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on Macroeconomics |
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Issue of 2021‒01‒11
164 papers chosen by Soumitra K Mallick Indian Institute of Social Welfare and Business Management |
| By: | Tweneboah Senzu, Emmanuel |
| Abstract: | The paper makes a proposition that the chaotic functioning order of the operating factors of the economy as a system only results in a constraint. And further, argue that a persistent aggregate chaotic functioning becomes a complex constraint, creating more distortion in the performance of the economy. Which the study further establishes the major causal factors that make the mainstream theoretical approach to economic growth and development within fiscal-monetary policy and its management space, fails to be effective in application towards developing and under developing economies, and recommends resolution as a method in a form of a policy framework, having within its core a job creation system to initiate full employment towards development as a focal interest of the paper. |
| Keywords: | Monetary Policy, Fiscal Policy, Development theory, Economic growth, Constraint |
| JEL: | E51 E52 E58 E62 E63 |
| Date: | 2020–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104872&r=all |
| By: | KLEIN, Mathias; POLATTIMUR, Hamza; WINKLER, Roland |
| Abstract: | This paper investigates household leverage-dependent fiscal policy effects in a twoagent New Keynesian DSGE model with occasionally binding borrowing constraints. Our model successfully replicates empirical evidence showing that fiscal policy’s effectiveness differs significantly across the household leverage cycle. Fiscal multipliers are persistently above unity when government spending rises at the peak of the household leverage cycle. In contrast, increases in government spending at the trough of the household leverage cycle imply fiscal multipliers below unity. We test the model’s predictions on post-WWII U.S. data. |
| Keywords: | Occasionally Binding Constraints, Government Spending Multiplier, Household Leverage Cycle, State-Dependence |
| JEL: | E32 E44 E62 H31 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2020007&r=all |
| By: | Vazquez, Francisco |
| Abstract: | This paper studies episodes in which aggregate bank credit contracts alongside expanding economic activity—credit reversals. Using data for 179 countries during 1960‒2017, the paper finds that reversals are a relatively common phenomenon--on average, they occur every five years. By comparison, banking crises take place every eight years on average. Credit reversals and banking crises also appear related to each other: reversals become more likely in the aftermath of banking crises, while the likelihood of crises drops following reversals. Reversals are shown to be very costly in terms of foregone economic activity—about two-thirds of the costs of banking crises, after taking into account their relative frequencies. |
| Keywords: | Credit reversals, credit booms, credit crunches, credit cycles, banking crises, financial stability |
| JEL: | E32 E44 E51 G01 G21 |
| Date: | 2020–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104869&r=all |
| By: | Ginters Buss (Latvijas Banka); Patrick Gruning (CEFER, Lietuvos Bankas) |
| 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: | 2020–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:ltv:wpaper:202005&r=all |
| By: | Domenico Delli Gatti; Severin Reissl |
| Abstract: | We employ a new macro-epidemiological agent based model to evaluate the “lives vs livelihoods” trade-off brought to the fore by Covid-19. The disease spreads across the networks of agents’ social and economic contacts and feeds back on the economic dimension of the model through various channels such as employment and consumption demand. We show that under a lockdown scenario the model is able to closely reproduce the epidemiological dynamics of the first wave of the coronavirus epidemic in Lombardy. We then explore the efficacy of the fiscal response to Covid-19 which may take different routes: income support, liquidity provision, credit guarantees. In an agent based setting we gain additional insights on the way in which fiscal measures impact not only on GDP but also on the defaults of firms and the allocation of inputs. We find that liquidity support for firms, a short-time working scheme with compensation for workers, and direct transfer payments to households are effective policy tools to alleviate the economic impact of the epidemic and the lockdown. |
| Keywords: | agent-based models, epidemic, Covid, fiscal policy |
| JEL: | E21 E22 E24 E27 E62 E65 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8763&r=all |
| By: | Berrak Bahadir (Department of Economics, Florida International University); Kuhelika De (Department of Economics, Grand Valley State University); William D. Lastrapes (Department of Economics, University of Georgia) |
| Abstract: | This paper examines the link between household credit shocks, consumption and income inequality at the national level. Empirically, we use country-speciï¬ c VAR models to estimate the dynamic responses of aggregate consumption to household credit shocks. We then show in cross-country regressions that the consumption response is more sensitive to such shocks in countries with higher levels of inequality, even after controlling for ï¬ nancial development. Theoretically, we construct and simulate a dynamic model based on the effect of inequality on the incidence of credit constraints, to illustrate potential causal mechanisms. |
| Keywords: | credit constraints, credit shocks, income distribution, VAR, Gini coefficient, local projections |
| JEL: | E21 E32 E44 E51 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:2011&r=all |
| By: | Bo?ena Kade?ábková (University of Economics, Prague); Emilie Ja?ová (Faculty of Social Sciences, Charles University in Prague) |
| Abstract: | The aim of the research paper is to analyze the development of the Phillips curve and the NAIRU, including the unemployment gaps in the Czech Republic and Poland in individual phases of the economic cycle, when using empirical analysis. According to the analysis, the resulting average value of the negative slope of the PC for the whole observed period in the Czech Republic is -0.19 and in Poland -0.09, which in both countries indicates a very weak intensity of substitutability of the household consumption deflator by unemployment. The resulting long-term NAIRU for the entire period we are monitoring was 6.70% in the Czech Republic and 12.50% in Poland. NAIRU values are affected by unemployment benefits, in the Czech Republic also by the growth of the minimum wage and in Poland by the growth of import prices, including the growth of oil prices. Research also shows expected inflation in both countries. |
| Keywords: | Unemployment rate by gender, age and education, Phillips curve, long-term NAIRU, phase of the economic cycle, inflation expectations |
| JEL: | E24 E32 E37 |
| URL: | http://d.repec.org/n?u=RePEc:sek:iefpro:11413218&r=all |
| By: | Murhula, Pacifique |
| Abstract: | In this paper, we estimate a SVAR model to analyze the trend of underlying inflation in the Democratic Republic of Congo and follow the identification approach of Blanchard and Quah (1989) to impose long-run restrictions. Thus, we use Congolese data on the growth rate of activity and the inflation rate from 2002Q1 to 2019Q4. Our results broadly confirm those generally found in the literature and show that the monetary shock has, in accordance with the identification constraint, almost no effect on economic activity, which tends to validate the verticality of the Phillips curve and the persistence of the negative real shock considerably explains the volatility of inflation in the Democratic Republic of Congo (DRC). |
| Keywords: | Core Inflation, Price Stability, Monetary Policy, Economic Growth, Structural VAR |
| JEL: | C32 E31 E52 E58 O47 |
| Date: | 2020–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105005&r=all |
| By: | Julien ALBERTINI (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France); Stéphane AURAY (CREST-ENSAI and ULCO); Hafedh BOUAKEZ (Department of Applied Economics and CIREQ, HEC Montréal, 3000 chemin de la Côte-Sainte-Catherine,Montréal, Québec, Canada H3T 2A7); Aurélien EYQUEM (Univ Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France, and Institut Universitaire de France) |
| Abstract: | We propose a model within voluntary unemployment, incomplete markets, and nominal rigidity, in which the effects of government spending are state-dependent. An increase in government purchases raises aggregate demand, tightens the labor market and reduces unemployment. This in turn lowers unemployment risk and thus precautionary saving, leading to a larger response of private consumption than in a model with perfect insurance. The output multiplier is further amplified through a composition effect, as the fraction of high-consumption households in total population increases in response to the spending shock. These features, along with the matching frictions in the labor market, generate significantly larger multipliers in recessions than in expansions. As the pool of jobseekers is larger during down turns than during expansions, the concavity of the job-finding probability with respect to market tightness implies that an increase in government spending reduces unemployment risk more in the former case than in the latter, giving rise to counter cyclical multipliers. |
| Keywords: | Government spending, Multipliers, Precautionary saving, State dependence, Unemployment risk. |
| JEL: | D52 E21 E62 |
| Date: | 2020–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2020-05&r=all |
| By: | Jean-Paul L’Huillier (Brandeis University); Gregory Phelan (Williams College); Hunter Wieman (Williams College) |
| Abstract: | Big technological improvements in a new, secondary sector lead to a period of excitement about the future prospects of the overall economy, generating boom-bust dynamics propagating through credit markets. Increased future capital prices relax collateral constraints today, leading to a boom before the realization of the shock. But reallocation of capital toward the secondary sector when the shock hits leads to a bust going forward. These cycles are perfectly foreseen in our model, making them markedly different from the typical narrative about unexpected financial shocks used to explain crises. In fact, these cycles echo Minsky’s original narrative for financial cycles, according to which “financial trauma occur as normal functioning event in a capitalistic economy.”(Minsky, 1980) |
| Keywords: | Endogenous cycles, boom-bust dynamics, optimism, credit markets, predictability. |
| JEL: | E22 E23 E32 E44 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:wil:wileco:2021-01&r=all |
| By: | Alessandro Cantelmo (Bank of Italy) |
| Abstract: | This paper evaluates the impact of rare disasters on the natural interest rate and macroeconomic conditions by simulating a nonlinear New-Keynesian model. The model is calibrated using data on natural disasters in OECD countries. From an ex-ante perspective, disaster risk behaves as a negative demand shock and lowers the natural rate and inflation, even if disasters hit only the supply side of the economy. These effects become larger and nonlinear if extreme natural disasters become more frequent, a scenario compatible with climate change projections. From an ex-post perspective, a disaster realization leads to temporarily higher natural rate and inflation if supply-side effects prevail. If agents' risk aversion increases temporarily, disasters may generate larger demand effects and lead to a lower natural rate and inflation. If supply-side effects dominate, the central bank could mitigate output losses at the cost of temporarily higher inflation in the short run. Conversely, under strict inflation targeting, inflation is stabilized at the cost of larger output losses. |
| Keywords: | rare disasters, natural disasters, natural interest rate, climate change, DSGE, monetary policy |
| JEL: | E4 E5 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1309_20&r=all |
| By: | Cristina Conflitti (Bank of Italy) |
| Abstract: | This paper proposes two measures of underlying inflation for euro area as an alternative to the Harmonized Index of Consumer Prices excluding Food and Energy. The first measure, called the Core cycle measure, is constructed by using a Phillips curve model to distinguish disaggregated prices that respond to the economic cycle (procyclical), from those which do not (acyclical). The second measure, called the Common core measure, is constructed using a factor model to remove components that are subject to large or unusual price changes, which are unlikely to be related to the underlying trend of inflation because of their idiosyncratic nature. Each measure has merits and shortcomings, suggesting that they should be taken together to assess inflation developments. |
| Keywords: | core inflation, disaggregate consumer prices, dynamic factor model, Phillips curve |
| JEL: | C32 E31 E32 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_593_20&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Iceland discusses that after years of robust growth, economic activity has significantly weakened. Supply disruptions in tourism, the engine of recent growth, and the associated uncertainty have triggered a drop in domestic demand and an increase in unemployment. A swift policy response, with fiscal relaxation and monetary easing, has stabilized expectations and cushioned the effects. A moderate but fragile growth recovery is expected in 2020. Macroprudential measures are helping to preserve buffers for managing financial stability risks. Macroprudential policies are adequate, given still elevated household debt and real-estate prices and benign external financing conditions. Looking forward, the macroprudential toolkit could be expanded to contain potential risks in the loan portfolio over the medium term. Ongoing education reforms would boost human capital and productivity, greater transparency of large unlisted companies would preserve the business environment, and strategic policies in tourism and fisheries would protect the sustainability of traditional economic sectors. |
| Keywords: | Public debt;Fiscal policy;Anti-money laundering and combating the financing of terrorism (AML/CFT);External debt;Government finance statistics;ISCR,CR,IMF staff country,inflation expectation,policy |
| Date: | 2019–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/375&r=all |
| By: | Luca Benati |
| Abstract: | M1 velocity is, approximately, the permanent component of the short-term rate. This implies that agents–in deciding how much wealth to allocate to non interest bearing M1, as opposed to interest-bearing assets–almost uniquely react to permanent shocks to the opportunity cost, essentially ignoring transitory shocks. This suggests that money-demand models must be modified to allow for such distinct reaction to permanent and transitory variation in the opportunity cost of holding M1. Under monetary regimes making inflation stationary, permanent fluctuations in M1 velocity uniquely reflect, to a close approximation, permanent shifts in the natural rate of interest. |
| Keywords: | Money demand; unit roots; cointegration; structural VARs; natural rate of interest. |
| JEL: | E30 E32 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp2022&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Malawi’s Second and Third Reviews Under the Three-Year Extended Credit Facility Arrangement and Requests for Waivers of NonObservance of Performance Criteria and Augmentation of Access. Program-supported structural reforms advanced, addressing several important gaps that had previously been identified in public financial management. All quantitative performance criteria were met except those on the primary balance, which were missed largely due to faster than envisaged implementation of rural electrification and development projects, unexpected spending for disaster relief and to ensure safety during elections and post-election protests. The authorities aim to entrench macroeconomic stability, preserve debt sustainability, and advance governance reforms while attaining higher, more inclusive, and resilient growth. Essential reconstruction and security spending will be accommodated by reprioritizing spending and a modest relaxation in the FY 2019/20 domestic primary balance target. Monetary policy remains targeted on containing inflation and exchange rate flexibility will buffer shocks and preserve competitiveness. Financial sector resilience continues to be strengthened. |
| Keywords: | Public debt;Fiscal stance;Public financial management (PFM);Revenue administration;External debt;ISCR,CR,ECF arrangement,SDR,resilience to climate change,Malawi's resilience,reconstruction |
| Date: | 2019–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/361&r=all |
| By: | Firrell, Alastair (Bank of England); Reinold, Kate (Bank of England) |
| Abstract: | Differences of opinion are a natural and vital part of monetary policy making by committee. With the appropriate stance for monetary policy both unobservable and uncertain, individual policymakers need to synthesise a wide range of information, including the views of other committee members. Using a novel measure of views that we construct from text analysis of the Bank of England Monetary Policy Committee’s minutes and speeches, we show that both individual economic assessments and broader committee views are important in explaining individual voting. But in periods of high uncertainty both become more volatile and carry less weight in votes, consistent with the predictions of a simple voting model embedding a signal extraction problem. There is no increase in the dispersion of economic assessments in periods of uncertainty, nor in the mean dissent rate. Thus we show that interpreting the voting record as a reflection of policy uncertainty is unreliable, and highlight the value of individual committee members’ communications — such as speeches — for conveying differences in view. |
| Keywords: | Central bank communication; committees; monetary policy; uncertainty |
| JEL: | D71 D81 E52 E58 |
| Date: | 2020–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0898&r=all |
| By: | Russell Cooper; Özgen Öztürk |
| Abstract: | This paper studies the determinants of TFPR, a revenue based measure of total factor productivity. Recent business cycle models are built upon the countercyclical dispersion of TFPR. But, the distribution of TFPR is endogenous, dependent upon other exogenous shocks and the endogenous determination of prices. This paper studies the determination the distribution of TFPR is an overlapping generations model with monopolistic competition and state dependent pricing. Changes in the mean and the dispersion of a quantity based measure of total factor productivity, TFPQ, and monetary shocks are analyzed as exogenous variations that influence the distribution of TFPR. None of these shocks alone can generate countercyclical dispersion in TFPR and match observed countercyclical dispersion in price changes and countercyclical movements in the frequency of price changes. Large enough shocks to the dispersion in TFPQ along with an appropriately responsive monetary policy can match these facts. But the required monetary feedback does not reproduce the positive correlation between money innovations and the dispersion in TFPR seen in the data. In this framework, uncertainty per se plays a very limited role. |
| JEL: | E31 E32 L11 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28174&r=all |
| By: | Viral V. Acharya; Matteo Crosignani; Tim Eisert; Christian Eufinger |
| Abstract: | We show that “zombie credit”—cheap credit to impaired firms—has a disinflationary effect. By helping distressed firms to stay afloat, such credit creates excess production capacity, thereby putting downward pressure on product prices. Granular European data on inflation, firms, and banks confirm this mechanism. Industry-country pairs affected by a rise of zombie credit show lower firm entry and exit rates, markups, and product prices, as well as a misallocation of capital and labor, which results in lower productivity, investment, and value added. Without a rise in zombie credit, inflation in Europe would have been 0.4 percentage point higher post-2012. |
| Keywords: | zombie lending; undercapitalized banks; disinflation; firm productivity; eurozone |
| JEL: | E31 E44 G21 |
| Date: | 2020–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:89275&r=all |
| By: | ; ; Vaishali Garga |
| Abstract: | This paper exploits the variation in the unemployment rate of different occupations in the first part of the COVID-19 pandemic to analyze the response of consumption spending to unemployment risk. We find that earlier in the pandemic, higher unemployment risk did not reduce relative spending. However, as the pandemic proceeded, higher unemployment risk reduced relative spending. This pattern held across both essential and nonessential spending categories. We find that “high-risk” occupations had three common characteristics: lower ability to be performed from home, higher physical proximity on the job, and a nonessential nature. |
| Keywords: | consumption; occupation; unemployment risk; COVID-19; CARES act |
| JEL: | E21 E32 E62 |
| Date: | 2020–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:89289&r=all |
| By: | Ludmila Fadejeva (Bank of Latvia); Zeynep Kantur |
