ongoing efforts to improve the functioning of local sovereign debt markets will help improve market liquidity and lower financing costs.
    Keywords: Monetary base;Fiscal stance;Public sector;Tariffs;Foreign exchange;ISCR,CR,effort,Arkansas,authority,expectation,market expectation
    Date: 2019–07–15
  101. By: International Monetary Fund
    Abstract: This paper discusses Mali’s Request for Three-Year Arrangement Under the Extended Credit Facility (ECF). The economic outlook for Mali remains positive; however, subject to important downside risks. The potential real growth rate is estimated at about 5 percent per year and inflation is expected to continue to be contained by the CFAF’s peg to the euro. Downside risks relate to the possible further deterioration of the security situation, potential shocks to the terms of trade (the price of gold, cotton, and fuels), and adverse weather conditions. Going forward, it is essential to pursue greater spending efficiency, including through strengthened project selection and execution, as well as the rationalization of subsidies. The authorities’ efforts to increase financial inclusion and narrow the gender gap, including by direct measures to economically empower women are welcome. The new ECF arrangement aims to support the authorities’ development strategy (CREDD) for strong and inclusive growth through job creation, economic diversification, and greater resiliency. The main focus in the short term is to significantly increase revenue collection to allow for development spending and to reform the energy sector.
    Keywords: Revenue administration;Public debt;External debt;Debt sustainability analysis;Stress testing;ISCR,CR,revenue administration reform,debt,government,company EDM
    Date: 2019–09–05
  102. By: World Bank
    Keywords: Public Sector Development - Public Sector Expenditure Policy Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth Public Sector Development - Public Investment Management
    Date: 2019–12
  103. By: Hope, David; Limberg, Julian
    Abstract: This paper uses data from 18 OECD countries over the last five decades to estimate the causal effect of major tax cuts for the rich on income inequality, economic growth, and unemployment. First, we use a new encompassing measure of taxes on the rich to identify instances of major reduction in tax progressivity. Then, we look at the causal effect of these episodes on economic outcomes by applying a nonparametric generalization of the difference-in-differences indicator that implements Mahalanobis matching in panel data analysis. We find that major reforms reducings taxes on the rich lead to higher income inequality as measured by the top 1% share of pre-tax national income. The effect remains stable in the medium term. In contrast, such reforms do not have any significant effect on economic growth and unemployment.
    Keywords: tax cuts for the rich; income inequality; growth; unemployment; difference-in-differences; Mahalanobis matching
    JEL: N0 E6
    Date: 2020–12
  104. By: International Monetary Fund
    Abstract: After a strong performance in 2017, economic activity has moderated. The second half of 2018 was marked by a deceleration, coinciding with weaker economic activity in Europe. The headline fiscal balance improved, with a small increase in the structural primary balance reflecting a strict budget execution. The current account turned negative in 2018 in conjunction with a deterioration of the balance of trade in goods and services. Total credit to the nonfinancial private sector continued to decline in 2018. Nevertheless, over the last 4 years the Portuguese banking system has been strengthening its balance sheet and its performance.
    Keywords: Public debt;Banking;Fiscal stance;Loans;Labor;ISCR,CR,deficit,Q4,GDP,Portugal
    Date: 2019–07–12
  105. By: International Monetary Fund
    Abstract: This paper discusses Guinea’s Third Review Under the Extended Credit Facility Arrangement, Request for Modification of Performance Criterion and Financing Assurances Review. Performance against end-December 2018 targets was satisfactory. All performance criteria and the indicative target (IT) on social safety net spending were met. A strong package of adjustment measures was implemented to achieve the end-2018 fiscal target. The ITs on tax revenue and the accumulation of new domestic arrears were not met. Program performance was satisfactory at end-March 2019, with most ITs met. Program-supported reforms advanced. Two of the four structural benchmarks were met, with substantial progress on the other two and full completion expected by. Additional adjustment measures are expected to be implemented to achieve a basic fiscal surplus in 2019, compensating for anticipated higher electricity subsidies and lower tax revenue. In parallel, public investment will be scaled-up to support growth. Advancing programmed tax measures and applying the petroleum prices adjustment mechanism will be key to support revenue mobilization.
    Keywords: Revenue administration;Public debt;External debt;Public investment and public-private partnerships (PPP);Banking;ISCR,CR,center,ECF arrangement,private sector,debt,Guinean authorities
    Date: 2019–08–23
  106. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with the Dominican Republic discusses that the economy rebounded to a record high growth of 7 percent in 2018, with the positive momentum carrying into early 2019. The strong economic and policy performance has strengthened resilience to downside risks, but vulnerabilities remain. The fiscal position is under moderate sustainability and affordability pressures; key structural bottlenecks have not been addressed; and social outcomes can be further strengthened. Upcoming elections in 2020 are likely to dominate the near-term policy landscape. The outlook is favorable, with growth moderating to potential, inflation picking up toward target with fading supply shocks, and the external position normalizing. Risks are moderate and balanced: on the upside, solid income and credit growth could sustain domestic demand, while on the downside external risks are building up. Tighter fiscal policies are warranted by demand, sustainability and affordability considerations. A frontloaded adjustment, anchored on widening the tax base and mindful of the distributional effects of the adjustment measures, would help reverse the upward debt dynamics.
    Keywords: Public debt;Public sector;Income;Electricity;Revenue administration;ISCR,CR,monetary policy,government,IMF staff calculation,inflation expectation,prompted authorities
    Date: 2019–08–15
  107. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Montenegro highlights that while the implementation of large publicly financed infrastructure projects has added economic growth, the accompanying use of fiscal resources has contributed to a large increase in government debt including guarantees, which reached 79 percent of gross domestic product in 2018. Despite the recent intervention in two non-systemic domestic banks, the overall banking sector exhibits improving asset quality, strong credit growth, high liquidity, and is well capitalized. Efforts to improve banking and Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) supervision are paramount. The emphasis should be a shift to risk-based tools for supervision in both off-site and on-site functions, and the establishment of a stronger supervisory structure within the central bank. The main priorities are reduction of the labor tax wedge and implementation of the new labor law that aims to increase labor market flexibility. Future decisions on the minimum wage should consider a broad set of indicators and require careful analyses of the impact of past increases.
    Keywords: Public debt;Fiscal stance;Fiscal consolidation;Banking;Capital spending;ISCR,CR,authority,debt,CBM balance sheet,development goal,MONSTAT,Montenegro
    Date: 2019–09–10
  108. By: Patrick Bolton; Ye Li; Neng Wang; Jinqiang Yang
    Abstract: We propose a dynamic theory of banking where the role of deposits is akin to that of productive capital in the classical Q-theory of investment for non-financial firms. As a key source of leverage, deposits create value for well-capitalized banks. However, unlike productive capital of nonfinancial firms that typically has a positive marginal q, the deposit q can turn negative for undercapitalized banks. Demand deposit accounts commit banks to allow holders to withdraw or deposit funds at will, so banks cannot perfectly control leverage. Therefore, for banks with insufficient capital to buffer risk, deposit inflow destroys value through the uncertainty it brings in future leverage. This intertemporal channel complements the focus of static models on value destruction of deposit outflow and bank run. Our model predictions on bank valuation and dynamic asset-liability management are broadly consistent with the evidence. Moreover, our model lends itself to a re-evaluation of the costs and benefits of leverage regulation, offers alternative perspectives on banking in a low interest rate environment, and reveals new aspects of deposit market power that has unique implications on bank franchise value.
    JEL: E44 G21 G32
    Date: 2020–12
  109. By: Böck, Maximilian; Feldkircher, Martin
    Abstract: This article investigates how market participants adjust their expectations of interest rates at different maturities in response to a monetary policy and a central bank information shock for the US economy. The results show that market participants adjust their expectations faster to changes in interest rates compared to new releases of information by the central bank. This finding could imply that central bank information shocks are more opaque whereas a change in interest rates provides a stronger signal to the markets. Moreover, financial market agents respond with an initial underreaction to both shocks, potentially resembling inattention or overconfidence. Last, we find that the adjustment of expectations for yields with higher maturities takes considerably longer than for short-term yields. This finding is especially important for central banks since in the current low-interest rate environment monetary policy actions mainly consist of policies aimed at the long-end of the yield curve.