| Abstract: | We observe differences in the net wealth distribution by age among European countries. The net wealth distribution in Western EU countries is consistent with the life cycle hypothesis. However, in Eastern EU countries, the wealth distribution is skewed towards younger ages. The aim of the paper is twofold: first, we study the characteristics of economies leading to differences in the net wealth distribution by age; second, we evaluate the impact of these differences on the transmission of monetary policy. To do so, we develop a modified New Keynesian model where the demand side is represented by a multi-period overlapping generation setup, and the supply side of the economy follows the New Keynesian framework. The model is used to analyse the interaction between monetary policy and wealth accumulation originated by demographics and the productivity gap among generations in a coherent general equilibrium model. The HFCS database is used to calibrate the model for two groups of European countries. We find that the shape of net wealth distribution by age has an important bearing on the effectiveness and hence conduct of monetary policy. |
| Keywords: | overlapping generations model, New Keynesian model, wealth distribution, monetary policy |
| JEL: | E32 E52 J11 |
| Date: | 2020–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:ltv:wpaper:202003&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents 2019 Article IV Consultation with Gabon and its Fourth and Fifth Reviews Under the Extended Fund Facility (EFF), and Request for Waiver for NonObservance of Performance Criteria, and Rephasing of the Remaining Purchases. Gabon’s performance under the program supported by the IMF’s EFF Arrangement has been broadly satisfactory. Macroeconomic conditions have continued to improve, with growth slowly picking-up, fiscal and external positions improving, and public debt declining. Going forward, bold and ambitious reforms are needed to generate higher, more inclusive, and resilient growth. Sustained implementation of structural reforms is critical. Efforts to close infrastructure gaps, improve human capital, deepen financial intermediation, clear domestic arrears, and enhance governance and anticorruption measures are necessary to improve the business climate and achieve higher and inclusive growth. Efforts should continue to further boost domestic revenue and contain nonpriority spending, while protecting investment and enhancing social protection. Improving public finance management and the efficiency of public investment is also important for growth prospects. |
| Keywords: | Revenue administration;Arrears;Public debt;Public financial management (PFM);Financial statistics;ISCR,CR,Executive Board discussion,authority,reform program,IMF Executive Board's decision,reform |
| Date: | 2019–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/389&r=all |
| By: | Asger Lau Andersen; Niels Johannesen; Mia Jørgensen; José-Luis Peydró |
| Abstract: | We analyze the distributional effects of monetary policy on income, wealth and consumption. For identification, we exploit administrative household-level data covering the entire population in Denmark over the period 1987-2014, including detailed information about income and wealth from tax returns, in conjunction with exogenous variation in the Danish monetary policy rate created by a long-standing currency peg. Our results consistently show that all income groups gain from a softer monetary policy, but that the gains are monotonically increasing in the ex-ante income level. Over a two-year horizon, a decrease in the policy rate of one percentage point raises disposable income by less than 0.5% at the bottom of the income distribution, by around 1.5% at the median income and by around 5% at the top. The effects on asset values through increases in house prices and stock prices are larger than the effects on disposable income by more than an order of magnitude and exhibit a similar monotonic income gradient. We show how all these distributional effects reflect systematic differences in the exposure to the direct and indirect channels of monetary policy. Consistent with the main results for disposable income and asset values, we also find that the effects on net wealth and consumption (car purchases) increase monotonically over the ex-ante income distribution. Our estimates imply that softer monetary policy increases income inequality by raising income shares at the top of the income distribution and reducing them at the bottom. |
| Keywords: | monetary policy, Inequality, household heterogeneity |
| JEL: | E2 E4 E5 G2 G1 G5 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1227&r=all |
| By: | Andersen, Asger Lau; Johannesen, Niels; Jørgensen, Mia; Peydró, José-Luis |
| Abstract: | We analyze the distributional effects of monetary policy on income, wealth and consumption. For identification, we exploit administrative household-level data covering the entire population in Denmark over the period 1987-2014, including detailed information about income and wealth from tax returns, in conjunction with exogenous variation in the Danish monetary policy rate created by a long-standing currency peg. Our results consistently show that all income groups gain from a softer monetary policy, but that the gains are monotonically increasing in the ex-ante income level. Over a two-year horizon, a decrease in the policy rate of one percentage point raises disposable income by less than 0.5% at the bottom of the income distribution, by around 1.5% at the median income and by around 5% at the top. The effects on asset values through increases in house prices and stock prices are larger than the effects on disposable income by more than an order of magnitude and exhibit a similar monotonic income gradient. We show how all these distributional effects reflect systematic differences in the exposure to the direct and indirect channels of monetary policy. Consistent with the main results for disposable income and asset values, we also find that the effects on net wealth and consumption (car purchases) increase monotonically over the ex-ante income distribution. Our estimates imply that softer monetary policy increases income inequality by raising income shares at the top of the income distribution and reducing them at the bottom. |
| Keywords: | monetary policy,inequality,household heterogeneity |
| JEL: | E2 E4 E5 G2 G1 G5 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:227763&r=all |
| By: | Mehdi El Herradi (https://www.amse-aixmarseille.fr/en/members/el-herradi); Aurélien Leroy (LAREFI, University of Bordeaux, Pessac, France) |
| Abstract: | This paper examines the distributional e ects of monetary policy in 12 OECD economies between 1920 and 2016. We exploit the implications of the macroeconomic policy trilemma with an external instrument approach to analyse how top income shares respond to monetary policy shocks. The results indicate that monetary tightening strongly decreases the share of national income held by the top one percent and vice versa for a monetary expansion, irrespective of the position of the economy. This e ect (i) holds for the top percentile and the ultra-rich (top 0.1% and 0.01% income shares), while (ii) it does not necessarily induce a decrease in income inequality when considering the entire income distribution. Our ndings also suggest that the e ect of monetary policy on top income shares is likely to be channeled via real asset returns. |
| Keywords: | monetary policy, top incomes, macroeconomic policy trilemma, external instrument |
| JEL: | E25 E42 E52 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2047&r=all |
| By: | Jean-Luc Gaffard (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur) |
| Abstract: | Les opinions exprimées dans la série des Documents de travail GREDEG sont celles des auteurs et ne reflèlent pas nécessairement celles de l'institution. Les documents n'ont pas été soumis à un rapport formel et sont donc inclus dans cette série pour obtenir des commentaires et encourager la discussion. Les droits sur les documents appartiennent aux auteurs. The views expressed in the GREDEG Working Paper Series are those of the author(s) and do not necessarily reflect those of the institution. The Working Papers have not undergone formal review and approval. |
| Keywords: | court et long terme,institutions,politique économique,rupture structurelle JEL Codes : E02,E20,E30,E60 short and long term,economic policy,structural breakthrough |
| Date: | 2020–11–23 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03019770&r=all |
| By: | Michał Brzoza-Brzezina; Grzegorz Wesołowski |
| Abstract: | This paper argues that noisy information about lockdown can cause undesired economic fluctuations. We construct a New Keynesian model with imperfect information about how long the lockdown would last. On the one hand, a false information about the lockdown being persistent (which we call fear of lockdown) lowers consumption, investment, employment and output. We show that the fear of lockdown may account for more than half of the decline in economic activity caused by the lockdown itself. On the other hand, a true information about lockdown being introduced can also be misinterpreted and hence cause an impact on the economy being smaller than desired by the authorities. These undesired fluctuations can be reduced if communication about lockdown policy is precise, for which our policy conclusion calls |
| Keywords: | Covid-19, lockdown, communication, imperfect information |
| JEL: | E32 E61 E65 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:sgh:kaewps:2021060&r=all |
| By: | Den Haan, W.; Freund, L. B.; Rendahl, P. |
| Abstract: | In search-and-matching models, the nonlinear nature of search frictions increases average unemployment rates during periods with higher volatility. These frictions are not, however, by themselves sufficient to raise unemployment following an increase in perceived uncertainty; though they may do so in conjunction with the common assumption of wages being determined by Nash bargaining. Importantly, option-value considerations play no role in the standard model with free entry. In contrast, when the mass of entrepreneurs is finite and there is heterogeneity in firm-specific productivity, a rise in perceived uncertainty robustly increases the option value of waiting and reduces job creation. |
| Keywords: | Uncertainty, search frictions, unemployment, option value |
| JEL: | E24 E32 J64 |
| Date: | 2020–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:20125&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2020 Article IV Consultation with Colombia highlights that with the disruptions associated with the coronavirus disease 2019 pandemic and with lower oil prices, real gross domestic product (GDP) is projected to contract by 2.4 percent in 2020. In the near term, disruptions associated, directly and indirectly, with the pandemic are expected to generate a recession of -2.4 percent in 2020. Weaker domestic demand from the shutdown efforts is expected to partially offset lower external demand and commodity prices, such that the current account deficit is projected to rise to 4.7 percent of GDP. In the wake of exceptional shocks and risks, recent monetary easing is welcomed by the IMF and accommodation should continue to support the economy if underlying inflation and inflation expectations remain moderate. Continued liquidity support should be provided as required, and available capital buffers in the banking system should be used as needed. All available space under the fiscal rule can be used to meet unforeseen health expenditures and for countercyclical spending to further support the economy through recession. |
| Keywords: | Public debt;Revenue administration;External debt;Oil prices;Expenditure;ISCR,CR,inflation expectation,Banco de la República,monetary policy interest rate,fully-fledged inflation targeting regime |
| Date: | 2020–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/104&r=all |
| By: | Luca Benati |
| Abstract: | Evidence from monetary VARs suggests that in the U.S., Canada, and the U.K. the impact of monetary shocks on real house prices is about three to five times as large as that onreal GDP. Although these trade-offs are not manifestly unfavorable, in the light of the large differences in the magnitudes of house prices and GDP fluctuations, a monetary policy of leaning against the former would inevitably entail significant losses in the latter. I use the identified VARs in order to explore the corresponding trade12 offs associated with a monetary policy of weakly, but systematically leaning against house prices. Results from ‘modest’ (in the sense of Leeper and Zha, 2003) policy counterfactuals suggest that, in population, the impact on real house prices is about three times as large as that on real GDP for all of the three countries. Within the specific context of the upsurge in U.S. house prices which pre-dated the financial crisis, a shortfall of one per cent of GDP would have been associated with a decline in real house prices by about four per cent. |
| Keywords: | Structural VARs; house prices; sign restrictions; zero restrictions. |
| JEL: | E30 E32 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp2020&r=all |
| By: | Dmitriy, Skrypnik |
| Abstract: | The paper examines the world experience in stimulating economic development based on the creation of infrastructure. The effects on economic growth are found to be moderate. Building infrastructure boosts economic growth in the poorest countries, where infrastructure shortages are critical. For developing countries, the creation of infrastructure is of secondary importance, and infrastructure has a significant impact when it is part of development projects implemented by industrial policy measures based on a system of catch-up development institutions. For developed countries, infrastructure can lag behind market sector dynamics and investment can again have significant impact. For the Russian economy, where the stock and quality of infrastructural and human capital are at medium levels, it is not necessary to expect accelerated growth from the implementation of national projects, the bulk of which goes to the creation of infrastructure. This conclusion is confirmed by numerical experiments based on a computable general economic equilibrium model constructed in this work for Russia. At the same time, it is found that the increase in the VAT rate itself, which is part of the budget maneuver, leads to a decrease in output in most industries, including the manufacturing sector. In the scenario of a budget maneuver - with an increase in the VAT rate and an increase in government spending - the negative effects of the increase in VAT are intensified: there is stronger growth in the public sector, construction and raw materials, which ensures economic growth, but at the same time increases the cost of factors and leads to a deepening decline in other sectors as a result, the economy experiences a double negative impact. The public sector begins to reproduce the mechanism of the Dutch disease. |
| Keywords: | infrastructure, government spending, fiscal policy, economic growth, computable general equilibrium models, structural vector autoregression models |
| JEL: | C68 E16 E17 E62 H25 H50 H54 O23 O43 |
| Date: | 2020–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104920&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with India discusses that India has been among the world’s fastest-growing economies in recent years, lifting millions out of poverty. However, growth slowed to a six-year low in the first half of 2019, with both consumption and investment decelerating owing to weak, especially rural, income growth, stresses in the nonbank financial sector, and corporate and environmental regulatory uncertainty. On the external sector, following a rise in vulnerabilities in 2018, stability has returned, anchored by high foreign reserve buffers and a modest current account deficit. With its strong mandate, the new government has an opportunity to reinvigorate the reform agenda aimed at boosting inclusive and sustainable growth. In the near term, given the cyclical weakness of the economy, monetary policy should maintain an easing bias at least until the projected recovery takes hold. Fiscal stimulus should be avoided given fiscal space at risk and revenue losses from the recent corporate income tax rate cut should be offset. |
| Keywords: | Public debt;Government debt management;External debt;Revenue administration;Fiscal consolidation;ISCR,CR,U.S. dollar,staff report projectionU.S. dollar-value,Indian rupee |
| Date: | 2019–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/385&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Turkey discusses that economic growth has since resumed, buoyed by expansionary fiscal policy, rapid credit provision by state-owned banks, and more favorable external financing conditions. The lira also recovered as market pressures abated. Import compression and a strong tourism season have contributed to a remarkable current account adjustment. Inflation has fallen sharply, and the central bank cut policy rates by 1000 basis points since July 2019. Inflation peaked at around 25 percent—five times the target—in October 2018 due, in large part, to high exchange rate passthrough and rising inflation expectations. However, strong base effects, relative lira stability, and a negative output gap have since contributed to a steep inflation decline, although inflation expectations remain well above target. State-owned banks are supporting rapid credit growth. While private banks have cut back on their lending, state-owned banks have engaged in a major credit expansion which picked up pace in early-2019. |
| Keywords: | Inflation;State-owned banks;Financial statements;Banking;National accounts;ISCR,CR,inflation expectation,authority,IMF staff calculation |
| Date: | 2019–12–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/395&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses The Democratic Republic of the Congo’s Staff-Monitored Program and Request for Disbursement Under the Rapid Credit Facility. The economic environment remains challenging and vulnerable to shocks. Real gross domestic product growth is projected to decelerate to 4.5 percent in 2019 from 5.8 percent in 2018. The recent fall in commodity prices, new spending initiatives, and looser spending oversight during the political transition period have led to a weaker fiscal position mostly financed by the central bank. In this context, international reserves have fallen to critically low levels creating urgent balance of payment needs. The new government is committed to implementing measures and reforms that would strengthen macroeconomic stability, reinforce international reserves, address issues related to poor governance, a difficult business environment, and pervasive poverty. Authorities also intend to boost domestic revenue by restoring the functioning of the value-added tax and enforcing the personal income tax, while improving mining revenue forecasting. In addition, the government intends to introduce strict spending caps, increase the effectiveness of monetary policy, and foster inclusive growth and private sector development including through infrastructure projects and free basic education. |
| Keywords: | Public debt;External debt;International reserves;Revenue administration;Mining sector;ISCR,CR,Congo,governance,holding,World Bank Group project |
| Date: | 2019–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/388&r=all |
| By: | Paolo Martellini; Guido Menzio; Ludo Visschers |
| Abstract: | We revisit the hypothesis that cyclical fluctuations in unemployment are caused by shocks to the discount rate. We use a rich search-theoretic model of the labor market in which the UE, EU and EE rates are all endogenous. Analytically, we show that an increase in the discount rate lowers the UE rate and, under some natural conditions, it lowers the EU rate. Quantitatively, we show that an increase in the discount rate from 4 to 10% generates a 3.5% decline in the UE rate and a 6% decline in the EU rate. The response of the unemployment rate is minuscule. These findings are at odds with the actual behavior of the US labor market over the business cycle, which features a negative comovement between the UE and EU rates and large unemployment fluctuations. We show that aggregate productivity shocks generate the correct comovement between the UE and EU rates, as well as large unemployment fluctuations. |
| Keywords: | Unemployment Fluctuations, Discount Rate, Human Capital, Lifecycle Earnings |
| JEL: | E24 J63 J64 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:296&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Cambodia discusses stable macroeconomic environment, strong growth and ongoing structural reforms have contributed to significant progress toward Sustainable Development Goals (SDGs). However, uncertainties including slower global growth and potential suspension of preferential market access under the Everything but Arms (EBA) scheme highlight the importance of maintaining macroeconomic stability while meeting still large development needs, addressing elevated financial sector vulnerabilities, and accelerating structural reforms. Continued strong revenue mobilization efforts and a prudent fiscal stance supported by restraining nondevelopment current spending will allow additional spending to address development needs. Expenditures should be oriented toward supporting inclusive growth through priority infrastructure investment, as well as health and education spending. Policies should be geared toward addressing sizeable spending needs to reach SDG targets in health, education and infrastructure, with support from the private sector and international donors. Accelerated implementation of structural reforms is needed to remove structural constraints to growth, correct external imbalances, address governance and corruption weaknesses and promote sustainable and inclusive development. |
| Keywords: | Public debt;External debt;Public investment and public-private partnerships (PPP);Infrastructure;Public investment spending;ISCR,CR,debt,authority,deficit |