    Keywords: monetary policy, expectation formation, belief bias
    Date: 2020–12
  110. By: Luis Franjo; Nathalie Pouokam; Francesco Turino
    Abstract: In this paper we build a model of occupational choice with informal production and progressive income taxation. We calibrate the model to the Brazilian economy to evaluate the impact of removing financial frictions on informality. We find that financial deepening leads to a drop in the size of the informal sector (from 37 percent to 22 percent of official GDP), to an increase in measured TFP (by 4 percent), to an increase in official GDP (by 27 percent), to a decrease in tax evasion (by 17 percent) and to an increase in fiscal revenues (by 15 percent). When assessing the response of this policy at different levels of financial development, we find a non-linear relationship between the credit-to-GDP ratio on the one hand, and either the size of the informal economy, or GDP per capita on the other hand. We test these features with cross-country data and find evidence in favor of both types of non-linearity. We also investigate changes in the income tax progressitivity as an alternative policy and find it to be more effective in countries with a medium to high level of financial markets development.
    Keywords: Self-employment;Tax evasion;Financial frictions;Credit;Informal economy;WP,informal firm,firms informality,survival firm,ghost firm,parasite firm
    Date: 2020–09–25
  111. By: International Monetary Fund
    Abstract: This Selected Issues paper discusses the choice and design of rules for Iraq, guided by fiscal policy priorities and the country’s institutional capacity. A ceiling on current spending is proposed as a fiscal rule that would be simple and easy to monitor and support efforts to create space for scaling up capital expenditure, build fiscal buffers to reduce fiscal policy procyclicality, and help secure debt sustainability. A strong policy framework can help Iraq manage the challenges arising from its heavy dependence on volatile oil revenues. The procyclicality of fiscal policy has led to short-term economic volatility and hindered long term development. Important fiscal institutions such as fiscal rules, stabilization funds, and fiscal responsibility laws that exist in many resource-rich countries are lacking in Iraq. Moving to a risk- and rules-based approach can be part of the new policy framework and would be timely. The two main building blocks of this approach involve anchoring fiscal policy on maintaining adequate fiscal buffers, and introducing operational fiscal rules designed to achieve this target for buffers and protect capital expenditure.
    Keywords: Expenditure;Oil prices;Fiscal policy;Capital spending;Financial inclusion;ISCR,CR,bank,Iraq,firm,expenditure rule,bank asset quality
    Date: 2019–07–26
  112. By: Don Bredin (University College Dublin); Stilianos Fountas (Department of Economics, University of Macedonia); Christos Savva (Cyprus University of Technology)
    Abstract: We examine the empirical relationship between output variability and output growth for Britain using data for eight centuries covering the 1270 to 2014 period. Drawing on the economic history literature, we split the full sample period in four subperiods and use GARCH models to measure output growth uncertainty and estimate its e ect on average growth. Within each sub-sample we allow output growth to depend on the state of the system, e.g. 2-regime switching model would switch between high-growth and low-growth regimes. We find that the e ect of uncertainty on growth di ers depending on the existing growth regime. Low-growth regimes are associated with a negative e ect of uncertainty on growth, and medium or high-growth regimes are associated with a positive e ect. These findings are consistent across the four states of economic development. Our results indicate why the empirical literature to date has found mixed results when examining the e ect of uncertainty on growth.
    Keywords: output variability, output growth, GARCH models, regime switching.
    JEL: C22 C51 C52 E32
    Date: 2021–02
  113. By: Vijayalakshmi S; Krishna Raj (Institute for Social and Economic Change)
    Abstract: India is one among the fastest growing economies in the world with an average growth rate of eight per cent of Gross Domestic Product in the last decade. The impact of increase in GDP can be observed in many sectors of the economy and transport is not devoid of it. Micro-economic theories firmly established the relationship between income and consumption having direct and positive impact. This can be observed in case of India’s per capita income and personal vehicular growth. In this line, the paper tried to analyse this relationship by compiling time-series data of total registered vehicles and personal income from 1960-2015. Since, vehicular population has influenced other important variables like urbanisation and employment, the paper tried to model their effect under Autoregressive - Distributed Lag model (ARDL) and proves their long run co-integration.Though increase in income and vehicles tend to show positive sign of economic growth, its negative implications cannot be ignored. The paper also brings out the emergence of negative externalities of growth of vehicular population by way of deteriorating air quality of the country, which has affected the GDP. World Bank (2013) estimates show that three percent of GDP is lost due to air pollution in India which is commonly attributed to vehicular emission
    Keywords: Microeconomics; Income and consumption; Econometrics
    Date: 2019
  114. By: Victor Olkhov
    Abstract: We suggest use continuous numerical risk grades [0,1] of R for a single risk or the unit cube in Rn for n risks as the economic domain. We consider risk ratings of economic agents as their coordinates in the economic domain. Economic activity of agents, economic or other factors change agents risk ratings and that cause motion of agents in the economic domain. Aggregations of variables and transactions of individual agents in small volume of economic domain establish the continuous economic media approximation that describes collective variables, transactions and their flows in the economic domain as functions of risk coordinates. Any economic variable A(t,x) defines mean risk XA(t) as risk weighted by economic variable A(t,x). Collective flows of economic variables in bounded economic domain fluctuate from secure to risky area and back. These fluctuations of flows cause time oscillations of macroeconomic variables A(t) and their mean risks XA(t) in economic domain and are the origin of any business and credit cycles. We derive equations that describe evolution of collective variables, transactions and their flows in the economic domain. As illustration we present simple self-consistent equations of supply-demand cycles that describe fluctuations of supply, demand and their mean risks.
    Date: 2020–12
  115. By: International Monetary Fund
    Abstract: The 2019 Article IV Consultation with Singapore analyses that Singapore’s growth is expected to continue to moderate as export momentum slows and growth drivers shift back to domestic demand. Risks to the near-term outlook are tilted to the downside and arise mainly from external sources. Over the medium term, modern services are expected to become increasingly important in driving growth. The report highlights that policies should be geared toward addressing the challenges to growth and inequality posed by shifts in the global economy, aging, and technological change, which could also promote external rebalancing. Policies have been aimed at boosting growth while promoting greater equity. The authorities are implementing measures to turn Singapore into a global innovation hub, redoubling efforts to boost labor productivity through investment in human, physical and organizational capital, and digitalization. Singapore is also emerging as a regional leader in fintech, supported by Monetary Authority of Singapore. Meanwhile, social policies are being updated, with the aim of raising wages and standards of living for lower-skilled Singaporeans.
    Keywords: Inflation;Expenditure;Banking;Fiscal policy;Fiscal stance;ISCR,CR,core inflation,Singapore,mas core inflation,Singapore dollar
    Date: 2019–07–15
  116. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with the Republic of Azerbaijan highlights that the economy is continuing to recover from a banking crisis and recession. Looking ahead, economic growth is expected to reach 2.7 percent in 2019 on strong hydrocarbon production and robust domestic demand, benefitting from new spending measures. Gradual and growth-friendly fiscal consolidation is needed to strengthen intergenerational and precautionary buffers while mitigating the adverse impact on the economy. Consolidation could rely on prioritizing and improving the efficiency of spending, rationalizing tax policy, and improving revenue administration. Reducing administrative burden for businesses, encouraging competition, and strengthening governance and transparency would reduce the cost of doing business, foster entrepreneurship, and attract foreign capital. Prioritizing investment for healthcare and education, improving its efficiency, and better targeting of social protection would help nurture human capital and improve productivity. Addressing governance weaknesses is essential to reduce vulnerabilities to corruption. More integrated policies, along with better data availability, would support decision making and credibility, and attract investment.
    Keywords: External sector statistics;Banking;Fiscal rules;Government finance statistics;Revenue administration;ISCR,CR,government,food price inflation,price,broad money
    Date: 2019–09–18
  117. By: Etleva Bajrami (Faculty of Economy, Tirana University)
    Abstract: In the focus of this paper are self-employment and its role in decreasing unemployment in Albania. Self-employment is very important for the employment of individuals, especially if there aren?t other employment opportunities due to the reduction of jobs, due to the lack of specialization or specific education. One of the most sensitive social problems of recent decades in Albania is high levels of emigration due to the unemployment and all measures that can be taken to increase the employment in the country are crucial. The country's economic growth is a direct factor that influences the opening of new enterprises or even the expansion of current enterprises, thus increasing employment. The purpose of this paper is to analyze the impact of self-employment on employment. To achieve this purpose, is studied the relation between self-employment, economic growth and exports with the level of employment. The relation between employment as a dependent variable and self-employed people, GDP growth rate and export as independent variables is studied through a linear model. After the analysis using the least squares method, in this paper it is concluded that the self-employed have a significant positive relationship with the level of employment in the country.
    Keywords: Self employment, employment, economic growth, GDP, export
    JEL: J01 E24 F16
  118. By: Carine Meyimdjui
    Abstract: Using a panel of 101 low- and middle-income countries with data covering the period 1980-2012, this paper applies various econometric approaches that deal with endogeneity issues to assess the impact of food price shocks on socio-political instability once fiscal policy and remittances have been accounted for. It focuses on import prices to reflect the vulnerability of importer countries / net-buyer households to food price shocks. The paper finds that import food price shocks strongly increase the likelihood of socio-political instability. This effect is greater in countries with lower levels of private credit and income per capita. On the other hand, while remittances seem to dampen the adverse effect of import food price shocks on socio-political instability in almost all countries, the mitigating role of fiscal policy is significant only in countries with low-levels of private credit.
    Keywords: Commodity price shocks;Remittances;Fiscal policy;Expenditure;Government consumption;import food price shocks,political instability,fiscal policy.,WP,food price shock,government crisis,consumption expenditure,expenditure growth,government reaction
    Date: 2020–11–13
  119. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This research assesses the relevance of enhancing remittances on value added across economic sectors in sub-Saharan Africa for the period 1980 to 2014 using the Generalised Method of Moments. First, no significant net effects on added value to the agricultural sector are apparent. Second, enhancing remittances engenders a positive net effect on added value to the manufacturing sector. Third, there are negative net effects on added value to the service sector. Given that the unfavourable net incidence of remittances to the service sector is associated with a positive marginal or conditional effect, the analysis is extended by computing thresholds at which remittances induce net positive effects on added value to the service sector. The extended analysis shows that a remittance threshold of 48.5% of GDP is the critical mass needed for further enhancement of remittances to engender positive net effects on value added to the service sector.
    Keywords: Economic Output; Remitances; Sub-Saharan Africa
    JEL: E23 F24 F30 O16 O55
    Date: 2021–01
  120. By: World Bank Group
    Keywords: International Economics and Trade - Export Competitiveness International Economics and Trade - Trade Policy Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth Social Protections and Labor - Labor Markets
    Date: 2019–12
  121. By: Simplice A. Asongu (Yaounde, Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Paul N. Acha-Anyi (Walter Sisulu University, South Africa)
    Abstract: This study investigates the simultaneous openness hypothesis by assessing the importance of trade openness in modulating the effect of foreign direct investment (FDI) on economic dynamics of gross domestic product (GDP) growth, real GDP and GDP per capita. The focus of the study is on 25 countries in Sub-Saharan Africa over the period spanning from 1980 to 2014. First, trade imports modulate FDI to induce net positive effects on GDP growth and GDP per capita. Second, trade exports moderate FDI to generate overall positive impacts on GDP growth, real GDP and GDP per capita. Implications of the study are discussed, inter alia: (i) both FDI and trade infrastructures are necessary for FDI-focused measures to engender positive economic development outcomes in host communities and countries. (ii) Macroeconomic conditions that are relevant for promoting economic development are necessary for the interactions between trade openness and FDI to generate favorable outcomes in terms of GDP growth, real GDP and GDP per capita.
    Keywords: Economic Output; Foreign Investment; Sub-Saharan Africa
    JEL: E23 F21 F30 L96 O55
    Date: 2020–01
  122. By: Nicolas End (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The concept of fiscal credibility is a watermark of some of the fiscal policy literature, but beyond an intuitive parallel with monetary policy, it remains not well defined, nor measured. This paper provides an explicit measure of fiscal credibility, based on the anchoring of private expectations onto official targets. I document how credibility varies among a sample of 26 European countries and evolves over 1995-2019. I find that private agents do not trust all governments uniformly. Country differences are mainly driven by past fiscal performance and institutions (fiscal rules and councils). Conversely, I find that credibility impacts sovereign financing conditions, as well as macroeconomic performance. Governments should thus strive to be (à la Rousseau) or appear (à la Machiavelli) credible.
    Keywords: fiscal policy,credibility
    Date: 2020–12–03
  123. By: Till Ebner; Thomas Nellen; Jörn Tenhofen
    Abstract: Many consumers use payment instruments to control their budget. Previously, such behavior has been associated with checking disposable cash ("pocket watching"). Based on recent survey data, we show that "digital watchers" have emerged, i.e., noncash payers who use digital applications to control their budget. Both watcher types have distinct characteristics. Pocket watchers tend to have lower incomes than other consumers, while digital watchers ascribe low security risk to payment cards. Watching behavior influences current and future payment behaviors. Pocket watchers use cash more intensively than nonwatching cash payers. Digital watchers expect to intensify their reliance on noncash payment instruments more strongly than nonwatching noncash payers.
    Keywords: Payment behavior, control motive, pocket watcher, digital watcher, survey data, central bank digital currency
    JEL: D14 E41 O33 G20
    Date: 2021
  124. By: Cezar Santos; Tiago Cavalcanti; Zeina Hasna
    Abstract: We evaluate the aggregate and distributional effects of climate change mitigation policies using a multi-sector equilibrium model with intersectoral inputoutput linkages and worker heterogeneity calibrated to different countries. The introduction of carbon taxes leads to changes in relative prices and inputs reallocation, including labor. For the United States, reaching its Paris Agreement pledge would imply at most a 0.6% drop in output. This impact is distributed asymmetrically across sectors and individuals.Workers with a comparative advantage in dirty energy sectors who do not reallocate bear relatively more of the cost but constitute a small fraction of the labor force.
    JEL: E13 H23 J24
    Date: 2020
  125. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Brazil discusses that growth is projected at 0.8 percent in 2019 and to accelerate in 2020 conditional on the approval of a robust pension reform and favorable financial conditions. The current budget is guided by the federal expenditure ceiling, entailing a minor reduction of the structural primary balance in 2019. The review encouraged the authorities to step up implementation of structural reforms essential to raise potential growth, including improving the business environment, lowering trade barriers, and boosting productivity. Fiscal policy is expected to be mildly supportive in 2019 and subsequently turn moderately contractionary to respect the constitutional ceiling. Gross public debt is projected to peak in 2024 at 96 percent of gross domestic product. Brazil needs decisive structural reforms to raise potential growth, including tax reforms, privatization, trade liberalization, and measures to enhance the efficiency of financial intermediation. Given the high and increasing level of public debt, fiscal consolidation is essential. The government should preserve a broadly neutral fiscal stance in 2019.