| Date: | 2019–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/387&r=all |
| By: | Grahame Johnson; Sharon Kozicki; Romanos Priftis; Lena Suchanek; Jonathan Witmer; Jing Yang |
| Abstract: | This paper summarizes the literature on the performance of various extended monetary policy tools when conventional policy rates are constrained by the effective lower bound. We highlight issues that may arise when these tools are used by central banks of small open economies. Tools that have already been used by various central banks include forward guidance and balance sheet policies—such as quantitative easing, yield curve targeting, credit easing, funding-for-lending and purchases of other assets. The paper also touches on the use of negative interest rates. The evidence to date suggests that such tools have allowed central banks to ease financial conditions and thereby stimulate aggregate demand. The article also considers overt monetary financing (often referred to as “helicopter money†) as an additional tool if conditions require even more aggressive easing. We review the sequencing and pacing of the use of such tools, as well as spillover effects and financial stability concerns, as important aspects of implementation strategies. |
| Keywords: | Monetary policy; Monetary policy implementation; Monetary policy transmission |
| JEL: | E63 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:20-16&r=all |
| By: | Bailey, Andrew (Bank of England); Bridges, Jonathan (Bank of England); Harrison, Richard (Bank of England); Jones, Josh (Bank of England); Mankodi, Aakash (Bank of England) |
| Abstract: | This paper focuses on what has been learned from the past decade of previously unconventional monetary policy measures and the emerging lessons from the effects of monetary policy responses to the Covid shock. The paper explores two observations from recent quantitative easing (QE) policies in detail. First, large QE programmes implemented quickly may be particularly effective in times of market dysfunction. Second, a rapid pace of asset purchases may also enhance QE effectiveness during these periods. These observations suggest a particular form of ‘state contingency’ for the impact of QE. The paper analyses the potential implications of such state contingency for the appropriate conduct of QE policies and the choice of policy instruments in more normal times. The paper also outlines some potential implications for future central bank balance sheet policies and the operational framework to support them. |
| Keywords: | Monetary policy; financial stability; central bank balance sheet; quantitative easing; reserves |
| JEL: | E52 E58 |
| Date: | 2020–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0899&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Mexico discusses that growth is expected to accelerate modestly in the near-term, reaching 0.4 percent in 2019, as macroeconomic policies become less contractionary. Monetary policy has started easing in the context of a widening negative output gap and declining inflation. The administration’s solid mandate presents an opportunity to address Mexico’s longstanding structural challenges while maintaining very strong policies and policy frameworks. Staff highlighted the need to specify credible measures to reach the announced fiscal targets while adopting a more growth-friendly and inclusive policy mix. Increasing non-oil tax revenues, paired with improving the efficiency of spending, will be an imperative in this regard. The authorities have initiated a package of reforms to strengthen financial deepening and inclusion. |
| Keywords: | Revenue administration;Public debt;Imports;Credit;Banking;ISCR,CR,inflation expectation,executive board assessment,largely not observed |
| Date: | 2019–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/336&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Ghana’s Request for Disbursement Under the Rapid Credit Facility (RCF). Growth is slowing down, financial conditions have tightened, and the exchange rate is under pressure. This has resulted in large government and external financing needs. The authorities have timely and proactively responded to contain the spread of the coronavirus disease 2019 pandemic in Ghana and support affected households and firms. The IMF continues to monitor Ghana’s situation closely and stands ready to provide policy advice and further support as needed. The uncertain dynamics of the pandemic creates significant risks to the macroeconomic outlook. Ghana continues to be classified at high risk of debt distress. The authorities remain committed to policies consistent with strong growth, rapid poverty reduction, and macroeconomic stability over the medium term. Additional support from other development partners will be required and critical to close the remaining external financing gap and ease budget constraints. |
| Keywords: | COVID-19 ;Energy sector;Financial sector;International reserves;Credit;ISCR,CR,financing,Ghana,government financing Needs,government |
| Date: | 2020–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/110&r=all |
| By: | He, Qichun; Wang, Xilin |
| Abstract: | We incorporate endogenous human capital accumulation into a scale-invariant Schumpeterian growth model with endogenous market structure. Endogenous human capital accumulation leads to continuous entry of firms. Therefore, continuous horizontal innovation is sustained by human capital accumulation in the absence of population growth and becomes a twin engine of long-run growth (together with vertical innovation). We then study monetary policy by considering a cash-in-advance constraint on consumption. We find that when the capital share in final good production is low (high), the effect of inflation on growth is positive (negative). We then use cross-country panel regressions to test the theoretical prediction and find that inflation and capital share have a significant, negative interaction effect on growth, which provides support for our theory. |
| Keywords: | Monetary policy; Human capital; Endogenous market structure; Economic growth |
| JEL: | E41 I15 O30 O40 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104609&r=all |
| By: | Iania, Leonardo; Lyrio, Marco; Moura, Rubens |
| Keywords: | Risk Premia, Term Structure of Interest Rates, International Finance, Emerging Markets |
| JEL: | E43 E44 G15 |
| Date: | 2020–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ajf:louvlf:2020010&r=all |
| By: | Mario J. Crucini; Oscar O'Flaherty |
| Abstract: | State and local governments throughout the United States attempted to mitigate the spread of Covid-19 using stay-at-home orders to limit social interactions and mobility. We study the economic impact of these orders and their optimal implementation in a fiscal union. Using an event study framework, we find that stay-at-home orders caused a 4 percentage point decrease in consumer spending and hours worked. These estimates suggest a $10 billion decrease in spending and $15 billion in lost earnings. We then develop an economic SIR model with multiple locations to study the optimal implementation of stay-at-home orders. From a national welfare perspective, the model suggests that it is optimal for locations with higher infection rates to set stricter mitigation policies. This occurs as a common, national policy is too restrictive for the economies of mildly infected areas and causes greater declines in consumption and hours worked than are optimal. |
| JEL: | E3 E47 E62 H12 H23 H7 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28182&r=all |
| By: | Bichler, Shimshon; Nitzan, Jonathan |
| Abstract: | Until the late 2000s, our work focused primarily on why capitalism should be understood as a mode of power. We argued that capital itself is a form of organized power and researched how capitalists sustain, defend and augment their capitalized power. We called our approach ‘capital as power’ – or CasP, for short. But that’s only one side of the picture. Power is never unbounded. It is always resisted, opposed and constrained by those on whom it is imposed. And so, in the early 2010s, we started to examine more closely the limits of capitalized power and of the capitalist mode of power more generally. We called this research ‘the asymptotes of power’. In this paper, we revisit and update some of our work on these asymptotes in the United States and think about what they might mean for the future. |
| Keywords: | capital accumulation,capital as power,income distribution,profit,sabotage,unemployment,United States |
| JEL: | P16 E24 E61 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:capwps:202006&r=all |
| By: | Antonio De Socio (Bank of Italy) |
| Abstract: | Based on a large sample of mostly unlisted non-financial companies, this paper studies the relationship between business cycles and firms’ leverage, disentangling the relative contributions of debt and equity and assessing the role of firm size in explaining cross-sectional heterogeneity. I find that aggregate leverage initially increases during busts, as debt growth remains steady, while the counterbalancing contribution of equity is smaller; after one year, as debt slows down, leverage decreases. Moreover, firm size matters, also after controlling for other proxies of financial frictions (age, risk, profitability, debt structure): leverage increases more at the beginning of busts for both very large and smaller firms; after one year, leverage decreases less for the latter, mainly due to persistently lower profits. |
| Keywords: | debt, equity, firm size, business cycles, crises |
| JEL: | E32 G01 G32 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_587_20&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Democratic Republic of São Tomé and Príncipe’s Request for a 40-Month Arrangement Under the Extended Credit Facility (ECF). The ECF aims to support São Tomé and Príncipe’s economic and structural reforms. The program aims to reduce debt vulnerability, alleviate balance of payment pressures, restore fiscal and external sustainability over the medium term, promote sustainable and inclusive growth, and provide positive signals to stakeholders. Structural reforms should help mobilize revenue, enhance control over public spending, reduce contingent liabilities from state owned enterprises, improve financial stability, and promote sustainable and inclusive growth to reduce poverty, including through empowering women economically. The government plans to undertake sustained fiscal consolidation and reforms to reduce debt vulnerability. A floor on pro-poor spending, along with a World Bank social protection program, will protect the most vulnerable. The Fund-supported program will also play a catalytic role and provide positive signals to stakeholders. |
| Keywords: | Arrears;Revenue administration;National accounts;Banking;Public debt;ISCR,CR,ECF arrangement,debt,Extended Credit Facility arrangement,GDP |
| Date: | 2019–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/315&r=all |
| By: | Niko Hauzenberger; Michael Pfarrhofer; Anna Stelzer |
| Abstract: | In this paper, we investigate the effectiveness of conventional and unconventional monetary policy measures by the European Central Bank (ECB) conditional on the prevailing level of uncertainty. To obtain exogenous variation in central bank policy, we rely on high-frequency surprises in financial market data for the euro area (EA) around policy announcement dates. We trace the dynamic effects of shocks to the short-term policy rate, forward guidance and quantitative easing on several key macroeconomic and financial quantities alongside survey-based measures of expectations. For this purpose, we propose a Bayesian smooth-transition vector autoregression (ST-VAR). Our results suggest that transmission channels are impaired when uncertainty is elevated. While conventional monetary policy is less effective during such periods, and sometimes also forward guidance, quantitative easing measures seem to work comparatively well in uncertain times. |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2011.14424&r=all |
| By: | Georgia Bush; Tomás Gómez; Alejandro Jara; David Moreno; Konstantin Styrin; Yulia Ushakova |
| Abstract: | This paper studies whether domestic macroprudential policy may attenuate the inward transmission of monetary-policy shocks from the U.S. to domestic banks' lending growth in three emergingmarket economies -Chile, Mexico, and Russia. Identification relies on banks' heterogeneous exposure to the prudential policies and the fact that foreign monetary policy shocks are exogenous from the perspective of these economies. After analyzing the effects of the aggregate domestic prudential policy stance, we focus on specific prudential policies targeting mortgage and consumer loans, as well as foreign-currency deposits. Although our overall results are mixed, we find evidence that the strength of international monetary policy spillovers varies depending on the stance of the domestic macroprudential policy. In particular, a tighter reserve requirement stance over foreigncurrency deposits in Chile dampens the effect of an international monetary policy shock on domestic local-currency lending, but reinforces that on foreign-currency lending, whereas in Russia, it dampens the effect on both local currency and foreign currency lending, although to different degrees. Prudential policies targeting the asset side of banks' balance sheets, such as mortgage loans or consumer credit, are found to amplify international monetary policy spillovers in some cases and attenuate in others, depending on the country context. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:chb:bcchwp:893&r=all |
| By: | Membreño, Luis; López, Jennifer; Jiménez, Kenneth |
| Abstract: | In the present study, we estimate the symmetric and asymmetric multipliers of expenditure and income for Nicaragua. For the symmetric model we used the Structural Vector Autoregressive (SVAR) to identify the fiscal multipliers on the product, consumption and investment. For the asymmetric model we used the local projections approach. The results of the linear model found that spending and income multipliers of the Central Government are less than one Córdoba for GDP, consumption and private investment. Likewise, the results suggest that capital spending has a greater effect on the product. Regarding to the non-linear model, a slight asymmetry was evidenced in the spending multipliers while the income multiplier was always negative no matter the state of the economy. |
| Keywords: | Fiscal policy, Fiscal multipliers, Asymmetry, Structural Vector Autoregressive, Local projections. |
| JEL: | E62 |
| Date: | 2020–12–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105040&r=all |
| By: | Ержан Ислам (National Bank of Kazakhstan); Орлов Константин (National Bank of Kazakhstan) |
| Abstract: | В настоящей работе описан подход к осуществлению сезонной корректировки индекса потребительских цен для Казахстана, и на основании ее результатов приведены примеры построения вспомогательных индексов, учитывающих фундаментальное поведение цен и очищенных от влияния временных факторов. // This paper describes an approach to the implementation of seasonal adjustment of the consumer price index for Kazakhstan, and based on its results, examples of constructing auxiliary indices that take into account the fundamental behavior of prices and are cleared of the influence of temporary factors are given. |
| Keywords: | inflation, seasonal adjustment, core inflation, trending inflation, инфляция, сезонная корректировка, базовая инфляция, трендовая инфляция |
| JEL: | C19 E31 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:aob:wpaper:5&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Ecuador’s Second and Third Reviews Under the Extended Fund Facility Arrangement and Request for a Waiver of NonObservance and Modifications of Performance Criteria. The Ecuadorian authorities have continued to make progress in strengthening the country’s fiscal and external positions and have appropriately recalibrated their economic program to include a more moderate fiscal consolidation and international reserves’ paths in response to recent developments and to protect pro-poor growth and social spending. Public financial management reforms are paramount to secure fiscal sustainability in the longer term. The reform of the central bank aimed at strengthening central bank autonomy, accountability, and governance will be instrumental in supporting the dollarization regime, boosting reserves, and ensuring their prudent management. Efforts to raise competitiveness should continue to focus on improving transparency, strengthening governance, increasing efficiency of the public sector, and creating conditions in the labor market to facilitate hiring and female participation. |
| Keywords: | Public debt;International reserves;Credit;Fiscal stance;Expenditure;ISCR,CR,IMF executive board Concludes Second,authority,spending,government,subsidy |
| Date: | 2019–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/379&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper highlights Republic of Equatorial Guinea’s Request for an Extended Arrangement Under the Extended Fund Facility and Second Review Under the Staff-Monitored Program. The IMF-supported program aims at maintaining macroeconomic and financial stability, while improving social protection, fostering economic diversification, strengthening governance and fighting corruption. The Equatoguinean economy has been impacted by a sharp decline in oil prices and a secular decline in hydrocarbon output, which led to large macroeconomic imbalances and negative economic growth. Increasing transparency, improving governance and fighting corruption are critical to improve socio-economic outcomes. Structural reforms are expected to play a crucial role in supporting fiscal consolidation and improving growth prospects. The program comprises reforms to the business environment and other reforms to promote economic diversification and support the achievement of sustainable economic growth. Program implementation remains subject to some downside risks, including volatility in hydrocarbon prices, and Public Financial Management (PFM), governance and corruption vulnerabilities. |
| Keywords: | Arrears;Fiscal stance;Public financial management (PFM);Revenue administration;External debt;ISCR,CR,governance,authority,corruption challenge,Equatoguinean economy,amount,anti-corruption framework |
| Date: | 2019–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/384&r=all |
| By: | Zongwu Cai (Department of Economics, The University of Kansas, Lawrence, KS 66045, USA); Jiazi Chen (The Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, Fujian 361005, China); Linlin Liu (The Wang Yanan Institute for Studies in Economics, Xiamen University, Xiamen, Fujian 361005, China and MOE Key Lab of Econometrics and School of Economics, Xiamen University, Xiamen, Fujian 361005, China) |
| 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 demo- graphic 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 boomerÕs life cycle, the remaining term structure component is stationary with counter-cyclical risk premia. |
| Keywords: | Demographic distribution, Life cycle, Term structure models, Semi- parametric model, Functional data analysis |
| JEL: | E43 G12 J11 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:kan:wpaper:202102&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Republic of Georgia’s Fifth Review Under the Extended Arrangement, Requests for Waivers of NonObservance of Performance Criteria, Modification of Performance Criteria, and an Extension of the Arrangement and Rephasing of Access. Georgia’s gross domestic product (GDP) growth remains on track to reach 4.6 percent despite the ban on direct flights from Russia. Strong revenue growth has more than offset higher-than-envisaged capital spending, and the 2019 fiscal deficit is likely to be lower than projected at the Fourth Review. The 2020 budget implies a neutral fiscal stance; spending on education and social benefits is expected to rise, while overall current primary spending would remain unchanged. Medium-term fiscal plans are anchored at keeping net debt below 45 percent of GDP. The central bank should maintain a tightening bias until inflation expectations are firmly anchored. The planned emergency liquidity assistance and bank resolution framework will strengthen financial stability. Decisive implementation of structural reforms is critical to support higher and more inclusive growth. Advancing education reform, adopting the insolvency framework, developing the local capital market, and judiciary reform will further improve the business environment and support private investment. |
| Keywords: | External debt;Loans;Public debt;Credit;Foreign exchange;ISCR,CR,IMF staff country,monetary policy,deficit |
| Date: | 2019–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/372&r=all |
| By: | Bove Guillaume; Dees Stéphane; Thubin Camille |
| Abstract: | We develop a model of house prices and household indebtedness and include it in the Banque de France's semi-structural macroeconomic model in order to analyse the implications of mortgage debt dynamics on economic fluctuations and financial stability in France. Our results show that accounting for household financial vulnerability in the distribution of loans is key to prevent large credit and house price fluctuations from reinforcing each other in the long term. Moreover, our model shows that measures constraining the indebtedness of households (regarding the maturity of loans or borrower-based caps) helps reducing short- to medium-term financial instability dynamics. |
| Keywords: | Semi-structural Models, House Prices, Mortgage Debt |