    Keywords: Public debt;Pension reform;External debt;Real interest rates;Fiscal stance;ISCR,CR,debt,interest,reform agenda
    Date: 2019–07–23
  126. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Republic of Latvia highlights that the economy continued to expand rapidly in 2018, as growth surprised with a strong construction-driven upswing. Fiscal and current account deficits are at manageable levels, as is the public debt. The financial system remains stable, despite a significant balance sheet restructuring of banks servicing foreign clients. The growth outlook is favourable; however, risks weigh on the downside due to a less supportive external environment. The financial system remains stable despite a significant balance sheet restructuring of banks servicing foreign clients. Banks remains well capitalized and liquid, with capital levels about 40 percent higher than the euro area average and average liquidity coverage four times the regulatory minimum. Higher productivity and investment growth are needed to offset the impact of Latvia’s exceptionally unfavorable demographic trends and achieve robust long-term growth and rapid income convergence.
    Keywords: Anti-money laundering and combating the financing of terrorism (AML/CFT);Public debt;External debt;Labor markets;Credit;ISCR,CR,debt,lat,firm,World Bank-International Monetary Fund mission,Latvia,SDR
    Date: 2019–08–07
  127. By: John P. Ansah; Natan P. Epstein; Valeriu Nalban
    Abstract: We develop an integrated epidemiological-macroeconomic model to analyze the interplay between the COVID-19 outbreak and economic activity, as a tool for capacity building purposes. We illustrate a workhorse framework that combines a rich epidemiological model with an economic block to shed light on the tradeoffs between saving lives and preserving economic outcomes under various mitigation policies and scenarios calibrated for emerging market and developing economies. In our benchmark setup, we link the effective contact frequency and labor supply decisions to the current state of the disease progression, allowing for relevant behavioral responses that introduce multiple feedback channels. We showcase the effects of various “smart” mitigation measures, e.g. improved quarantine capacity or targeted labor market restrictions, to alleviate the tradeoffs between health-related outcomes and economic activity, including in response to a second infection wave. The discovery of treatment or vaccine, and the possibility of temporary immunity for the recovered individuals are also considered. The model is further extended to a multisector framework to analyze the sectoral allocation effects of the COVID-19 shock.
    Keywords: Population and demographics;Health;Labor markets;Labor;COVID-19 ;Pandemic,Epidemiological model,Macroeconomics,Emerging market and developing economies,Mitigation policy,WP,infection risk,lockdown measure,infection rate,government-mandated lockdown,infection prevalence
    Date: 2020–11–08
  128. By: Frederic Lambert; Andrea Pescatori; Frederik G Toscani
    Abstract: Labor market informality is a pervasive feature of most developing economies. Motivated by the empirical regularity that the labor informality rate falls with GDP per capita, both at business cycle frequency and in a cross-section of countries, and that the Okun's coefficient falls with the level of labor informality, we build a small open-economy dynamic stochastic general equilibrium model with two sectors, formal and informal, which can replicate these key stylized facts. The model is calibrated to Colombia. The results show that labor market and tax reforms play an important role in changing the informality rate but also caution against over-optimism - with low GDP per capita, informality will always be relatively high as there is insufficient demand for formal goods. Quantitatively we find that higher productivity in the formal sector is key in explaining the difference between Colombia and countries with significantly lower informality. We use the model to study how labor informality and labor market frictions mediate the cyclical response of the economy to shocks, including commodity price shocks which are particularly relevant in Latin America. Informality is shown to play an important role as a shock absorber with the informal-formal margin limiting movements in the employed-unemployed margin.
    Keywords: Total factor productivity;Labor;Labor markets;Business cycles;Unemployment;labor market,informality,business cycle,WP,commodity price shock,frictions affect labor market dynamics,GDP growth,sector TFP,labor market informality
    Date: 2020–11–20
  129. By: Damien Azzopardi; Fozan Fareed; Patrick Lenain; Douglas Sutherland
    Abstract: The U.S. population has become increasingly concentrated in large metropolitan areas. However, there are striking differences in between the performances of big cities: some of them have been very successful and have been able to pull away from the rest, while others have stagnated or even declined. The main objective of this paper is to characterize U.S. metropolitan areas according to their labor-market performance: which metropolitan areas are struggling and falling behind? Which ones are flourishing? Which ones are staying resilient by adapting to shocks? We rely on an unsupervised machine learning technique called Hierarchical Agglomerative Clustering (HAC) to conduct this empirical investigation. The data comes from a number of sources including the new Job-to-Job (J2J) flows dataset from the Census Bureau, which reports the near universe of job movements in and out of employment at the metropolitan level. We characterize the fate of metropolitan areas by tracking their job mobility rate, unemployment rate, income growth, population increase, net change in job-to-job mobility and GDP growth. Our results indicate that the 372 metropolitan areas under examination can be categorized into four statistically distinct groups: booming areas (67), prosperous mega metropolitan areas (99), resilient areas (149) and distressed metropolitan areas (57). The results show that areas that are doing well are predominantly located in the south and the west. The main features of their success have revolved around embracing digital technologies, adopting local regulations friendly to job mobility and business creation, avoiding strict rules on land-use and housing market, and improving the wellbeing of the city’s population. These results highlight that cities adopting well-targeted policies can accelerate the return to growth after a shock.
    Keywords: clustering analysis, job-to-job flows, Labour mobility, metropolitan areas, United States
    JEL: E24 J11 J61 C38 O51
    Date: 2020–12–18
  130. By: International Monetary Fund
    Abstract: This 2012 Article IV Consultation with Maldives discusses that fiscal position is weak, and its external reserves are critically low. The country has a long history of fiscal and external imbalances. Macroeconomic policies need adjustment. The authorities have taken important steps in the 2013 budget to reduce the fiscal deficit, but further consolidation is needed, both to ensure debt sustainability and to strengthen the balance of payments. That latter goal would be aided by devaluation, combined with a restrictive incomes and subsidy policy, which would address the current overvaluation of the rufiyaa and help to curb imports. Monetary tightening would help to prevent the need for a further devaluation. Financial supervision, particularly with regard to the state bank, also needs strengthening. Given the track record, a Staff Monitored Program could be the appropriate starting point for any renewed engagement, however, in order to begin discussions, there would need to be a clear commitment on the authorities’ part to implementing a comprehensive set of policy adjustments.
    Keywords: Imports;External debt;Fiscal policy;Tourism;Expenditure;ISCR,CR,deficit,Maldives economy,dollar,devaluation,exchange rate
    Date: 2019–09–03
  131. By: International Monetary Fund
    Abstract: After a sharp slowdown starting in 2018, euro area growth is expected to recover over the course of 2019. However, mounting downside risks from global trade tensions, a no-deal Brexit, and market concerns about countries with high public debt emphasize the precarious nature of the forecast. Even in the absence of a major shock, there is a danger that the area could enter a prolonged period of anemic growth and inflation. Policies should focus on supporting growth while also reducing vulnerabilities.
    Keywords: Inflation;Banking;Labor markets;Labor;Productivity;ISCR,CR,monetary policy,single market,euro,policy,tailored monetary policy
    Date: 2019–07–11
  132. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with Zambia highlights that the development strategy has targeted a rapid scale-up of public investment to address infrastructure needs. Recent efforts to adjust the fiscal stance have delivered some improvement in revenues; however, deficits have continued to rise following faster-than-budgeted execution of foreign-financed capital spending. With the anticipated growth dividend yet to materialize, the debt burden has risen sharply, resulting in currency weakness and rising local borrowing costs that have further pushed up the interest bill. A large, frontloaded, and sustained fiscal effort is needed to bring debt down to safer levels. This should include a moratorium on contracting new external non-concessional borrowing, steps to raise revenues, halt the build-up of domestic expenditure arrears, and to better prioritize public investment projects. Decisive steps forward to build confidence and deliver meaningful fiscal adjustment will be essential. Appropriately tight monetary policy also has a role to play in securing stability. Reserves should be replenished over the medium term. Steady attention to the business environment is also needed to support private investment going forward.