| JEL: | E51 E47 C51 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:787&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Cote d’Ivoire’s Sixth Review Under the Arrangement of the Extended Credit Facility and the Extended Arrangement Under the Extended Fund Facility, and Request for Extension and Augmentation of Access. Côte d’Ivoire has been pursuing a development-oriented policy agenda, and the IMF-supported program in place since 2016 has supported that focus, paving the way for the private sector to become the main driver of growth. The performance under the program has been strong. The medium-term growth prospects remain robust, predicated on continuing prudent macroeconomic policy, furthering financial sector reforms and sustaining structural reforms to bolster private sector-led inclusive growth. Côte d’Ivoire’s reform efforts have resulted in improvements in its business climate in recent years. It will be imperative to continue the reform agenda to further stimulate private sector activity and support inclusive growth, including by improving the energy sector, human capital and financial inclusion, accelerating digitalization, enhancing trade connectivity and governance, expanding the coverage of social safety nets, and reinforcing the statistical apparatus to help better inform economic policy. |
| Keywords: | Public debt;External debt;Revenue administration;Debt sustainability;Stress testing;ISCR,CR,summary debt service table,debt,authority,reform agenda |
| Date: | 2019–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/366&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents The Gambia’s First Review of the Staff-Monitored Program and Request for a 39-Month Arrangement Under the Extended Credit Facility (ECF). The IMF-supported program aims to help The Gambia to be better prepared for external shocks, pursue high and inclusive growth, lessen debt vulnerabilities, strengthen public financial management, and bolster domestic revenue mobilization. The ECF arrangement is essential to help the authorities deal with the challenges posed by the coronavirus disease 2019 pandemic. The Gambian authorities’ commitment to prudent policies and institutional improvements has supported robust economic growth, while voluntary debt service deferrals from their main external creditors have helped attain debt sustainability. The authorities should remain committed to fiscal consolidation in the medium-term to ensure debt sustainability. The vulnerabilities identified in the 2019 Financial Sector Stability Assessment should be addressed to ensure soundness of the financial sector and improve legal and supervisory framework for banking supervision. The authorities should leverage the financial inclusion strategy, including through mobile banking, while strengthening the oversight of nonbanking institutions and monitoring of risks involved in mobile banking. |
| Keywords: | External debt;Public debt;Debt service;Debt sustainability analysis;Domestic debt;ISCR,CR,end-March program target,ECF arrangement,end-March program ceiling,March,government financing needs |
| Date: | 2020–04–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/102&r=all |
| By: | ; Philippe Andrade; Olivier Coibion; Yuriy Gorodnichenko |
| Abstract: | We study how firms’ expectations and actions are affected by both aggregate and industry-specific conditions using a survey of French manufacturing firms. We document an important new stylized fact. In response to industry-level shocks that have no aggregate effects, firms’ aggregate expectations respond persistently. This is consistent with “island” models in which firms use the local prices they observe to make inferences about broader aggregate conditions. We then assess the extent to which these patterns are related to observable characteristics of firms and the industries in which they reside. Finally, we extend the analysis to firms’ expectations of their own future price changes and document how these respond to both industry and aggregate variation. |
| Keywords: | expectations; rational inattention |
| JEL: | E2 E3 E4 |
| Date: | 2020–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:89290&r=all |
| By: | International Monetary Fund |
| Abstract: | The COVID-19 pandemic has led to severe socio-economic dislocations and hardship. Supported by an unprecedented policy response and by the easing of lockdown measures as the infection rate moderated, the euro area economy initially recovered strongly from the pandemic’s first wave. However, a large second wave and reimposition of containment measures suggest much slower growth momentum in the near term. The outlook is for a subdued economic recovery and low inflation, with a significant permanent output loss relative to the pre-crisis trajectory. Uncertainty remains extremely high, mainly due to different pandemic scenarios, including regarding the availability and effectiveness of potential vaccines and therapies and behavioral changes. Output growth is expected to be much lower through 2021Q1 than projected in 2020 October World Economic Outlook (WEO) but may rebound beyond then in light of recent promising news on vaccine development. The key policy challenge is to continue countering the pandemic while facilitating a robust and inclusive recovery, including by addressing the health crisis, containing economic scarring, supporting resource reallocation and transformation to greener and more digital economies, and limiting the crisis’s impact on inequality and poverty. In a downside scenario, sizable further stimulus would be needed. |
| Date: | 2020–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/324&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper highlights Honduras’ First Reviews Under the Stand-By Arrangement and the Arrangement Under the Stand-By Credit Facility, and Request for Modification of Performance Criteria. Despite headwinds to growth and a challenging external environment, the Honduran authorities remain fully committed to the economic program supported by the IMF. They have maintained prudent macroeconomic policies—the fiscal position is in line with the Fiscal Responsibility Law, inflation is within the central bank’s target band, and the current account deficit has narrowed despite adverse terms of trade—and have taken initial steps on structural reforms to promote sustained, inclusive growth. Important measures to strengthen the governance and anti-corruption frameworks have been incorporated into the program, adding to the ongoing efforts to strengthen the institutional framework in the central bank and in public finances, and to improve the business environment. The authorities are expected to protect the revenue mobilization efforts made over the past years to reduce the infrastructure gap and increase social spending. These efforts seem to be critical to reduce poverty and inequality, while maintaining a prudent fiscal position that secures debt sustainability over the medium term. |
| Keywords: | Credit;Revenue administration;Public sector;Banking;Loans;ISCR,CR,revenue mobilization effort,target band,authority,SCF arrangement,BCH authorities |
| Date: | 2019–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/377&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with People’s Republic of China—Hong Kong Special Administrative Region (SAR) discusses that the economy is projected to start recovering next year, but the pace is expected to be gradual and both near- and medium-term risks have increased significantly, including from trade and technology tensions, ongoing social unrest, and structural challenges of insufficient housing supply and high income inequality. Hong Kong SAR is well placed to address both cyclical and structural challenges with its significant buffers thanks to its long history of prudent macroeconomic policies. Given that the fiscal framework permits deficits during economic downturns, government spending should be increased significantly in the areas of social safety nets, education/retraining, and infrastructure to cope with the cyclical downturn and address structural challenges of insufficient housing and high-income inequality. This should be complemented with measures to ensure fiscal sustainability and greater equity. |
| Keywords: | Housing prices;Housing;Banking;External sector statistics;Monetary statistics;ISCR,CR,China,Hong Kong SAR,price,article IV consultation discussion,HK dollar |
| Date: | 2019–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/394&r=all |
| By: | International Monetary Fund |
| Abstract: | The UK entered 2020 negotiating a new economic relationship with the EU and facing other challenges, including meeting climate targets, dealing with an aging population, and reinvigorating tepid productivity growth. Growth and investment had been weak since the 2016 referendum, and the current account deficit elevated, but unemployment was low, inflation on target, and balance sheets strong. The global pandemic hit the UK hard in March, and the country now faces a second wave. The economic impact has been severe, but helped by an aggressive policy response, jobs have been preserved, businesses kept afloat, and banking sector losses contained. Still, the outlook for the near term is weak, as the economy works through the second wave, Brexit, rising unemployment, and corporate distress. Risks are overall to the downside, centering on the degree of balance sheet damage sustained by households and small and medium enterprises. The pace at which vaccines are able to bring the pandemic under control could be an important mitigating factor. |
| Date: | 2020–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/320&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper highlights Rwanda’s Request for Disbursement Under the Rapid Credit Facility (RCF). The economic impact of the coronavirus disease 2019 pandemic is rapidly unfolding with the near-term outlook deteriorating quickly. This has given a rise to significant fiscal and external financing needs. The authorities have acted fast by putting in place measures to help contain and mitigate the spread of the disease. The RCF funds will support the authorities’ efforts by backstopping the decline in international reserves and providing financing to the budget for increased spending aimed at containing the epidemic and mitigating its economic impact. This additional IMF financing also ought to help catalyze further assistance from the international community, preferably in the form of grants. The IMF continues to monitor Rwanda’s situation closely and stands ready to provide policy advice and further support as needed. Monetary policy needs to be data-driven and the central bank should stand ready to provide additional liquidity support if warranted. A flexible exchange rate should be maintained as a shock absorber. The National Bank of Rwanda has taken various measures to help maintain the health of the financial sector and should continue to show flexibility, while encouraging prudent loan restructuring and stepping up reporting requirements. |
| Date: | 2020–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/115&r=all |
| By: | International Monetary Fund |
| Abstract: | Prior to the COVID crisis, Côte d’Ivoire had established a strong track record of economic policies, although domestic revenue mobilization has disappointed. The authorities reacted swiftly to the pandemic, supported by emergency financing from the IMF and other donors. They implemented a health and economic response plan combined with frontloaded capital spending, relaxing the 2020 fiscal stance by 3½ ppt of GDP compared to pre-COVID projections. The authorities will start consolidating the fiscal position in 2021 while supporting the recovery, with tax measures underpinning the 2021 budget. Beyond, the authorities are committed to returning to the regional fiscal deficit norm of 3 percent of GDP by 2023. The October 2020 presidential election was accompanied by socio-political tensions. |
| Date: | 2020–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/321&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Greece discusses that public debt is projected to trend down over the next decade, though long-term sustainability is not assured under realistic macro-fiscal assumptions. Still-weak bank balance sheets act as a drag on growth prospects and pose significant fiscal and financial stability risks. These and other factors leave Greece vulnerable to a range of external and domestic shocks. Greece’s prospects for improved living standards and economic convergence within the Euro Area (EA) depend on implementing a critical mass of inter-related fiscal, financial, and structural policy reforms. In order to achieve better growth and social outcomes, the fiscal policy mix should be improved, with more emphasis on investment and targeted social spending and lower direct taxes, backed by reforms in revenue administration and public financial management. Greece’s success within the currency union critically hinges on narrowing its structural competitiveness gap. Policies should focus on productivity enhancement through improved labor market flexibility, more effective labor activation policies, stronger institutions, and business deregulation. |
| Keywords: | Banking;Fiscal stance;Loans;Tax administration core functions;Fiscal policy;ISCR,CR,authority,reform,cornerstone program-era labor market reform,reform implementation,bank balance balance sheet |
| Date: | 2019–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/340&r=all |
| By: | Kilian Huber |
| Abstract: | The effects of large banks on the real economy are theoretically ambiguous and politically controversial. I identify quasi-exogenous increases in bank size in postwar Germany. I show that firms did not grow faster after their relationship banks became bigger. In fact, opaque borrowers grew more slowly. The enlarged banks did not increase profits or efficiency, but worked with riskier borrowers. Bank managers benefited through higher salaries and media attention. The paper presents newly digitized microdata on German firms and their banks. Overall, the findings reveal that bigger banks do not always raise real growth and can actually harm some borrowers. |
| JEL: | E24 E44 G21 G28 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8746&r=all |
| By: | Ã sgeir Daníelsson |
| Abstract: | In this paper we study volatility of national accounting aggregates for Iceland and compare it to volatility of these aggregates for other OECD countries. The paper uses three different methods to measure volatility: 1) log deviations from trend obtained using HP filter; 2) log deviations from trend obtained using the filter suggested by J.D. Hamilton; 3) log changes in the series. The paper studies effects of filters like seasonal adjustments on measured volatility. In most cases seasonal factors account for much of the variance in the unadjusted time series. Iceland and Ireland are outliers in this respect asseasonal variations explain relatively small part of the variance in the unadjusted series. We compare volatility of quarterly data to volatility of annual data and derive approximate formulas for the measures of volatility in annual data in terms of voltility and autocorrelations of the quarterly series. In most cases measured volatility in quarterly and annual data give similar pictures of the volatility of national accounting aggregates in a given country, but there are exceptions. Iceland is an outlier in this respect as the increase in the volatility of annual data for consumption is very large compared to volatility of seasonally adjusted data when log changes in the series are used to measure volatility. Much higher autocorrelations in the data forseasonally adjusted consumption compared to GDP explain why consumption can be less volatile than GDP in terms of seasonally adjusted quarterly data, but much more volatile in terms of annual data. We also study the relationship between the volatility of consumption and volatility of GDP. In almost half of the countries in our data set of 34 OECD countries consumption is more volatile than income measured by GDP. Finally, this paper studies the relationship between the size of an economy and its volatility and use it to assess if the Icelandic economy is more volatile than is to be expected when its size is taken into account. |
| JEL: | E01 E30 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:ice:wpaper:wp83&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation discusses that in an increasingly uncertain global economic environment, Hungary’s growth registered one of the highest rates in Europe in 2018. The economy now appears to be running above capacity and wages are growing rapidly amid historically low unemployment. It is thus likely that growth will slow down over the medium term. Supply-side reforms can help sustain the momentum. Policies have reduced vulnerabilities substantially; however, measures to support the targeted fiscal consolidation could be more ambitious to ensure that room for fiscal policy manoeuvre is rebuilt. Wages outstripping labor productivity growth, slower export growth, and shortcomings in the business environment for small and medium enterprises call for invigorating structural reform efforts. Improvements in competitiveness are needed to sustain rapid income convergence and address demographic challenges. The government’s competitiveness program contains important elements. Focus should be on improving the business environment, enhancing the legal and regulatory framework, and increasing labor force participation. |
| Keywords: | Public debt;Inflation;Expenditure;Labor;Labor markets;ISCR,CR,headline inflation,MNB,rate,holding |
| Date: | 2019–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/357&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Suriname discusses that Suriname continues to grow steadily with low inflation. However, there has been little progress in implementing urgently needed fiscal reforms, and the fiscal position is likely to continue to weaken in the coming year. The consultation focused on policies to bolster the economy in the medium term. These include fiscal measures to enhance revenues and efficiency and lower expenditures, policies to improve the monetary and financial sector supervision frameworks, and structural policies to boost potential growth. Advances have been made in developing the central bank’s monetary tools and facilities; however, more is needed to strengthen the credibility of the monetary framework. The banking sector faces important downside risks and there are gaps in the central bank’s supervisory and resolution framework. It is advised to put the public debt on a sustainable path. A significant reduction in the fiscal deficit could be achieved by implementing a value-added tax, curtailing electricity subsidies except to the poor, and improving public financial management. |
| Keywords: | Banking;Monetary base;Public debt;International reserves;Exchange rates;ISCR,CR,CBvS,central bank,GDP,Suriname |
| Date: | 2019–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/391&r=all |
| By: | PINSHI, Christian P. |
| Abstract: | This paper attempts to answer the optimal question, that of decelerating the spread of COVID-19 without damaging the economy. Proceeding through standard thinking of dynamic optimization theory à la Fujita, we believe that workers need to come into contact with other workers less and less, Government should regulate workers so that their contact rate is lower ( by reducing the number of employees per office and by encouraging teleworking) and finally, Government should stop confining while insisting on maintaining barrier gestures to cushion the loss of GDP and preserve the economy. |
| Keywords: | Economy, COVID-19, Optimization, Hamiltonian |
| JEL: | C61 E23 E60 H00 I18 O47 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105107&r=all |
| By: | Alabi, M. K. (University of Ilorin); Amirthalingam, K. (University of Colombo) |
| Abstract: | The Economic Community of West African States has come up with a new single currency to be used for its proposed West African monetary union. It is called eco. Among the West African states are a group of countries collectively referred to as the West African Monetary Zone. For the smooth running of a monetary union, fiscal policy should be sustainable and countercyclical. Main objectives of this study are to assess the relationship between fiscal policy and the business cycle and the role of institutions. Panel data of six countries for the period 2001-2018 were used. A fiscal reaction model was estimated. The cyclical component of real general government expenditure was used to represent fiscal policy while the cyclical component of real Gross Domestic Product (GDP) was used as a proxy for the business cycle. Results showed that West African Monetary Zone member countries exhibit pro-cyclical fiscal policy and weak fiscal sustainability. Also, the quality of institutions has the capability of making fiscal policy less procyclical. The policy implication of this study’s finding is that these countries may not perform well if they go ahead with the single currency union. These countries must make concerted efforts to improve the quality of institutions and implement countercyclical fiscal policies. Meanwhile the proposed monetary union should be suspended. |
| Keywords: | Fiscal Policy; Business cycle; Monetary Union; West African Monetary Zone; Pro-cyclical |