    Keywords: Public debt;Public investment and public-private partnerships (PPP);External debt;Arrears;Public investment spending;ISCR,CR,deficit,balance of payments estimate,arrears to Belgium,staff appraisal
    Date: 2019–08–02
  133. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation discusses that the French government revamped vocational training and professional development to foster labor market participation, especially for low-skilled workers, following key labor tax and labor code reforms enacted in its first year in office. In prioritizing the recommended reforms, the report highlights that the importance of carefully assessing the trade-offs and the proper sequencing of structural reforms and fiscal consolidation. The government’s structural reform agenda is being put in place and growth is expected to gradually return to its potential level over the medium run. However, risks have risen, related to a disorderly Brexit, trade tensions, and a softening of activity in the euro area, but also to a slowdown in the domestic reform momentum. Building on the ongoing government reform agenda, policies should aim at addressing France’s structural challenges—high public debt and spending, rising private sector indebtedness, high unemployment, inequality of opportunity, and sluggish productivity.
    Keywords: Public debt;Expenditure;Fiscal stance;Labor;Fiscal policy;ISCR,CR,authority,reform,France-Report on the Observance of Standards and Codes,labor market participation
    Date: 2019–07–24
  134. By: Dogan, Mesut; Kevser, Mustafa
    Abstract: Purpose: The purpose of this research is to reveal the effect of firms' intellectual capital on financial performance. Firms invest in intangible assets as well as tangible assets in order to gain competitive advantage (Atan ve Tuncer, 2019). Within the scope of intangible fixed assets, the most investment is made to intellectual capital. Intellectual capital has three basic dimensions: human capital, structural capital and customer capital (Soylu, 2020). In the 21st century, where technology changes and develops very rapidly, companies create added value by using their intellectual capital and turn the added value into profit. In this respect, intellectual capital is knowledge that can turn into profit (Çetin, 2005). Methodology: The intellectual capital levels of companies operating in the Borsa Istanbul Industrial Index were measured by the Intellectual Value Added Coefficient (VAIC) method for the period of 2015-2019. The relationship between the obtained coefficient and financial performance indicators, return on assets ratio (ROA), return on equity (ROE) and Tobin's Q ratio, was analyzed by panel data method. Findings: According to the results of the research, there is a statistically significant and positive relationship between the intellectual capital coefficient and profitability rates and Tobin's Q ratio. Conclusion- The results obtained show the positive effect of intellectual capital on firm performance. Companies can focus on intellectual capital investments and increase their productivity for sustainable financial performance.
    Keywords: Intellectual capital,ROA,ROE,Tobin’s Q,intellectual value added coefficient
    JEL: C61 E22 G30
    Date: 2020
  135. By: Wensheng Kang; Ronald Ratti Bd; Joaquin Vespignani (UTAS - University of Tasmania [Hobart, Australia])
    Abstract: We investigate the time-varying dynamics of global stock market volatility, commodity prices, domestic output and consumer prices. We find (i) stock market volatility and commodity price shocks impact each other and the economy in a gradual and endogenous adjustment process, (ii) impact of commodity price shock on global stock market volatility is significant during global financial crises, (iii) effects of global stock market volatility on the US output are amplified by endogenous commodity price responses, (iv) effects of global stock market volatility shocks on the economy are heterogeneous across nations and relatively larger in twelve developed countries, (v) four developing/small economies are more vulnerable to commodity price shocks.
    Keywords: Global commodity prices,Global stock market volatility,Output,Heterogeneity JEL Codes: D80,E44,E66,F62,G10
    Date: 2020–12–16
  136. By: Wang, Tianxi
    Abstract: This paper studies non-neutrality of monetary policy in a model where fiat money is used by banks to meet liquidity demand and a government bond to collateralize reserve borrowing. It finds that if some banks are liquidity constrained, any monetary policy that alters the bond-to-fiat money ratio moves the interbank rate and is non-neutral in the steady state. Moreover, the effect for liquidity un-constrained banks is the opposite of that for the maximally constrained. Lastly, if the expansion of digital ways of payment eliminates depositor withdrawals, fiat money will stop circulation and a bullion standard will probably return.
    Date: 2021–01–12
  137. By: Tolulope T. Osinubi (Obafemi Awolowo University, Ile-Ife, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: This study examines the effect of globalization on female economic participation (FEP) in MINT (Mexico, Indonesia, Nigeria & Turkey) and BRICS (Brazil, Russia, India, China & South Africa) countries between 2004 and 2018. Four measures of globalization are employed and sourced from KOF globalization index, 2018, while the female labour force participation rate is a proxy for FEP. The empirical evidence is based on Pooled Mean Group (PMG) estimators. The findings of the PMG estimator from the Panel ARDL method reveal that political and overall globalization in MINT and BRICS countries have a positive impact on FEP, whereas social globalization exerts a negative impact on FEP in the long-run. It is observed that economic globalization has no long-run effect on FEP. Contrarily, all the measures of globalization posit no short-run effect on FEP in the short-run. This supports the argument that globalization has no immediate effect on FEP. Thus, it is recommended that both MINT and BRICS countries should find a way of improving the process of globalization generally to empower women to be involved in economic activities. This study complements the extant literature by focusing on how globalization dynamics influence FEP in the MINT and BRICS countries.
    Keywords: Globalization; female; gender; labour force participation; MINT and BRICS countries
    JEL: E60 F40 F59 D60
    Date: 2020–08
  138. By: International Monetary Fund
    Abstract: Leveraging its location and low-cost skilled labor, Slovakia has attained a very high level of integration with the global value chains, which has proved pivotal to exports growth and income convergence with the European Union. After half a decade of robust growth, the Slovak economy is decelerating. With rising trade tensions and a turning economic cycle, several vulnerabilities are coming to the fore. High dependence on exports combined with a concentrated export structure makes Slovakia particularly vulnerable to external developments. On the domestic front, a prolonged period of double-digit mortgage credit growth and declining bank profit margins have made households and the financial sector susceptible to labor and property market downturns.
    Keywords: Banking;Mortgages;Exports;Housing prices;Labor markets;ISCR,CR,Slovakia,IMF staff calculation,labor market,credit growth,growth
    Date: 2019–07–12
  139. By: Carlos León; Javier Miguélez
    Abstract: Under the market discipline hypothesis, monitoring by interbank lenders may induce changes in either the price or availability of new interbank funds to borrower banks. However, the presence of interbank relationship lending has been evaluated based on the availability of funds only—disregarding their price. We revisit relationship lending in unsecured interbank lending markets by simultaneously evaluating the availability and price of funds. We calculate the survival ratio of networks containing the price of daily interbank lending in Colombia from 2014 to 2020. Under this framework, an interbank relation survives from one day to the next if the funds are available at a price that does not increase too much; that is, either a halt in interbank funding or a sizeable increase in the price of interbank funding mark a break in the relation between two banks. We find that about 38 percent of relations in the Colombian unsecured interbank lending market survive from one day to the next. Therefore, from a comprehensive market discipline perspective, we find evidence of interbank relationship lending in Colombia. **** RESUMEN: Según la hipótesis de disciplina de mercado, el monitoreo que realizan los bancos que otorgan créditos en el mercado interbancario puede inducir cambios en el precio o disponibilidad de nuevos fondos para los bancos que buscan liquidez. No obstante, la presencia de relaciones de préstamo interbancario se ha evaluado con base en la disponibilidad de fondos únicamente dejando de lado su precio. En este documento reexaminamos la presencia de relaciones de préstamo interbancario evaluando simultáneamente la disponibilidad y precio de fondos interbancarios. Calculamos el coeficiente de sobrevivencia de las redes diarias que contienen el precio de los préstamos interbancarios en Colombia desde 2014 hasta 2020. Bajo esta aproximación, una relación interbancaria sobrevive de un día al siguiente si los fondos están disponibles a un precio que no se incrementa demasiado; en este sentido, la no disponibilidad de fondos o un aumento considerable en el precio de los fondos marca una discontinuidad en la relación entre dos bancos. Encontramos que cerca del 38 porciento de las relaciones en el mercado interbancario no colateralizado sobrevive de un día al siguiente. En consecuencia, desde una perspectiva amplia de disciplina de mercado, encontramos evidencia de la existencia de relaciones de préstamo interbancario en Colombia.