| Date: | 2020–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:decilo:0008&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Arab Republic of Egypt’s Fifth Review Under the Extended Fund Facility (EFF). Macroeconomic performance has remained strong in 2018/19, supported by continued sound policy implementation. The report highlights that monetary policy remains anchored by the medium-term objective of bringing inflation to single digits. Core inflation appears to be well contained, however the central bank should remain cautious until disinflation is firmly entrenched. Exchange rate flexibility remains essential to improve resilience to shocks and preserve competitiveness. The outlook remains favorable and provides an opportune juncture to further advance structural reforms to support more inclusive private-sector led growth and job creation. The authorities have launched important reforms of competition policy, public procurement, industrial land allocation, and state-owned enterprises, and sustained implementation will be essential to ensure that statutory changes achieve meaningful results in the business climate. Sustained efforts are needed to advance reforms in competition, industrial land allocation, and governance of state-owned enterprises. |
| Keywords: | Public debt;External debt;Inflation;Energy subsidies;Structural reforms;ISCR,CR,authorities' economic reform program,core inflation,private sector,authority,Egypt-IMF Executive Board |
| Date: | 2019–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/311&r=all |
| By: | Tomas Reichenbachas (Bank of Lithuania) |
| Abstract: | In this paper, we adopt a dual micro-and-macro simulation strategy to assess the impact of introducing (or changing) the LTV limit. Due to the nature of borrower-based macroprudential measures, to assess this impact we need to use borrower-level micro data. Tightening (or loosening) the LTV limit increases the share of borrowers constrained by the policy measure in question; thus, the overall impact depends on initial market conditions. We find that the introduction of an LTV limit of 85 % in 2011 had a modest short-term impact on economic activity because the new regulatory limit was non-binding for most borrowers at the time. We estimate that if the LTV limit would not have been introduced, the household loan portfolio would have grown on average 1.5 percentage points faster per year (over 2012-2014). This would have led to a 0.5 percentage point higher housing price growth and a 0.2 percentage point higher real GDP growth. When the macroprudential LTV limit is binding for a significant portion of borrowers, lowering the LTV limit at current market conditions has a much more pronounced effect. We show that if the LTV limit had been implemented at the end of 2004, it would have substantially helped in tempering the credit and housing boom, albeit at the cost of lowering economic growth. |
| Keywords: | Financial stability, Macroprudential policy, Borrower-based macroprudential policy instruments, LTV limit |
| JEL: | C32 C53 E58 G28 |
| Date: | 2020–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:lie:wpaper:80&r=all |
| By: | Thibault Lemaire (Université Paris 1 Panthéon – Sorbonne) |
| Abstract: | The relative price Phillips curve hypothesis gives a better account of the dynamics of the Egyptian economy than the price Phillips curve. Using standard aggregate macroeconomic quarterly data for the Egyptian economy from 2003q1 to 2019q1 to obtain Ordinary Least Squares and Generalized Method of Moments estimates for four versions of the Phillips curve, this article provides evidence that the exchange rate regime affects the relation between prices and unemployment in emerging economies: while an economic boom leads to lower unemployment and higher inflation in a fixed exchange rate regime, the nominal appreciation of the currency negatively affects imported goods prices and flattens the price Phillips curve in a flexible exchange rate regime. The results also suggest a broken link between inflation and unemployment during the Egyptian Revolution and the subsequent period, raising questions on macroeconomic management in times of political turmoil. |
| Date: | 2020–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1453&r=all |
| By: | Candelon, Bertrand; Luisi, Angelo |
| Keywords: | Global VAR, Structural VAR, Likelihood Ratio Test, Interdependence |
| JEL: | C12 C32 C52 E44 H63 |
| Date: | 2020–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ajf:louvlf:2020009&r=all |
| By: | McLeay, Michael; Tenreyro, Silvana |
| Abstract: | Several academics and practitioners have pointed out that inflation follows a seemingly exogenous statistical process, unrelated to the output gap, leading some to argue that the Phillips curve has weakened or disappeared. In this paper, we explain why this seemingly exogenous process arises, or, in other words, why it is difficult to empirically identify a Phillips curve, a key building block of the policy framework used by central banks. We show why this result need not imply that the Phillips curve does not hold—on the contrary, our conceptual framework is built under the assumption that the Phillips curve always holds. The reason is simple: if monetary policy is set with the goal of minimizing welfare losses (measured as the sum of deviations of inflation from its target and output from its potential), subject to a Phillips curve, a central bank will seek to increase inflation when output is below potential. This targeting rule will impart a negative correlation between inflation and the output gap, blurring the identification of the (positively sloped) Phillips curve. We discuss different strategies to circumvent the identification problem and present evidence of a robust Phillips curve in US data. |
| JEL: | J1 |
| Date: | 2020–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:103080&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Cyprus discusses that following a period of very rapid growth in the aftermath of the economic crisis, growth is gradually settling in at a more sustainable but still relatively robust pace despite the external slowdown. Output is projected to rise by around 3 percent in 2019–20, supported by construction and services sectors. Good progress has been made in addressing domestic and external stability risks arising from legacies of the financial crisis. Sales of nonperforming loans (NPLs), amendments to the foreclosure and insolvency framework and resolution of a large systemic bank have helped strengthen bank balance sheets. Reversal of reforms to the foreclosure framework would hinder ongoing NPL resolution efforts and create risks for financial stability. Realization of contingent liabilities from the still weak banking sector or increased fiscal spending pressures could undermine investor confidence, raising interest costs and depressing growth. Cyprus needs to build on recent gains by advancing reforms to secure macroeconomic stability, enhance efficiency and strengthen productivity and growth potential. |
| Keywords: | Nonperforming loans;Banking;Public debt;Loans;Fiscal stance;ISCR,CR,Cyprus,growth,Cyprus economy,EFF arrangement,debt |
| Date: | 2019–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/362&r=all |
| By: | Florian Pelgrin (EDHEC Business School); Alain Venditti (Aix-Marseille Univ., CNRS, AMSE and EDHEC Business School) |
| 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 |
| JEL: | C62 E32 O41 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2048&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Lebanon highlights that Lebanon’s economic position continues to be very difficult, with very low growth, high public debt and large twin deficits. While financial stability has been maintained, deposit inflows, critical to finance the budget and external deficits, slowed down during the past year, reducing the authorities’ room for manoeuvre. The new government has taken some important policy steps to start the needed policy adjustment, which could help raise confidence among investors and donors. The highest priority is the implementation of a sustainable fiscal adjustment that will bend down the path of the public debt-to-gross domestic product ratio through a combination of revenue and expenditure measures. This needs to be complemented by structural reforms and concessionally financed investment to raise Lebanon’s growth potential and help external adjustment, as well as policies to build further buffers in Lebanon’s financial sector. Structural reforms should prioritize reforming the electricity sector, removing impediments to and lowering the cost of doing business, as well as improving governance and reducing corruption. |
| Keywords: | Public debt;Revenue administration;Budget planning and preparation;National accounts;Electricity;ISCR,CR,power sector reform agenda,government,government infrastructure,deficit |
| Date: | 2019–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/312&r=all |
| By: | Nicolas End (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.) |
| 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 |
| JEL: | E60 H30 H11 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2042&r=all |
| By: | Ritzen, Jozef M. (UNU-MERIT, Maastricht University) |
| Abstract: | In 2021 lockdowns still will be necessary to keep COVID-19 in check world-wide. Vaccination might bring sufficient coverage by the end of 2021 for some countries. Priorities in the re-emergence of economies should be for sustainability, health, education, full employment and social cohesion to preserve long-term welfare. Pressures on Government budgets are going to rise in view of the unprecedented high public debt to GDP ratio world-wide. Increased taxation of wealth and of the top 10%-income-group is a superior strategy compared to retrenchment (budget cuts in health, education and social expenditures). International cooperation is top priority. This applies to health, but also to economic and monetary policy: it can lift economic growth in the G20 countries over the short and long run by at least one third. The resumption of trade should be guided by rewarding the achievement of social goals and realizing sustainability. In this way the level playing field is restored for those countries which want to contribute to a sustainable world and to cooperation. International taxation rules for profits should prevent tax havens to make this a negative sum game. This would give developing countries some of the necessary breathing space to re-emerge from the COVID-19 crisis. |
| Keywords: | COVID-19, employment, economic development, environmental sustainability, social cohesion, education, health, monetary policy, long-term interest rates, conditionalities, taxation, stock market |
| JEL: | I00 J20 H63 H74 O38 O40 O43 O44 E62 E43 Q58 F18 F23 O52 R30 I25 F30 G15 H25 H87 |
| Date: | 2020–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:unm:unumer:2020057&r=all |
| By: | International Monetary Fund |
| Abstract: | This technical note on balance sheet risks and financial stability on France discusses that macroprudential policy setting faces the challenge of identifying growth of financial and macroeconomic variables above and below potential. A macro-financial structural model is presented that captures: sectoral dynamics of firms and banks and feedbacks between them; capital and default risk dynamics of each sector; capital and risk gaps i.e., deviations of capital and default risk from potential, and it provides; and a quantitative method for measurement. The report finds that default risk fluctuates during time between being too high and too low. Risk is too high during four episodes: prior to the Technology Crisis, prior to the Global Financial Crisis, prior to the Sovereign Debt Crisis, and now. The analysis implies that firms should be encouraged to strengthen their equity capital base by retaining earnings or issuing equity. This could be done also indirectly by publishing related research. |
| Keywords: | Insurance companies;Banking;Nonbank financial institutions;Cross-border effects;Debt default;ISCR,CR,financial crisis,capital base,equity capital,risk gap |
| Date: | 2019–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/324&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Togo’s Fifth Review Under the Extended Credit Facility (ECF) Arrangement. The report highlights that the economic recovery seems to be taking hold. Inflation stood at 0.6 percent at end-July 2019. Given high debt levels, revenue mobilization efforts and spending prioritization should continue, while addressing the persistent underperformance on social spending to enhance economic inclusiveness and to reduce poverty. It is important to address the weaknesses in the two public banks transparently. A successful privatization of these two banks would safeguard financial stability and minimize costs to the State budget. Broader financial sector developments should also be monitored, and corrective actions should be taken as needed, including in terms of the high nonperforming loans. Structural reforms are progressing on tax policy, revenue administration, and public expenditure management. Significant progress has also been made in the improvement of the business environment, which is expected to boost domestic and foreign private investment. |
| Keywords: | Public debt;External debt;Fiscal stance;State-owned banks;Government debt management;ISCR,CR,debt,authority,expenditure,disbursement of SDR |
| Date: | 2019–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/333&r=all |
| By: | Paul J.J. Welfens (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)) |
| Abstract: | Cumulated inward foreign direct investment has two major macroeconomic effects: (i) on the one hand, there is a positive international technology transfer effect on real GDP (ii) on the other hand, real national income is reduced by profit remittances to the source country. This naturally leads to the question of an optimal FDI share in the total capital stock, namely for maximizing real national income. The analysis presented herein derives new results for the rather simple case of asymmetric inward foreign direct investment and the setting of international mergers & acquisitions. Moreover, an enhanced neoclassical growth model also shows new results for the golden age - the approach assumes that the output elasticity can change and that the FDI inward intensity will affect the output elasticity of capital; empirical evidence for OECD countries is presented. From this transparent analytical framework, clear results for optimal inward FDI are obtained and the implications are indeed relevant in a modern macroeconomic research perspective which includes FDI analysis in open economies. There are crucial economic policy implications for policy makers as well international organizations; the approach also can be integrated into DSGE models. |
| Keywords: | FDI, technology transfer, optimal economic policy, economic welfare analysis, Schumpeter |
| JEL: | E6 F15 F21 F23 F41 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:bwu:eiiwdp:disbei283&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents 2019 Article IV Consultation with Republic of Afghanistan and its Sixth Review Under the Extended Credit Facility Arrangement. Despite difficult circumstances, the Afghan authorities have continued to demonstrate strong commitment to the economic program supported by the Extended Credit Facility arrangement. Given the uncertain outlook dominated by downside risks, policies should focus on maintaining macroeconomic and financial stability and putting the conditions in place for stronger and more inclusive growth, led by the private sector. The authorities have made progress with their self-reliance agenda, yet strong financial support from donors is needed to help Afghanistan stay on the path to greater prosperity. Fiscal policy should continue to target a broadly balanced budget, supported by fair and sustainable domestic revenue mobilization and strong financial support by donors. Resources should shift toward pro-growth and pro-poor outlays and create fiscal space to meet the country’s considerable development needs. |
| Keywords: | Public debt;Currencies;Credit;Banking;Corruption;ISCR,CR,Afghanistan,right,authority,debt |
| Date: | 2019–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/382&r=all |
| By: | Olena Kostyshyna; Étienne Lalé |
| Abstract: | The number of workers who hold more than one job (a.k.a. multiple jobholders) has increased spectacularly in Canada since the mid-1970s – it has been multiplied by almost three. In this paper, we document this historical change and provide a comprehensive account of its dynamics. To this end, we use restricted-access panel micro-data from the Canadian labour force survey to construct transition probabilities in and out of multiple jobholding. We analyze these data through the lens of a trend decomposition that separates out the role of worker inflows and outflows. The upward trend in multiple jobholding is chiefly explained by the increased likelihood of single jobholders to pick up second jobs. While economic reasons remain important among the motives that push workers towards multiple jobholding, a more flexible hours schedule in the main job may explain why taking on a second job has become more frequent. |
| Keywords: | Multiple Jobholding,Worker Flows,Long-run Trends,Business Cycles, |
| JEL: | E24 J21 J22 J60 |
| Date: | 2020–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2020s-69&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Tunisia’s Request for Purchase Under the Rapid Financing Instrument (RFI). The IMF financing will support the authorities’ emergency measures to contain the spread of the virus and mitigate its human, social, and economic toll amid unprecedented uncertainty. These measures involve raising health spending, strengthening social safety nets, and supporting small- and medium-sized firms hit by the crisis. The RFI is the most appropriate instrument to help address the urgent balance of payments need considering that too little time would have been left before the Extended Fund Facility expiration on May 19 to agree on the significant revisions to program objectives required in response to the Covid-19 shock. The IMF financing will also ensure an adequate level of international reserves and catalyze additional donor financing. The authorities are committed to maintaining prudent economic policies and resuming fiscal consolidation once the crisis abates to ensure macroeconomic stability and the sustainability of Tunisia’s debt. Macroeconomic stability and debt sustainability hinge on strong policy and reform implementation. The authorities are committed to resuming fiscal consolidation once the crisis abates. |
| Keywords: | External debt;Public debt;Credit;Loans;Imports;ISCR,CR,emergency assistance loan,government guarantee line,pandemic |
| Date: | 2020–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/103&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents Senegal’s Request for Disbursement Under the Rapid Credit Facility (RCF) and Purchase Under the Rapid Financing Instrument (RFI). The sharp global economic downturn and domestic containment measures have led to a substantial reduction in economic activity, with sectors such as tourism, transport, construction, and retail particularly hard-hit, and the pandemic in Europe is also translating into lower remittances. As a result, the short-term economic outlook has deteriorated significantly, with large uncertainties surrounding the duration and spread of the pandemic. The IMF’s emergency financing under the RCF and the RFI is expected to provide much-needed liquidity to support the authorities’ response to the crisis and could catalyze further assistance from the international community, preferably in the form of grants. Additional concessional donor support will be critical to close the remaining financing gap, ease the adjustment burden, and preserve Senegal’s impressive economic achievements. Ensuring that disbursed funds are used in a well-targeted, cost-effective and transparent manner remains imperative. |
| Keywords: | Public debt;Debt sustainability analysis;COVID-19 ;Credit;Loans;ISCR,CR,financing,financing gap,gross domestic product,IMF's emergency financing |
| Date: | 2020–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/108&r=all |
| By: | Ernest Liu; Aleh Tsyvinski |
| Abstract: | We associate a dynamical system with input-output networks and study its spectral properties. Specifically, we develop a dynamic production network model featuring adjustment costs of changing inputs and thus gradual recovery from temporary TFP shocks. First, we explicitly solve for the output and welfare effects of temporary shocks. We show shocks to sectors that generate significant sales through distant linkages to the consumer are most damaging. Second, we eigendecompose the input-output matrix and show, because higher-order linkages take longer to recover, fewer eigenvectors are needed to represent the welfare impact of sectoral shocks in the dynamic economy compared to the Domar weights. Third, we analyze the U.S. input-output structure and show the welfare impact of temporary shocks has a low-dimensional, 4-factor structure (out of 171 eigenvectors). Finally, we revisit the historical use of input-output analysis in target selection for bombing Nazi Germany and Imperial Japan during WWII. |
| JEL: | E0 E23 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28178&r=all |
| By: | Pazhanisamy, R. |
| Abstract: | The present pandemic covid-19 has changed the world in all the dimension of the human life. It has also changed the views of all discipline from individual attitude towards his health to the international trade. The life during the lockdown is an unforgettable experience to almost all in the world by creating defences in every walk of life for the survival. The time taken by the researched and scientist across the globe to invent the vaccine and its issues related to the general acceptability claimed the lives of many millions across the continents and still in the questions of how long will it take us in this journey. Everything is a product in economics. When there is global demand for the vaccine for the virus, how global market failed to provide it on time. This compels to make an enquiry into how the world market failed to react with appropriate vaccine invention and what theories are working in background for the present situation and how long will the world would be like this. What economic theories can be applied to make a solution under what constraints? There are very few attempts are only available on the interlink ages of this global market failure and the causes, policy remedies both at the gross root as well as at the macro level. In this context this paper is attempted to probe into this issue and fill the gap in research. Using the graphical approach first we have used the asymmetric information model for the accuses of market failure and then probed it towards the information's asymmetries and discover the combined impact on the Covid 19 policy response. |