    Keywords: Market discipline, interbank, lending, network, disciplina de mercado, interbancario, préstamo, redes.
    JEL: E43 G21 L14
    Date: 2021–01
  140. By: International Monetary Fund
    Abstract: This 2019 Article IV Consultation with People’s Republic of China highlights that after the slowdown in 2018, reflecting financial regulatory strengthening and softening external demand, growth stabilized in early 2019. Financial deleveraging and reduced interconnectedness between banks and non-banks have helped contain the build-up of financial risks, but vulnerabilities remain elevated and progress on rebalancing is mixed. While a moderate slowdown is expected in 2019, uncertainty around trade tensions remains high and risks are tilted to the downside. Successfully shifting from high-speed to high-quality growth in a highly uncertain environment requires stabilizing the economy amid rising trade tensions while continuing with deleveraging and strengthening rebalancing. It is important to improve external policies and frameworks by working constructively with trading partners to better address shortcomings and enable a trading system that can more readily adapt to economic changes in the international environment.
    Keywords: Public debt;Credit;Banking;Public enterprises;Expenditure;ISCR,CR,People's Bank of China,PPI inflation,fixed asset investment growth,authority
    Date: 2019–08–09
  141. By: Ana Isabel Sá
    Abstract: Differences in mortgage law have significant effects on loan characteristics at origination. Borrower-friendly laws impose higher costs and risks for lenders and, thus, induce effects on mortgage pricing and leverage. However, not all borrower-friendly laws have the same effects. This finding is established using loan-level data for the U.S. mortgage market between 2001 and 2011. Judicial foreclosure requirements imply higher mortgage interest rates due to higher recovery costs and activate the price channel. Recourse restrictions imply higher loan collateralization to compensate for the fewer recovery opportunities and activate the collateral channel.
    JEL: E43 G21 G28 K25 K35
    Date: 2020
  142. By: International Monetary Fund
    Abstract: This Selected Issues paper explores non-oil growth impediments in Chad to better understand why the Chadian economy has not sufficiently rebounded from the crisis. It discusses how the economy is held back by crisis legacies such as high public debt and a fragile banking sector and how Chad continues to face long standing structural weaknesses which hamper potential growth. Three years of recession in Chad have left important legacies that continue to affect fiscal policy and performance in the non-oil private sector and the banking sector. Public domestic debt more than doubled with the crisis. As the Chadian economy was hit by the oil shock, while dramatically cutting spending, the government had to rely on large domestic financing to cushion the impact of the shock. Although the government started paying arrears, the remaining stock is very large and presents a drag on the non-oil economy. The paper ends with a discussion of how Chad’s economic potential will require reforms to address those weaknesses to foster economic diversification.
    Keywords: Education;Health;Corruption;Arrears;Commercial banks;ISCR,CR,Chad,spending,Chadian economy,governance,proceeds
    Date: 2019–07–31
  143. By: International Monetary Fund
    Abstract: This Selected Issues paper focuses on the potential to improve government efficiency and reduce opportunities for corruption in Russia by further improving fiscal transparency. The analysis presented here is in the context of the 2018 Framework for Enhanced IMF Engagement in Governance, which supports more systematic, candid, and even-handed engagement with member countries on this issue. The cross-country evidence presented confirms that fiscal transparency is broadly and robustly correlated with better outcomes. Improved outcomes include lower financing costs, better efficiency of public investment and revenue collection, and improved corruption perceptions. The IMF’s fiscal transparency evaluations provide an alternative to the Open Budget Survey. In order to investigate the possibility of omitted variables, data presents result from panel regressions on the impact of fiscal transparency on corruption perceptions. Although regressions analysis can mitigate the risk of omitted variables, it leaves the issue of causality unresolved. Fully disentangling all the causal links among corruption, institutions, and economic development may not be feasible.
    Keywords: Fiscal transparency;Fiscal Transparency Evaluation (FTE);Budget planning and preparation;Corruption;Fiscal risks;ISCR,CR,Russia,country,evaluation,FTE rating
    Date: 2019–08–02
  144. By: McCrory, Peter B
    Abstract: Local fiscal policy shocks propagate between labor markets through the trade in intermediate goods used in final production. Through this channel, each $1 of local aid from the 2009 Recovery Act increased output by $1.33 in the rest of the country over two years, in addition to its local state-level effect of $1.46. Combining both the local and spillover effects, absent other offsetting forces, the implied aggregate multiplier from the Recovery Act was approximately 2.8. A sectoral decomposition of the direct and spillover effects is consistent with the spillover effects being mediated through the trade in intermediate goods.
    Keywords: Social and Behavioral Sciences, fiscal policy, spillover effects, labor markets, recession
    Date: 2020–07–21
  145. By: International Monetary Fund
    Abstract: The fourth and last technical assistance (TA) mission for the benefit of Guinea, under the project on improving external sector statistics (ESS) in 17 Francophone countries of West and Central Africa, funded by the Japanese government and administered by the IMF, took place in Conakry during August 26–30, 2019. The mission was hosted by the Central Bank of the Republic of Guinea (BCRG), which is the institution responsible for compiling the ESS. The main points addressed by the mission were to support (i) the process of participating in the coordinated direct investment survey (CDIS), (ii) the detailed technical work for improving the current and financial accounts, and (iii) the implementation of recommendations from previous missions.
    Date: 2020–12–09
  146. By: Alejandro D Guerson
    Abstract: This paper estimates insurance requirements against natural disasters (NDs) in the Eastern Caribbean Currency Union (ECCU) using an insurance layering framework. The layers include a government saving fund, as well as market instruments. Each layer is calibrated to cover estimated fiscal cost of NDs according to intensity and expected damage. The results indicate that ECCU countries could target saving fund stocks for relativelly smaller and more frequent events in the range of 6-12 percent of GDP, enough to cover 95 percent of NDs’ fiscal costs. To ensure financially-sustainable saving funds with a low probability of depletion, this requires annual budget savings in the range os 0.5 to 1.9 percent of GDP per year. Additional coverage could be obtained with market instruments for large and less frequent events, albeit at a significant cost.The results are based on a Monte-Carlo experiment that simulates natural disaster shocks and their impact on output and government finances.
    Date: 2020–12–04
  147. By: International Monetary Fund
    Abstract: This technical note evaluates the macroprudential policy framework in Singapore with a focus on the price effect of macroprudential instruments. It assesses the domestic institutional arrangement, systemic risk monitoring framework, and macroprudential policy toolkit. The note assesses the strengths and weaknesses of the institutional arrangements for macroprudential policymaking and provides recommendations on how to enhance them further. It also describes the existing systemic risk monitoring framework and provides options to strengthen it. The use of macroprudential instruments in recent years and their effects on residential prices have also been discussed. The institutional framework for macroprudential policymaking has been revised and contains a clear mandate and well-defined objectives. The macroprudential mandate is assigned to dedicated committees within Monetary Authority of Singapore, limiting risk of dual mandates for the central bank. The authorities have taken important steps in recent years to develop the macroprudential policy framework and address relevant recommendations.
    Keywords: Housing;Macroprudential policy;Macroprudential policy instruments;Loans;Housing prices;ISCR,CR,price,loan,market,housing loan,MAS Financial
    Date: 2019–07–15
  148. By: Anja Baum; Paulo Medas; Alberto Soler; Mouhamadou Sy
    Abstract: Ensuring that state-owned enterprises (SOEs) are efficient and managed prudently is important for economic and social reasons. It is also crucial to contain fiscal risks and reduce the burden on taxpayers from recurrent and large bailouts. Governments need to develop stronger capacity to monitor and mitigate the risks from SOEs. We present a risk tool to benchmark the performance of SOEs relative to their peers and assess their vulnerabilities, including through stress tests. A strategy to mitigate risks requires the right incentives for managers to perform and for government agencies to conduct effective oversight. Incorporating SOEs in overall fiscal targets would promote greater fiscal discipline and transparency.
    Date: 2020–09–25
  149. By: Bui, Dzung; Dräger, Lena; Hayo, Bernd; Nghiem, Giang
    Abstract: We analyze consumer sentiment with a novel survey of Thai and Vietnamese consumers conducted in May 2020, that is, shortly after the end of the immediate lockdown due to the COVID-19 pandemic. In a randomized control trial, we expose subgroups of the survey respondents to four different information treatments: (1) how their country ranks in a global survey on agreement or disagreement with the government's response to COVID-19, (2) how the country compares in a global survey on the appropriateness of the general public's reaction to the pandemic, (3) the negative unemployment outlook due to the pandemic, and (4) the positive effects of social distancing for the spread of the virus. First, our results show that consumers are more optimistic if they expect higher GDP growth and trust the government in dealing with the crisis, whereas having stronger concerns about their household's financial situation due to COVID-19 is related to less optimistic sentiment. Second, we find that the information treatments only weakly affect consumer sentiment. However, consumer sentiment is strongly affected by treatment (1) and (2) when they go against respondents' previously held views. Finally, we discover large differences between the two countries.
    Keywords: Consumer sentiment; COVID-19; randomized control trial (RCT); survey experiment; government trust; macroeconomic expectations; Thailand; Vietnam
    JEL: E71 H12 I12 I18 Z18
    Date: 2020–12
  150. By: Damien Azzopardi; Patrick Lenain; Margit Molnar; Natia Mosiashvili; Jon Pareliussen
    Abstract: Technologies such as cloud computing, software to automate supplier- and customer relations, online platforms and artificial intelligence seem to offer a vast potential to boost productivity and living standards. However, aggregate productivity growth has declined sharply across the OECD over the past decades. Estonia is no exception, though it is well placed to gain from digital technology diffusion, with strong digital foundations, including advanced and secure physical and digital infrastructure and world-leading e-government services. Turning this potential into a productivity boost necessitates speeding up digital take-up also outside of the ICT sector and fostering the complementarities between digital technologies, skills and policies. Skills are high in general, and the supply of ICT specialists is picking up. There is still potential to improve digital user skills, and notably to put skills to better use by improving management skills and practices. Business-friendly regulations in general and pioneering attempts in some areas will likely spur the adoption of digital technologies. However, insolvencies are too slow and costly, command-and-control regulations relatively frequent and public ownership in network industries is high. Strengthening collaboration between industry associations, labour unions and industry clusters within technology investments, internationalisation, skill supply and management practices could help the country better realise complementarities between technologies, skills and policies, and thereby tap deeper into the productivity potential offered by digital technologies.
    Keywords: automation, Digitalisation, productivity, skills
    JEL: D24 D47 E22 J24 O33 O38
    Date: 2020–12–16
  151. By: Christa N. Brunnschweiler; Steven Poelhekke
    Abstract: Does institutional change in the petroleum sector lead to more oil and gas ex-ploration and discoveries? Foreign ownership and investment in the sector has tra-ditionally been unrestricted. We document that this is no longer the case; foreign-domestic partnerships are the norm today. Tracking changes in legislation between 1867 and 2008 for a panel of countries, we show that switching to foreign ownership results in more drilling and more discoveries of petroleum than domestic ownership. Switching to partnership yields even more drilling, but yields fewer discoveries. Dis¬coveries, and the intensity and quality of exploration drilling, are endogenous to industry-specific institutional change.
    Keywords: discoveries, oil and gas, natural resources, institutions
    JEL: E02 O43 Q30
    Date: 2019–05–09
  152. By: Hamish Burrell; Joaquin Vespignani (UTAS - University of Tasmania [Hobart, Australia])
    Abstract: Understanding the impact of economic uncertainty shocks at the industrial disaggregated level is critical for both fiscal and monetary policy response to economic uncertainty shocks. We estimate an SVAR model using quarterly Australian data from 1987:2 to 2018:4. The results of this paper emphasise that individual industries have unique responses to economic uncertainty shocks and do not necessarily reflect the response of the broader aggregate macroeconomy. We found the following stylized facts; i) The construction industry is the most negatively impacted industry by an economic uncertainty shock in terms of investment, output and employment in Australia; ii) The financial and insurance services industry also endures a substantial decline to these shocks, particularly on investment and employment indicators; iii) Economic uncertainty is shown to have less impact on the mining, health care and social assistance and public administration and safety industry, where the government plays a significant role.
    Keywords: Economic Uncertainty,Economic Uncertainty Shocks,SVAR,Australian economy,Australian Industries JEL classification: C10,C32,E00,E30
    Date: 2020–12–11
  153. By: International Monetary Fund
    Abstract: This Selected Issues paper analyzes France’s fiscal stance using a structural stochastic model. The theoretical model features a forward-looking benevolent government that needs to decide the optimal fiscal stance given the level of public debt, the cyclical position of the economy, and expectations about future shocks. This paper shows that a fiscal consolidation can help build buffers that could help France confront the next downturn from a stronger fiscal position. The analysis highlights that, on average, fiscal policy in France exhibited a deficit bias over the past four decades, being unable to react to either rising debt levels, or cyclical conditions. A model-based analysis further confirms that fiscal policy was generally looser than warranted by cyclical and debt sustainability considerations, and this is only partly due to the fact policymakers need to take decisions based on real-time output gap measures that are subject to uncertainty.
    Keywords: Fiscal policy;Fiscal stance;Fiscal consolidation;Debt rescheduling;Output gap;ISCR,CR,regulation,deficit,fiscal policy stance,France
    Date: 2019–07–24
  154. By: Andreas Hefti; Julian Teichgräber
    Abstract: This paper develops a framework to systematically study how changes in market conditions affect the equilibrium inequality between heterogeneous agents. By stating our setting as a "competition for market shares", we can derive inequality predictions for vastly different competition models. This approach allows us to identify a common structure, e.g., in monopolistic competition, perfect competition, or competition for prizes, that explains why these models deliver similar inequality predictions. We apply our results to problems from trade, competition theory, consumption inequality, political economics and marketing, and relate some of the predicted inequality patterns to empirical evidence.
    Keywords: Inequality analysis, market shares, power functions, monopolistic competition, perfect competition competition for prizes
    JEL: C65 D30 D41 E10 L11 M37
    Date: 2021–01
  155. By: Ruud A. de Mooij; Dinar Prihardini; Antje Pflugbeil; Emil Stavrev
    Abstract: Luxembourg receives ample investment from multinational corporations, in part due to some attractive features in its international tax rules. Around 95 percent of these foreign investments pass through Luxembourg via companies performing holding and/or intra-group financing activities. While their contribution to Luxembourg’s economy is modest relative to their large overall balance sheets, they still generate around 3 percent of GDP in tax revenue, create almost 4500 direct jobs, and spend almost 3 percent of GDP on salaries and purchases of business services. Ongoing changes in the international corporate tax framework pose risks to these economic contributions, which this paper attempts to quantify. It also discusses options for reforms in Luxembourg’s tax system that could help offset adverse revenue and economic effects.
    Date: 2020–11–25
  156. By: Serhan Cevik; Belma Öztürkkal
    Abstract: This paper investigates the impact of infectious diseases on the evolution of sovereign credit default swap (CDS) spreads for a panel of 77 advanced and developing countries. Using annual data over the 2004-2020 period, we find that infectious-disease outbreaks have no discernible effect on CDS spreads, after controlling for macroeconomic and institutional factors. However, our granular analysis using high-frequency (daily) data indicates that the COVID-19 pandemic has had a significant impact on market-implied sovereign default risk. This adverse effect appears to be more pronounced in advanced economies, which may reflect the greater severity of the pandemic and depth of the ensuing economic crisis in these countries as well as widespread underreporting in developing countries due to differences in testing availability and institutional capacity. While our analysis also shows that more stringent domestic containment measures help lower sovereign CDS spreads, the macro-fiscal cost of efforts aimed at curbing the spread of the disease could undermine credit worthiness and eventually push the cost of borrowing higher.