| Keywords: | Market Failure,Coordination Failure,Asymmetric Information,Covid-19 and Global Market Failure,Policy Implication from Covid-19 |
| JEL: | D82 E30 E32 I38 J22 P11 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esrepo:228512&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Sri Lanka’s Sixth Review Under the Extended Arrangement Under the Extended Fund Facility and Request for Waiver of Nonobservance and Modification of Performance Criterion. The Sri Lankan economy is gradually recovering from the impact of the Easter Sunday terrorist attacks. Growth is projected to strengthen to 3.5 percent in 2020, from 2.7 percent in 2019, as tourist arrivals and related activities gradually recover. Sustaining fiscal policy discipline remains critical to strengthen resilience and support growth, as important downside risks remain, amid heightened external and domestic uncertainty. The Sri Lankan economy is gradually recovering, supported by the authorities’ security and policy efforts to mitigate the impact of the attacks. Nevertheless, the economy remains vulnerable to shocks, given high public debt and low external buffers, with higher downside risks since the attacks, amid heightened external and domestic uncertainty. Sustained policy discipline and efforts to rebuild reserve buffers remain critical to address Sri Lanka’s vulnerabilities and strengthen the economy’s resilience, while supporting investment and growth. |
| Date: | 2019–11–04 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/335&r=all |
| By: | Jaravel, Xavier; O'Connell, Martin |
| Abstract: | We use real-time scanner data in Great Britain during the COVID-19 pandemic to investigate the drivers of the inflationary spike at the beginning of lockdown and to quantify the impact of high-frequency changes in shopping behaviours and promotions on inflation measurement. Although changes in product-level expenditure shares were unusually high during lockdown, we find that the induced bias in price indices that do not account for expenditure switching is not larger than in prior years. We also document substantial consumer switching towards online shopping and across retailers, but show this was not a key driver of the inflationary spike. In contrast, a reduction in price and quantity promotions was key to driving higher inflation, and lower use of promotions by low-income consumers explains why they experienced moderately lower inflation. Overall, changes in shopping behaviours played only a minor role in driving higher inflation during lockdown; higher prices were the main cause, in particular through a reduced frequency of promotions. |
| Keywords: | Great Lockdown; inflation; Covid-19; coronavirus; ES/V003968/1; ES/M010147/1; WEL/FR‐000022585 |
| JEL: | D12 E31 I30 |
| Date: | 2020–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:107828&r=all |
| By: | International Monetary Fund |
| Abstract: | On September 30, 2020, the IMF Executive Board approved a 27-month arrangement under the Extended Fund Facility (EFF) with exceptional access (SDR 4,615 million, 661 percent of quota, about $6.5 billion) to help Ecuador restore macroeconomic stability and pursue the unfinished structural agenda from the previous program. High frequency indicators point to improvements in economic activity after bottoming out in Q2, while oil prices have been declining relative to earlier assumptions, leaving the macroeconomic outlook broadly unchanged over the medium term. |
| Date: | 2020–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/325&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Togo’s Sixth Review Under the Extended Credit Facility (ECF) Arrangement and Request for Augmentation for Access. Togo’s performance under the ECF-supported program has been broadly satisfactory. While the economic recovery was firming up, it has recently been hindered by the coronavirus disease 2019 pandemic. The macroeconomic outlook is subject to a high degree of uncertainty. Structural reforms are progressing on revenue administration and public financial management. Progress has been made on collection of tax arrears, online submission of customs declarations, and steps toward program-based budgeting. It will be important to implement recommendations from a recent Tax Administration Diagnostic Assessment Tool, address remaining deficiencies in essential customs functions, and bolster voluntary compliance to ensure strong permanent revenue. Togo is amongst the best performers in the improvement of the business environment in recent years. It will be important to pursue such reforms, including strengthening governance, and to implement the measures outlined in the National Development Plan to support strong and inclusive growth. Completing the delayed reforms of the two state-owned banks is paramount to safeguarding financial stability and preventing risks to the state budget. |
| Keywords: | Public debt;External debt;Revenue administration;Debt sustainability analysis;Debt sustainability;ISCR,CR,financing,deficit,disbursement,ECF arrangement |
| Date: | 2020–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/107&r=all |
| By: | Scott R. Baker (Northwestern University, Kellogg School of Management, Department of Finance); Stephanie Johnson (Rice University, Jones School of Business); Lorenz Kueng (University of Lugano - Faculty of Economics; Swiss Finance Institute; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); Northwestern University - Kellogg School of Management) |
| Abstract: | Households tend to hold substantial amounts of non-financial assets in the form of inventory. Households can obtain significant financial returns from strategic shopping and optimally managing these inventories of consumer goods. In addition, they choose to maintain liquid savings - household working capital - not just for precautionary motives but also to support this inventory management. We demonstrate that households earn high returns from inventory management at low levels of inventory, though returns decline rapidly as inventory levels increase. We provide evidence using scanner and survey data that supports this conclusion. High returns from inventory management that are declining in wealth offer a new rationale for poorer households not to participate in risky financial markets, while wealthier households invest in both financial assets and working capital. |
| Keywords: | household working capital, stock market participation, financial returns, inventory, stockpiling |
| JEL: | G51 G11 D14 D13 D12 D11 E21 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp20114&r=all |
| By: | María J Nieto; Dalvinder Singh |
| Abstract: | The ambition to expand participation in the European Banking Union was to allow the ‘outs’ to enter in to close cooperation, however, it did not include the simultaneous joining of ERM II. Focusing on the cases of Bulgaria and Croatia, this paper attempts to respond to a number of questions: What is the rationale behind the double requirement of having to simultaneously apply to become a member of the ERM II and to prepare to become a member of the Banking Union via rule based “close cooperation†mechanism of coordination between the EU non-euro area NCAs and the ECB? Does the integration of close cooperation countries' banking systems with the euro area banking systems support the decision to join ERM II and ¨opting-in¨ to the SSM? Do the existing “close cooperation†arrangements guarantee greater coordination of resource-allocating decisions on prudential supervision and improved internalization of financial stability decisions? What are the advantages of the preparation to become a full member of the euro area and the SSM (e.g. coordination of macro and micro-prudential regulation; coordination of micro-prudential supervision and bank resolution)? It is evident from the research undertaken in this paper that there are clear benefits from close cooperation for the respective Member States whose domestic currencies are already linked to the euro in view of the dominant position eurozone banks have in their respective domestic markets. |
| Keywords: | Banking Union, Close Cooperation, ERM II |
| JEL: | E02 E44 F15 G15 G21 H12 K23 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:baf:cbafwp:cbafwp20150&r=all |
| By: | Dang, Hai-Anh (World Bank); Nguyen, Cuong Viet (National Economics University Vietnam) |
| Abstract: | Vietnam is widely praised for its successful fight against the COVID-19 pandemic. The country has had an extremely low mortality rate of 35 deaths to date (out of a population of approximately 100 million) and currently has no community transmission. We offer the first study that examines the effects of the COVID-19-induced lockdown on various employment outcomes for Vietnam. We employ difference-in-differences econometric models to estimate the causal effects of the lockdown, using rich individual-level data from the quarterly Labor Force Surveys. We find that the lockdown increases the unemployment rate, the temporary layoff rate, and decreases the quality of employment. It also reduces workers' numbers of working hours and their monthly incomes and wages. Our estimation results remain robust to different model specifications and estimation samples. Further heterogeneity analysis suggests that the effects vary across education levels and occupation sectors but are similar across regions or provinces with different lockdown durations. |
| Keywords: | COVID-19, employment, income loss, differences-in-differences, Vietnam |
| JEL: | E24 I30 J21 O12 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp13958&r=all |
| By: | Dang, Hai-Anh H.; Nguyen, Cuong Viet |
| Abstract: | Vietnam is widely praised for its successful fight against the COVID-19 pandemic. The country has had an extremely low mortality rate of 35 deaths to date (out of a population of approximately 100 million) and currently has no community transmission. We offer the first study that examines the effects of the COVID-19-induced lockdown on various employment outcomes for Vietnam. We employ difference-in-differences econometric models to estimate the causal effects of the lockdown, using rich individual-level data from the quarterly Labor Force Surveys. We find that the lockdown increases the unemployment rate, the temporary layoff rate, and decreases the quality of employment. It also reduces workers' numbers of working hours and their monthly incomes and wages. Our estimation results remain robust to different model specifications and estimation samples. Further heterogeneity analysis suggests that the effects vary across education levels and occupation sectors but are similar across regions or provinces with different lockdown durations. |
| Keywords: | COVID-19,employment,income loss,differences-in-differences,Vietnam |
| JEL: | E24 I30 J21 O12 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:741&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Morocco’s First Review Under the Arrangement Under the Precautionary and Liquidity Line (PLL). The Moroccan authorities are committed to sustaining sound policies. The government’s economic program remains in line with key reforms agreed under the PLL arrangement, including to further reduce fiscal and external vulnerabilities, while strengthening the foundations for higher and more inclusive growth. The transition to greater exchange rate flexibility initiated in 2018 is expected to enhance the economy’s capacity to absorb shocks and preserve its external competitiveness. The current favorable economic environment remains supportive to continue this reform in a carefully sequenced and well-communicated manner. The report recommends that continued reforms are needed to raise potential growth and reduce high unemployment levels, especially among the youth, increase female labor participation, and reduce regional disparities. Reforms of education, governance, the labor market, and the business environment would help support more private sector-led growth and job creation. |
| Keywords: | External debt;Public debt;External position;Financial regulation and supervision;Loans;ISCR,CR,policy,The Article IV consultation discussion,authority,current account,reform |
| Date: | 2019–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/317&r=all |
| By: | Орлов Константин (National Bank of Kazakhstan) |
| Abstract: | В настоящей работе была проведена оценка эффективности динамических факторных моделей в прогнозировании ВВП Казахстана для текущего и будущих кварталов, доказана целесообразность применения данных моделей, а также получено факторное разложение динамики ВВП. Факторы были поделены на группы и включали в себя показатели реального и внешнего, финансового, денежного, ценового блоков. // In this paper, the effectiveness of dynamic factor models in forecasting Kazakhstan's GDP for the current and future quarters was assessed, the expediency of using these models was proved, and a factor decomposition of the dynamics of GDP was obtained. The factors were divided into groups and included indicators of real and external, financial, monetary, and price blocks. |
| Keywords: | GDP, short-term forecasts, dynamic factor models, principal component analysis, Kalman filter, ВВП, краткосрочные прогнозы, динамические факторные модели, метод главных компонент, фильтр Кальмана |
| JEL: | C52 C53 C55 C82 E17 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:aob:wpaper:7&r=all |
| By: | World Bank |
| Keywords: | Public Sector Development - Public Investment Management Education - Education For All Health, Nutrition and Population - Health Indicators Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Policy, Institutions and Governance Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth Social Protections and Labor - Safety Nets and Transfers Social Protections and Labor - Social Protections & Assistance |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33323&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Pakistan’s First Review Under the Extended Arrangement Under the Extended Fund Facility and Request for Modification of Performance Criteria. Pakistan’s program is on track and has started to bear fruit. However, risks remain elevated. Strong ownership and steadfast reform implementation are critical to entrench macroeconomic stability and support robust and balanced growth. The authorities are committed to sustaining the progress on fiscal adjustment to place debt on a downward path. The planned reforms include strengthening tax revenue mobilization, including the elimination of tax exemptions and loopholes, and prudent expenditure policies. Preparations for a comprehensive tax policy reform should start early to ensure timely implementation. The authorities have adopted a comprehensive plan to address the accumulation of arrears in the power sector. Its full implementation is key to improve collection, reduce losses, and enhance governance. Timely and regular adjustment of energy tariffs will bring the sector in line with cost recovery. |
| Keywords: | Public debt;Revenue administration;External debt;Budget planning and preparation;Tariffs;ISCR,CR,exchange rate,government,reform implementation,implementation,SDR |
| Date: | 2019–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/380&r=all |
| By: | Ã sgeir Daníelsson; Lúdvik Elíasson; Magnús F. Gudmundsson; Svava J. Haraldsdóttir; Lilja S. Kro; Thórarinn G. Pétursson; Thorsteinn S. Sveinsson |
| Abstract: | This Handbook documents Version 4.0 of the Quarterly Macroeconomic Model of the Central Bank of Iceland (QMM). QMM and the underlying quarterly database have been under construction since 2001 at the Research and Forecasting Division of the Economics and Monetary Policy Department at the Bank and was first implemented in the forecasting round for the Monetary Bulletin 2006/1 in March 2006. QMM is used by the Bank for forecasting and various policy simulations and therefore plays a key role as an organisational framework for viewing the medium-term future when formulating monetary policy at the Bank. This paper is mainly focused on the short and mediumterm properties of QMM. Steady state properties of the model are documented in a paper by Dan’elsson (2009). |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:ice:wpaper:wp82&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation discusses Thailand’s robust policy framework and ample buffers continue to underpin its resilience to external headwinds. The authorities have taken measures to strengthen medium-term fiscal management and financial stability. With respect to the outlook, growth is projected to slow down to about 3 percent in 2019–20 reflecting external and domestic headwinds. On the external side, the projected slowdown in global demand and uncertainty about trade tensions are expected to weigh on exports throughout 2019. Policies should aim at boosting growth, while promoting domestic and external rebalancing and making growth more inclusive. The IMF staff recommends a front-loaded fiscal impulse in FY 2020. Thailand should use available fiscal space judiciously to spur domestic demand and support potential output. Implementation of macro-critical public infrastructure projects would also crowd in private investment. The report also highlights that structural reforms aimed at improving the implementation of public investment, strengthen social safety nets, and raise productivity in an increasingly digital economy, would boost growth and enhance its inclusiveness. |
| Keywords: | Financial sector stability;Trade balance;Public debt;Foreign exchange;Commercial banks;ISCR,CR,U.S. dollar,government,headline inflation,housing loan demand |
| Date: | 2019–10–07 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/309&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Somalia’s First Review Under the Staff-Monitored Program (SMP). The report focuses on further efforts to mobilize revenues, including across the Federal Member States, strengthen public financial management, enhance financial sector stability, and strengthen compliance with the framework for anti-money laundering/ combatting the financing of terrorism. The authorities’ strong commitment and program implementation has strengthened capacity despite a challenging environment. Underlying economic growth remains stable, supported by donor support and the ambitious and broad reform agenda. However, insecurity and recurring drought represent key risks to the outlook, and, despite progress, growth is insufficient to substantially reduce poverty. Financial stability reforms are deepening. New mobile money regulations are welcome, and implementation will be key for supporting financial stability. Continued efforts to expand the operational and organizational capacity of the Central Bank of Somalia will underpin further development of the financial sector more broadly. Reducing Somalia’s debt to sustainable levels under the Heavily Indebted Poor Countries Initiative and normalizing relations with international financial institutions will unlock access to additional financial resources to address Somalia’s development needs. |
| Keywords: | Revenue administration;External debt;Arrears;Public debt;Expenditure;ISCR,CR,Somalia,authority,U.S. dollar,excl. IMF |
| Date: | 2019–11–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/343&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses El Salvador’s IMF Staff report on Request for Purchase Under the Rapid Financing Instrument (RCI). This assistance is expected to help El Salvador direct funds swiftly to the country’s most affected sectors, including the healthcare system. El Salvador has adopted strict measures to prevent and contain the pandemic since early February—even before the first case was diagnosed—including travel restrictions, mandatory quarantine for exposed citizens, suspension of nonessential public and private sector operations, and a nationwide shelter-in-place order. The authorities’ emergency response also comprises measures to mitigate the economic impact of the pandemic on the population, including through targeted cash transfers to vulnerable households and tax relief in the most affected economic sectors. IMF financing will help preserve fiscal space and catalyze significant funding from other multilateral institutions. The IMF continues to closely monitor El Salvador’s situation and stands ready to provide policy advice and further support as needed. |
| Keywords: | Public debt;International reserves;Fiscal stance;Public sector;Revenue administration;ISCR,CR,financing,government,GDP,balance of payments gap,IMF lending arrangement |
| Date: | 2020–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/106&r=all |
| By: | Самат Мөлдір (National Bank of Kazakhstan) |
| Abstract: | Целью данной работы является оценка вклада внутренних и иностранных инвестиций в экономический рост страны, а также анализ взаимного влияния иностранных и внутренних инвестиций друг на друга. Для такой оценки использовался широко используемый в мире метод VAR, а именно панельная векторная авторегрессия, которая позволяет объединить данные по отраслям экономики с временным рядом. // The purpose of this work is to assess the contribution of domestic and foreign investment to the country's economic growth, as well as to analyze the mutual influence of foreign and domestic investment on each other. For such an assessment, the VAR method, widely used in the world, was used, namely, panel vector autoregression, which allows combining data on sectors of the economy with a time series. |