    Date: 2020–11–25
  157. By: Huber, Florian; Koop, Gary; Onorante, Luca; Pfarrhofer, Michael; Schreiner, Josef
    Abstract: This paper develops Bayesian econometric methods for posterior inference in non-parametric mixed frequency VARs using additive regression trees. We argue that regression tree models are ideally suited for macroeconomic nowcasting in the face of extreme observations, for instance those produced by the COVID-19 pandemic of 2020. This is due to their flexibility and ability to model outliers. In an application involving four major euro area countries, we find substantial improvements in nowcasting performance relative to a linear mixed frequency VAR. JEL Classification: C11, C32, C53, E37
    Keywords: Bayesian, macroeconomic forecasting, regression tree models, vector autoregressions
    Date: 2021–01
  158. By: Pierre Boyer (X - École polytechnique); Elie Gerschel; Anasuya Raj
    Abstract: Summary: The European economic union is incomplete, which makes it vulnerable to macroeconomic shocks. The opportunity to move forward in the integration process was highly debated even before the Covid-19 crisis. Yet the diverging views among countries and political groups are often considered as an obstacle on the path to required agreements for completing the Economic and Monetary Union (EMU). We present the results of a survey conducted in 2018 among members of national parliaments (MPs) in France, Germany and Italy on European integration in policy fields related to risk-sharing and budgetary institutions, asking for their opinion on proposals such as the creation of a European Unemployment Insurance (EUI), Eurobonds, or an EU tax. We find that nationality and political groups are key determinants of support for such proposals, the latter being the strongest. We describe how opinions are divided and try to identify policy proposals which could gather enough political support. The agreement reached on July 21st, 2020 at the last European summit includes financial transfers between States and the creation of Eurobonds, thus representing an important institutional move and an application of some of the reforms suggested by our survey. Yet what has been decided upon is only temporary and leaves open the question of the future of European integration. Key points: At first glance, the answers show diverging opinions on most questions between countries with Italy supporting more integration, and Germany opposing it for most proposals. France has an intermediate position, leaning towards Italy. A breakdown of the results by party affiliation shows a more nuanced picture. For cross-country comparisons, we build a party indicator using the affiliation of national parties to European political groups. National MPs associated with the group of Socialists and Democrats (S&D) at the European level show strong support for the creation of new fiscal institutions and a new EU tax, and for risk sharing institutions (European Unemployment Insurance, Eurobonds). On the contrary, MPs associated with the European People's Party (EPP) are mildly positive or against risk-sharing and fiscal institutions. National MPs affiliated to Renew Europe hold similar views to S&D MPs, but are less supportive of risk-sharing mechanisms. There is a substantial diversity of positions between the German AfD, the Italian Lega and the 5-star movement: the three parties have diverging views on the future of integration. Our econometric analysis shows that party affiliations have more explanatory power than nationality for all questions. This clearly shows that outcomes of national parliamentary elections could change the overall support for any issue.
    Date: 2020–07
  159. By: World Bank
    Keywords: Industry - Accommodation & Tourism Industry Industry - Mining & Extractive Industry (Non-Energy) International Economics and Trade - Export Competitiveness International Economics and Trade - Foreign Trade Promotion and Regulation International Economics and Trade - Trade Facilitation Macroeconomics and Economic Growth - Investment and Investment Climate Private Sector Development - Business Environment
    Date: 2019–12
  160. By: Natia Mosiashvili; Jon Pareliussen
    Abstract: With a newly constructed firm-level dataset combining various survey- and registry data from Statistics Estonia, this paper sheds new light on the labour productivity premium from adopting digital technologies and boosting digital skill use. The productivity premium is decomposed into a direct effect benefitting the firms actually increasing their digital intensity, and an indirect effect of belonging to a sector with high digital intensity. The firm-level productivity premium of being an adopting firm is consistently positive and sizeable across different digital technologies and measures of skill intensity. The evidence also suggests positive spill-over effects in manufacturing sectors and sectors with a high routine task content and thus a high automation potential.
    Keywords: Digitalisation, productivity, skills, training
    JEL: D24 E22 J24 M53 O33
    Date: 2020–12–16
  161. By: Björn Bartling; Ernst Fehr; David Huffman; Nick Netzer
    Abstract: Under weak contract enforcement the trading parties’ trust, defined as their belief in the other party’s trustworthiness, appears important for realizing gains from trade. In contrast, under strong contract enforcement beliefs about the other party’s trustworthiness appear less important, suggesting that trust and contract enforcement are substitutes. Here, we show, however, that trust and contract enforcement are complements. We demonstrate that in a weak contract enforcement environment trust has no effect on the gains from trade, but when we successively improve contract enforcement, larger effects of trust emerge. We also document that improvements in contract enforcement lead to no, or only small, increases in gains from trade under low initial trust, but generate high increases in gains from trade when initial trust is high. Thus, the effect of improvements in contract enforcement is trust-dependent, and the effect of increases in trust is dependent on the strength of contract enforcement. We identify three key ingredients underlying this complementarity: (1) heterogeneity in trading partners’ trustworthiness; (2) strength of contract enforcement affecting the ability to elicit reciprocal behavior from trustworthy types, and screen out untrustworthy types; (3) trust beliefs determining willingness to try such strategies.
    Keywords: Trust, contract enforcement, complementarity, equilibrium selection, causal effect, screening, belief distortions, institutions
    JEL: C91 D02 D91 E02
    Date: 2021–01
  162. By: Aneesha Chitgupi (Institute for Social and Economic Change)
    Abstract: The impact of macroeconomic determinants on software services exports (SSE) is estimated by using a panel of 45 countries from 2000-2014. Software services exports (SSE) expressed as a percentage share of total world software services exports is used as dependent variable. Macroeconomic variables along with demographic variables are estimated using the TSLS fixed effects technique. Using the estimated coefficients from the cross-country panel model, India specific results are drawn to explain the impact of macroeconomic and demographic variables on India’s SSE and their contribution towards achieving the objective of external stabilisation. The empirical results suggest that GDP, R&D expenditure and reduction in trade barriers of the exporting country improved SSE, whereas internet penetration may have led to the diversion of software services towards the domestic market, thereby reducing exports. Among demographic variables, the share of population within 30-39 improved the SSE. Together, R&D expenditure, reduction in trade barriers and population share (30-39) reduce the CAD/GDP ratio for India by 1.6 percentage points through their contribution towards SSE.
    Keywords: Macroeconomic; Domestic market; Software services exports
    Date: 2019
  163. By: Florian Pelgrin (École des hautes études commerciales du Nord (EDHEC)); Alain Venditti (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique, École des hautes études commerciales du Nord (EDHEC))
    Abstract: This paper provides a long-run cycle perspective to explain the behavior of the annual flow of inheritance as identified by Piketty [51] for France and Atkinson [3] for the UK. Using a two-sector Barro-type [9] OLG model with non-separable preferences and bequests, we show that endogenous fluctuations are likely to occur through period-2 cycles or Hopf bifurcations. Two key mechanisms, which can generate independently or together quasi-periodic cycles, can be identified as long as agents are sufficiently impatient. The first mechanism relies on the elasticity of intertemporal substitution or equivalently the sign of the cross-derivative of the utility function whereas the second rests on sectoral technologies through the sign of the capital intensity difference across two sectors. Furthermore, building on the quasi-palindromic nature of the degree-4 characteristic equation, we derive some meaningful sufficient conditions associated to the occurrence of complex roots in a two-sector OLG model. Finally, we show that our theoretical results are consistent with some empirical evidence for medium- and long-run swings in the inheritance flows as a fraction of national income in France over the period 1896-2008.
    Keywords: two-sector overlapping generations model,optimal growth,endogenous fluctuations,quasi-palindromic polynomial,periodic and quasi-periodic cycles,altruism,bequest
    Date: 2020–12–17

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