| Keywords: | foreign direct investment, investment in fixed assets, elasticity, vector autoregression model, impulse responses, прямые иностранные инвестиции, инвестиции в основной капитал, эластичность, модель векторной авторегрессии, импульсные отклики |
| JEL: | C22 C33 C51 E22 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:aob:wpaper:6&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Ghana highlights discussions focused on strengthening institutions and policies to preserve macroeconomic stability and promote inclusive growth, building on the authorities’ “Ghana beyond Aid” strategy. The government headline deficit is projected to reach 4.7 percent of gross domestic product in 2019, driven by lower-than-expected revenues, spending on flagship programs, and unexpected security outlays due to emerging security challenges in the region. Medium-term prospects are favorable, with robust growth driven mostly by the extractive sector. Election-related spending pressures in 2020 constitute the main risk to the baseline scenario. Fiscal risks in the financial and energy sectors could also impact the government deficit. Government borrowing needs are exposed to rollover risk that should be carefully managed as financing conditions could tighten. The commitment to the new fiscal rules is expected to help maintain fiscal discipline, as reflected in the unchanged policy baseline. A more ambitious fiscal stance is called for to reduce macroeconomic risks, accelerate debt reduction, and strengthen the external balance. |
| Keywords: | Energy sector;Public debt;Financial sector;External debt;Government debt management;ISCR,CR,staff projection,staff appraisal,deficit,MPC meeting |
| Date: | 2019–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/367&r=all |
| By: | World Bank |
| Keywords: | Energy - Oil & Gas International Economics and Trade - External Debt Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Achieving Shared Growth Poverty Reduction - Inequality |
| Date: | 2020–02 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33453&r=all |
| By: | World Bank |
| Keywords: | Information and Communication Technologies - Digital Divide Information and Communication Technologies - Information Technology Information and Communication Technologies - Poverty Reduction & ICT Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Economic Policy, Institutions and Governance Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33247&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents Jordan’s 2020 Article IV Consultation and Request for an Extended Arrangement Under the Extended Fund Facility (ECF). Jordan’s IMF-supported economic reform program is anchored on structural reforms designed to spur growth by creating jobs—especially for women and young people—and reduce poverty. The Jordanian economy has continued facing significant challenges. Macroeconomic stability and external buffers have been preserved, but fiscal vulnerabilities remain. Structural reforms and continued fiscal consolidation efforts are critical to lift growth, reduce unemployment and bring debt on a downward path. Continued support from donors, particularly through concessional loans and budget grants, will be critical to help Jordan cope with humanitarian and economic needs. The coronavirus disease 2019 (COVID-19) outbreak poses significant risks to the program implementation. The authorities have implemented measures to help contain the impact of the pandemic; however, adjustments to the program modalities might be necessary considering the rapidly changing circumstances. Donor support through budget grants and concessional financing will be critical to help Jordan cope with the effects of the COVID-19 outbreak and the Syrian refugee crisis and to support program objectives. |
| Keywords: | Public debt;Electricity;Arrears;Tariffs;External debt;ISCR,CR,fiscal consolidation effort,emergency outlay,economic reform program,COVID,authority |
| Date: | 2020–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/101&r=all |
| By: | Amy Y. Guisinger; Michael T. Owyang; Daniel Soques |
| Abstract: | The effect of economic shocks on business cycles fluctuations may vary across industries. For example, shocks that originate in a single industry may propagate elsewhere, either up or down stream in the production chain. Thus, industries that are more connected may be more vulnerable to industry-specific economic shocks. However, any model of industrial connectedness must account for the fact that much of the inter-industry correlation will be driven by national shocks. In light of this, we develop a panel Markov-switching model for industry-level data that incorporates a number of features relevant for sub-national analysis. First, we model industry-level trends to differentiate between cyclical downturns and secular decline in an industry. Second, we incorporate a national-level business cycle that industries may or may not attach to. Third, we model comovement off of the national-level cycle as factors that affect clusters of industries. We find that there are industry groupings that comove because their production networks are intrasectoral and industry groupings that lack inter or intra-sectoral classification, but most industries move together. |
| Keywords: | cluster analysis; Markov-switching |
| JEL: | C32 E32 |
| Date: | 2020–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:89372&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Benin’s Fifth Review Under the Extended Credit Facility Arrangement, Request for Extension, and Request for Modification of Performance Criteria. Program implementation continues to be very satisfactory. The macroeconomic and structural policies outlined by the authorities are adequate to pursue the program’s objectives, and risks to program implementation are deemed manageable. Benin’s economic performance remains strong despite a less supportive external environment and the border closure with Nigeria. The significant increase in the share of external debt in total debt in the past two years warrants caution. The recent debt reprofiling operation and the Eurobond issuance have contributed to lowering borrowing costs, diversifying the financing structure, and extending debt maturity. However, these operations can also generate new vulnerabilities that will need to be mitigated through an enhanced debt management strategy and continued capacity improvements at the debt management office. |
| Keywords: | Public debt;External debt;Capital spending;Government debt management;Revenue administration;ISCR,CR,IMF mission,deficit,objective |
| Date: | 2019–12–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/398&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper highlights Gabon’s Request for a Purchase Under the Rapid Financing Instrument (RFI). The coronavirus disease 2019 (COVID-19) pandemic and concurrent collapse in oil prices are expected to put the economy under extreme stress, particularly in a context of limited financial buffers. Economic activity will slow, and the fiscal and external positions will weaken, creating significant additional financing needs. In addition to immediate measures of containment, including border closures and curfews, the authorities are also taking significant steps to strengthen health policy responses and support households and firms. The RFI fund is expected to help create fiscal space for essential COVID19-related expenditure and catalyze donor support. The size and impact of the shocks is, however, subject to a considerable margin of uncertainty. The IMF continues to monitor Gabon’s situation closely and stands ready to provide policy advice and further financial support if needed, in collaboration with other donors. The authorities should stand ready to suspend all emergency measures once the crisis subsides. Over the medium term, public debt needs to be put back on a firmly downward path. The decline in oil prices will necessitate faster fiscal adjustment and economic diversification. |
| Keywords: | Oil prices;Public debt;Arrears;Fiscal stance;Currencies;ISCR,CR,IMF staff estimate,financing |
| Date: | 2020–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/109&r=all |
| By: | International Monetary Fund |
| Abstract: | A Technical Assistance (TA) Mission from the Regional Technical Assistance Center for Central America, Panama, and the Dominican Republic, visited the city of San Salvador, El Salvador, on August 13–24, 2018, to provide TA to the Central Reserve Bank of El Salvador (BCRES) on compiling annual accounts by institutional sectors (AAIS) from 2014 onwards, as part of the data series from the base year of 2005. In March 2018, the BCRES published a dataset of quarterly and annual national accounts series by economic activity; a monthly volume indicator; backcasted series from 1990–2014; and Supply and Use Tables (SUT) from 2005 and 2014, with a base year of 2005. As part of the dataset to be prepared and disseminated in the new 2005 base year, the authorities requested TA to compile annual accounts focusing on institutional sectors starting in 2014. |
| Keywords: | National accounts;Fiscal accounting and reporting;Public sector;Public enterprises;Business enterprises;ISCR,CR,BCRES,income,account,enterprise |
| Date: | 2020–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/084&r=all |
| By: | World Bank Group |
| Keywords: | Macroeconomics and Economic Growth - Business Cycles and Stabilization Policies Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Inequality Social Protections and Labor - Social Protections & Assistance |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33196&r=all |
| By: | Vinicius Curti Cicero; Gilberto Tadeu Lima |
| Abstract: | We examine the impact of the functional distribution of income on the demand for imports in developed and developing countries. Drawing upon a motivating accounting structure suggesting a potentially causal effect of the functional distribution of income in an extended version of a standard import function, we find evidence that a fall in the wage share has a statistically significant positive (negative) impact on the volume of imports in developing (developed) countries and the entire sample of countries. Therefore, the neglect of such income distribution effects in import demand functions represents the omission of both an empirically relevant variable and a further theoretically significant channel through which the functional distribution of income affects output growth. A key implication is that the impact of the functional distribution of the social product on the demand for imports has to be considered in growth empirics based on either a binding balanceof-payments constraint in the Kaldor-Thirlwall tradition or a demand-led regime approach or a competitive real exchange rate. |
| Keywords: | Functional distribution of income; import demand; aggregate demand regimes; balance-of-payments-constrained growth |
| JEL: | E25 F14 F43 |
| Date: | 2020–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:spa:wpaper:2020wpecon25&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Mexico’s Arrangement Under the Flexible Credit Line and Cancellation of Current Arrangement. Fiscal policy has stemmed the rise in the public debt ratio in the past two years; a very tight monetary policy stance has helped reduce headline inflation to the central bank’s target; and financial supervision and regulation are strong. The flexible exchange rate is playing a key role in the economy’s adjustment to external shocks. The Mexican economy, nonetheless, remains exposed to external risks, including renewed volatility in global financial markets, increased risk premia, and a sharp pull-back of capital from emerging markets, as well as continued uncertainty about Mexico’s trade relations with the United States. The new arrangement under the Flexible Credit Line (FCL) will continue to play an important role in supporting the authorities’ macroeconomic strategy by providing insurance against tail risks and bolstering market confidence. The proposed new commitment and cancellation of the current arrangement would have a net positive impact on the Fund’s liquidity position. |
| Keywords: | External debt;Public debt;Credit;Debt service;Public sector;ISCR,CR,Mexico,fund,FCL arrangement,SDR |
| Date: | 2019–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/354&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper highlights annual discussions on Central African Economic and Monetary Community’s (CEMAC) Common Policies in Support of Member Countries Reform Programs. Tighter macroeconomic and financial policies helped to avert a deeper crisis, and gross external reserves increased more rapidly in recent months, also helped by a stronger implementation of CEMAC foreign exchange regulations. Reforms to support a more diversified and inclusive growth, including by improving governance and the business climate, should gain momentum to make current efforts to buttress the external position of the region sustainable. The outlook for 2019 and beyond foresees further improvement in regional reserves assuming CEMAC countries remain committed to their program objectives and new programs with Cameroon, Central African Republic and Equatorial Guinea could start around end-2019. |
| Keywords: | Banking;Fiscal stance;Foreign exchange regulations;Foreign assets;Arrears;ISCR,CR,CEMAC authorities,CEMAC PFM,CEMAC Commission,MCM,FAD CEMAC |
| Date: | 2019–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/383&r=all |
| By: | International Monetary Fund |
| Abstract: | This Technical Assistance Paper on Ukraine discusses that implementing strategic planning and a medium-term budget framework (MTBF) is a core component of Ukraine’s Public Financial Management (PFM) reform strategy. A pilot MTBF conducted in 2017 formed the basis for amendments to the Budget Code in December 2018, which firmly establish a MTBF as the basis for budget preparation. The amendments also establish a legal basis for related reforms, including regular spending reviews and monitoring and managing risks to public finances. The report also highlights that a central margin should also be established to accommodate budget volatility and meet the costs of genuinely urgent, unavoidable and unforeseeable expenditure pressures that may arise. In order to reinforce spending discipline, the margin should be tightly controlled, centrally managed and transparently reported. Strategic planning should also be improved to provide a stronger basis for integrated policymaking, strategizing, planning and budgeting. Creating a robust strategic planning system would assist in this regard. |
| Keywords: | Budget planning and preparation;Fiscal risks;Expenditure;Medium-term budget frameworks;Public expenditure review;ISCR,CR,expenditure ceiling,State budget,budget volatility,KSU budget submission,KSU ceiling |
| Date: | 2019–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/360&r=all |
| By: | Jardet Caroline; Meunier Baptiste |
| Abstract: | The Covid-19 crisis has shown how high-frequency data can help tracking economic turning points in real-time. Our paper investigates whether high-frequency data can also improve the nowcasting performances for world GDP growth on quarterly or annual basis. To this end, we select a large dataset of 151 monthly and 39 weekly series for 17 advanced and emerging countries representing 68% of world GDP. Our approach builds on a Factor-Augmented MIxed DAta Sampling (FA-MIDAS) which allows us to take advantage of our large database and to combine different frequencies. Models that include weekly data significantly outperforms other models relying on monthly or quarterly indicators, both in- and out-of-sample. Breaking down our sample, we show that models with weekly data have similar nowcasting performances relative to other models during “normal” times but strongly outperform them during “crisis” episodes (2008-2009 and 2020). We finally construct a nowcasting model of annual world GDP growth incorporating weekly data which give timely (one every week) and accurate forecasts (close to IMF and OECD projections, but with a 1 to 3 months lead). Policy-wise, this model can provide an alternative “benchmark” projection for world GDP growth during crisis episodes when sudden swings in the economy make the usual “benchmark” projections (from the IMF or the OECD) rapidly outdated. |
| Keywords: | Nowcasting, Mixed-Frequency Data, High-Frequency Data, World GDP, Large Factor Models |
| JEL: | C53 C55 E37 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:788&r=all |
| By: | Olegs Tkacevs (Bank of Latvia) |
| Abstract: | This study investigates the impact of national fiscal rules on public investment policy. Using data of 35 OECD countries for the period 1995–2015, the paper provides evidence of a negative effect of expenditure rules on the level and share of government investment expenditure in total outlays, particularly in economic affairs. The effect of budget balance rules is less certain and seems to stem from those rules that do not explicitly exclude investment from the assessment. The coefficient estimates however imply a relatively low magnitude of the negative effect of fiscal rules. Overall, our paper suggests that, while loosening fiscal rules will not solve the problem of underinvestment, properly designed rules can help to protect public capital stock to some extent only. |
| Keywords: | fiscal rules, government expenditure, public investment, panel analysis |
| JEL: | E62 H50 C23 |
| Date: | 2020–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:ltv:wpaper:202004&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper highlights Liberia’s Request for a Four-Year Arrangement Under the Extended Credit Facility. The program aims to support the authorities’ strong adjustment efforts, catalyze significant donor financing, and provide a framework within which to implement the authorities’ ambitious reform agenda. The authorities have demonstrated commitment by passing a credible budget for FY2020 that consolidates public finances, including by rightsizing the compensation of employees and implementing long-overdue comprehensive civil service reform, while protecting funds for critical social spending. The program also aims to catalyze substantial external support, which is critical to ensure that the programmed adjustment can be contained at levels that are politically and economically feasible while, at the same time, ensuring public and external debt sustainability. Ensuring financial sector stability is an important element of the program. Improving data reporting, obtaining an overview of the health of the banking system, and taking decisive measures as needed will help identify and address financial sector vulnerabilities. At the same time, enhancing the legal framework is important to ensure that the Central Bank of Liberia has the required instruments should remediation be necessary. |
| Keywords: | Public debt;External debt;Foreign exchange;Wages;Debt sustainability analysis;ISCR,CR,authority,CBL credit,debt,FX liquidity demand |
| Date: | 2019–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/381&r=all |
| By: | Maria Cotofan (LSE); Lea Cassar (University of Regensburg); Robert Dur (Erasmus University Rotterdam); Stephan Meijer (Columbia Business School) |
| Abstract: | Preferences for monetary and non-monetary job attributes are important for understanding workers' motivation and the organization of work. Little is known, however, about how those job preferences are formed. We study how macroeconomic conditions when young shape workers' job preferences for the rest of their life. Using variation in income-per-capita across US regions and over time since the 1920s, we find that job preferences vary in systematic ways with experienced macroeconomic conditions during young adulthood. Recessions create cohorts of workers who give higher priority to income, whereas booms make cohorts care more about job meaning, for the rest of their life. |
| Keywords: | preferences for job attributes, experience, macroeconomic condition, generational difference |
| JEL: | M5 D9 E7 |
| Date: | 2021–01–04 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20210002&r=all |
| By: | World Bank |
| Keywords: | Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Achieving Shared Growth Poverty Reduction - Inequality Macroeconomics and Economic Growth - Macroeconomic Management |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33210&r=all |
| By: | Checo, Ariadne; Grigoli, Francesco; Mota, Jose M. |
| Abstract: | The large economic costs of full-blown lockdowns in response to COVID-19 outbreaks, coupled with heterogeneous mortality rates across age groups, led to question non-discriminatory containment mea- sures. In this paper we provide an assessment of the targeted approach to containment. We propose a SIR-macro model that allows for heterogeneous agents in terms of mortality rates and contact rates, and in which the government optimally bans people from working. We find that under a targeted pol- icy, the optimal containment reaches a larger portion of the population than under a blanket policy and is held in place for longer. Compared to a blanket policy, a targeted approach results in a smaller death count. Yet, it is not a panacea: the recession is larger under such approach as the containment policy applies to a larger fraction of people, remains in place for longer, and herd immunity is achieved later. Moreover, we find that increased interactions between low- and high-risk individuals effectively reduce the benefits of a targeted approach to containment. |
| Keywords: | Optimal containment policies,COVID-19,heterogeneous agents,mortality rate,voluntary social distancing |
| JEL: | E10 H00 I10 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:752&r=all |
| By: | ; Carter Mix |
| Abstract: | A large empirical literature has shown that countries that trade more with each other have more correlated business cycles. We show that previous estimates of this relationship are biased upward because they ignore common trade exposure to other countries. When we account for common trade exposure to foreign business cycles, we find that (1) the effect of bilateral trade on business cycle comovement falls by roughly 25 percent and (2) common exposure is a significant driver of business cycle comovement. A standard international real business cycle model is qualitatively consistent with these facts but fails to reproduce their magnitudes. Past studies have used models that allow for productivity shock transmission through trade to strengthen the relationship between trade and comovement. We find that productivity shock transmission increases business cycle comovement largely because of a country-pair's common trade exposure to other countries rather than because of bilateral trade. When we allow for stronger transmission between small open economies than other country-pairs, comovement increases both from bilateral trade and common exposure, similar to the data. |
| Keywords: | Trade; Business cycles; Open economy macroeconomics |
| JEL: | E32 F10 F41 F44 |
| Date: | 2020–12–29 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1306&r=all |
| By: | David Amirault; Naveen Rai; Laurent Martin |
| Abstract: | In 1997, the Bank of Canada established regional offices to enhance communication and liaison activities across the country and to gather more effective regional input for the Bank’s policy deliberations. Shortly thereafter, the regional offices began conducting the Business Outlook Survey (BOS)—a quarterly face-to-face survey of senior managers at Canadian firms. The BOS has become an important part of monetary policy deliberations at the Bank of Canada and is also well known in Canadian policy and financial circles. This paper compiles more than 20 years of experience conducting the BOS and serves as a comprehensive reference manual. More specifically, it provides a brief history of the BOS; explains and discusses the survey’s sampling strategy and other elements of its design and implementation; highlights some demographic characteristics of the firms that participate; assembles a list of special topics addressed in both the quarterly BOS and the ad-hoc surveys conducted by regional offices; discusses some BOS questions not regularly published; and updates and augments an earlier assessment (Martin and Papile 2004) of the information content of BOS indicators. |
| Keywords: | Firm dynamics; Regional economic developments |
| JEL: | C83 D22 E32 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:20-15&r=all |
| By: | Luca Benati; Robert E. Lucas Jr.; Juan Pablo Nicolini; Warren Weber |
| Abstract: | We explore the long-run demand for M1 based on a dataset comprising 38 countries and relatively long sample periods, extending in some cases to over a century. The evidence supports the existence of a stable long-run relationship between the ratio of M1 to GDP and a short-term interest rate for a large majority of the countries. The log-log specification provides a good characterization of the data, with the exception of periods featuring very low interest rates. An extension of the theory that imposes limits on the amount households can borrow results in a truncated log-log specification, which is in line with what we observe in the data. We estimate the interest rate elasticity to be between 0.3 and 0.6 |
| Keywords: | Long-run money demand, Cointegration |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:ube:dpvwib:dp2021&r=all |
| By: | International Monetary Fund |
| Abstract: | This Technical Assistance paper on Ukraine discusses medium-term budget framework (MTBF) and fiscal risk statement. In order to strengthen the medium-term orientation of the budget, the authorities have committed to implement a full-fledged MTBF as part of their Public Financial Management Reform Strategy (2017–21). The ability of the Ministry of Finance (MoF) to enforce compliance with ceilings during the annual budget will be critical to the success of the pilot exercise. The MoF will need to develop a robust report explaining the ceilings for cabinet discussion and for presentation to the legislature. The authorities have been taking steps to improve their understanding and disclosure of fiscal risks and have made significant progress with the inclusion of a summary fiscal risk statement in the draft Budget Declaration. The institutional structures to support fiscal risk analyses and disclosure are also yet to be established. |
| Keywords: | Budget planning and preparation;Fiscal risks;Expenditure;Medium-term budget frameworks;Macroeconomic and fiscal forecasts;ISCR,CR,budget declaration,expenditure ceiling,challenge function,build budget challenge capacity,KSU ceiling |
| Date: | 2019–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/342&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper presents 2019 Article IV Consultation with Barbados and its Second Review Under the Extended Arrangement, Request for Completion of the Financing Assurances Review, and Modification of Performance Criteria. The Article IV discussions focused on fiscal adjustment, medium-term growth and resilience to climate change and natural disasters. The Barbadian authorities continue to make good progress in implementing the comprehensive Economic Recovery and Transformation (BERT) plan aimed at restoring fiscal and debt sustainability, rebuilding reserves, and increasing growth. All program targets for end-June and end-September 2019 have been met. All three structural benchmarks for the second review have also been met. The authorities have continued the reform of state-owned enterprises (SOEs) by completing a review of tariffs and fees charged by SOEs, tightening reporting requirements, and reducing costs. The authorities reached agreement with the External Creditor Committee on a restructuring of external debt to private creditors in October 2019 and launched a debt exchange offer in early November. The IMF Staff proposes modification of the performance criteria relating to the primary balance, net international reserves and net domestic assets. |
| Keywords: | External debt;Public debt;Natural disasters;Debt restructuring;Fiscal stance;ISCR,CR,w IMF disbursement,creditor,Barbados,bondholder meeting,authority,debt exchange |
| Date: | 2019–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/370&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation highlights that Brunei’s economy has been adjusting to declining oil production since 2010 and lower oil and gas (O&G) prices since 2014, with the authorities undertaking wide-ranging reforms. Growth is expected to pick up in 2019 to 1.8 percent, with the outlook improving further over the medium term, driven by stronger O&G activities from asset rejuvenation and large foreign direct investment projects. The authorities have made substantial progress in fiscal consolidation, improving the business climate, and developing the financial sector. The fiscal consolidation initiatives include corporatization and privatization, public-private partnership, evaluation of subsidies against targets, fiscal management enhancement, revenue diversification, and amalgamation of the government’s asset management system. The IMF staff supports the authorities’ initiatives to develop the financial sector, while safeguarding financial stability and integrity. The initiatives include steps to broaden the investor base, establish a secondary bond market, develop the required infrastructure and rules for establishing a stock exchange, and put all the three pillars of Basel II in place. |
| Keywords: | Fiscal stance;Fiscal consolidation;Financial sector;Expenditure;Oil prices;ISCR,CR,Brunei,authority,O&G price,oil price shock |
| Date: | 2019–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/310&r=all |
| By: | Niklas Potrafke; Fabian Ruthardt; Kaspar Wüthrich; Fabian Ruthardt |
| Abstract: | We investigate how protectionist policies influence economic growth. Our empirical strategy exploits an extraordinary tax scandal that gave rise to an unexpected change of government in Sweden. A free-trade majority in parliament was overturned by a protectionist majority in 1887. We employ the synthetic control method to select control countries against which economic growth in Sweden can be compared. We do not find evidence suggesting that protectionist policies influenced economic growth and examine channels why. Tariffs increased government revenue. However, the results do not suggest that the protectionist government stimulated the economy in the short-run by increasing government expenditure. |
| Keywords: | protectionism, economic growth, first era of globalization, synthetic control method, causal inference |
| JEL: | C33 D72 F10 F13 N10 O11 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8759&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper focuses on Guinea’s Fourth Review Under the Extended Credit Facility (ECF) Arrangement, and Financing Assurances Review. While performance under the IMF-supported program remains broadly satisfactory, Guinea faces significant downside risks related to coronavirus disease 2019 pandemic. The IMF will remain closely engaged with the Guinean country authorities as the situation evolves, and as the authorities further develop their policy responses and financing needs change. The ECF arrangement supports strengthening Guinea’s resilience, scaling-up growth-supporting investment and social-safety nets and promoting private sector development. Achieving the programmed basic fiscal surplus in 2020 will contribute to containing inflation and preserving debt sustainability. Mobilizing additional tax revenues and reducing electricity subsidies will create fiscal space to scale-up growth-supporting public investments and strengthen social safety nets. Implementing programmed tax revenues measures, adopting an automatic petroleum products price adjustment mechanism, and advancing the multi-year electricity tariff reform is key. A prudent borrowing strategy will support scaling-up growth-supporting public investment. |
| Keywords: | Revenue administration;Public debt;External debt;Public investment and public-private partnerships (PPP);Banking;ISCR,CR,firm financing assurance,regime,financing,financing needs,ECF arrangement |
| Date: | 2020–04–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/111&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper highlights Chad’s Fifth Review Under the Extended Credit Facility (ECF) Arrangement and Financing Assurances Review. Chad’s performance under the Fund’s ECF-supported program has been broadly satisfactory, reflecting strong commitment by the authorities despite a challenging environment, including security concerns and a tense social situation. Good progress on the structural reform agenda has been made, despite some delays. Looking ahead, it is essential that the authorities continue to pursue prudent fiscal policy, particularly in the run up to the upcoming elections, create enough fiscal space for increased social and development spending, and pay down domestic debt and arrears. Chad’s program is 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: | Oil, gas and mining taxes;Arrears;External debt;Expenditure;Oil;ISCR,CR,ECF arrangement,audit result,CBT,Executive Board discussion |
| Date: | 2019–12–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/399&r=all |
| By: | World Bank |
| Keywords: | Finance and Financial Sector Development - Banks & Banking Reform Macroeconomics and Economic Growth - Economic Growth Macroeconomics and Economic Growth - Fiscal & Monetary Policy Poverty Reduction - Employment and Shared Growth |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wboper:33334&r=all |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues on Gabon seeks to quantify the impact of governance reforms on growth. It uses a dynamic stochastic general equilibrium (DSGE) model calibrated to Gabon to simulate the potential benefits from governance and anti-corruption reforms to growth and public debt. Vulnerabilities in the fiscal institutional framework constrain effective revenue collection and reduce the efficiency of public spending, thus limiting fiscal space for priority pro-growth spending. The results of a DSGE model for Gabon suggest that macro-fiscal gains from governance reforms could be substantial. The potential additional growth can range from 0.8 to 1.5 percent per year over the next 10 years, and debt can decline by 1.0 to 2.0 percent of non-oil gross domestic product per year over the same period. It is urgent to improve governance and curb corruption to boost domestic revenue, enhance public finance management and the quality of spending, and improve the business environment to promote private investment and facilitate private sector activity. |
| Keywords: | Expenditure;Health;Education;Health care spending;Corruption;ISCR,CR,Gabon,spending,governance,revenue |
| Date: | 2019–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/390&r=all |
| By: | Жузбаев Адам (National Bank of Kazakhstan) |
| Abstract: | Был изучен и применен к Казахстану международный опыт прогнозирования показателей фискальной политики и определения направленности фискальной политики. Построение прогнозов налоговых поступлений осуществлялось на основе трех методов: эффективная налоговая ставка; подход, основанный на эластичности изменения налоговых поступлений к налоговой базе; уравнения связки на основе множественной регрессии. // International experience of forecasting indicators and determining the direction of fiscal policy was studied and applied to Kazakhstan. Tax revenue forecasts were made on the basis of three methods: effective tax rate; approach based on the elasticity of tax change receipts to the tax base; bridge equations based on multiple regression. |
| Keywords: | Automatic stabilizers, GDP deflator, GDP, tax revenues, operational balance, budget expenditures, fiscal impulse, fiscal policy, Buoyancy, ETR, OLS, RMSE, автоматические стабилизаторы, дефлятор ВВП, ВВП, налоговые поступления, операционное сальдо, затраты бюджета, фискальный импульс, фискальная политика |
| JEL: | C51 C32 H68 |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:aob:wpaper:16&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Angola’s Second Review of the Extended Arrangement Under the Extended Fund Facility, Requests for a Waiver of NonObservance of Performance Criteria, Modifications of Performance Criteria, and Financing Assurances Review. Angola continues to face a deteriorated external environment, which is weighing on the economic outlook. The Angolan authorities have maintained their commitment to the Fund-supported program despite a challenging external and domestic environment. The authorities’ commitment to fiscal consolidation has been illustrated by the outperformance of the end-June 2019 non-oil primary fiscal deficit target by a wide margin. Sustained fiscal discipline is needed to address debt vulnerabilities. The conservative fiscal stance is expected to continue in 2020. In order to ensure that gains from fiscal consolidation will be preserved in the medium term and to mitigate the elevated risks to debt sustainability, the authorities need to persevere with measures to mobilize non-oil revenue, strengthen public financial management, improve debt management, and bolster transparency and accountability of state-owned enterprises. |
| Keywords: | Public debt;External debt;Exchange rates;Oil prices;Arrears;ISCR,CR,national bank of Angola,authority,EFF arrangement,executive board discussion |
| Date: | 2019–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/371&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Belize focused on structural reforms to raise growth and social inclusion; strengthening resilience to natural disasters; balanced medium-term fiscal consolidation; tax reform; and strengthening financial oversight and anti-money laundering and combating the financing of terrorism actions. Public debt remains above 90 percent of gross domestic product, the current account deficit is projected to remain large over the medium term, and international reserves are just below three months of imports of goods and services. The pace of structural reform has been slow. Downside risks, including from slower US growth, natural disasters, crime, and renewed pressures on correspondent banking relationships could weaken growth and financial stability. Belize is adapting its tax regime in response to concerns from multilateral institutions regarding potentially harmful features. Sustaining Belize’s recent economic expansion, spurring private investment, and facilitating structural diversification hinges on strengthening the business environment. |
| Keywords: | Public debt;Natural disasters;Tourism;Financial services;Fiscal stance;ISCR,CR,authority,policy,policy priority,Belize |
| Date: | 2019–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/364&r=all |
| By: | International Monetary Fund |
| Abstract: | This Technical Assistance paper on the Russian Federation provides a summary of the changes to Russia’s fiscal transparency practices since 2014 and makes recommendations for further improvements. Russia has made important progress in enhancing the coverage and detail of fiscal reporting since 2014, but assurances of the quality and integrity of fiscal reporting remain incomplete. Reforms to the statistical treatment of taxes and nonfinancial assets have improved the comparability of budgets, statistics, and accounts but transparent reconciliations between the three are still not provided. It is imperative to make Rosstat fully independent of government and produce and publish metadata explaining in an accessible way how the main fiscal indicators or datasets are compiled. The ministry of finance has initiated an annual assessment of the quality of loans and will begin writing-down the value of doubtful debts from 2020. Separate detailed reconciliations of changes to revenue and expenditure are included in the documentation accompanying the annual budget. |
| Keywords: | Budget planning and preparation;Fiscal risks;Macroeconomic and fiscal forecasts;Oil prices;Fiscal reporting;ISCR,CR,government,Russia,Duma,MoF Directive,Federal budget expenditure |
| Date: | 2019–10–30 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/329&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Jamaica’s Sixth Review Under the Stand-By Arrangement (SBA). All quantitative performance criteria, indicative targets, and the structural benchmark at end-June were met, marking a successful completion of the SBA. Discussions centered on policies to lock-in macroeconomic stability and advance supply-side reforms to promote inclusive growth, including: building institutions and advancing fiscal reforms to safeguard and sustain economic stability and debt reduction; improving monetary operations and policy transmission; and bolstering financial inclusion, access to credit, and formality. Most structural policy commitments are on track, although some key reforms to public sector transformation, the compensation framework for public employees, legislation to establish a fiscal council, and creating a special resolution regime for financial institutions have been delayed due to capacity constraints and the need to build stakeholder support for these reforms. Important gains have been made in the oversight of financial institutions. |
| Keywords: | Public debt;Public sector;PFM legal and regulatory frameworks;Fuel prices;Expenditure;ISCR,CR,policy,IMF's Executive Board,governance framework,reform commitment,government |
| Date: | 2019–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/338&r=all |
| By: | International Monetary Fund |
| Abstract: | This Selected Issues paper examines scope for improving Iceland’s fiscal framework. Iceland’s fiscal framework provides for a forward-looking exercise in consolidated fiscal planning. The Icelandic fiscal framework shares most elements of successful fiscal frameworks but would benefit from more structured guidance in dealing with cyclical fluctuations. It is backed by a firm legal basis that reflects political support for the fiscal policy objectives, covers the consolidated general government, and is based on sound accounting practices and budget management arrangements. The current parameters of the policy rules have a bias to reduce net public debt and gradually build fiscal space to deal with adverse shocks to economic activity. Adding a primary structural balance rule to the framework would ensure a countercyclical fiscal policy but would add significant complexity. Once the net public debt reaches a socially desirable level, the fiscal rule parameters may be modified to keep net public debt fluctuating around that level. |
| Keywords: | Public debt;Fiscal policy;Fiscal rules;Output gap;Fiscal stance;ISCR,CR,interest rate,countercyclical fiscal policy,disp-formula id |
| Date: | 2019–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/376&r=all |
| By: | Giannitsarou, C.; Kissler, S.; Toxvaerd, F. |
| Abstract: | This paper offers projections of future transmission dynamics for SARS-CoV-2 in an SEIRS model with demographics and waning immunity. In a stylized optimal control setting calibrated to the USA, we show that the disease is endemic in steady state and that its dynamics are characterized by damped oscillations. The magnitude of the oscillations depends on how fast immunity wanes. The optimal social distancing policy both curbs peak prevalence and postpones the infection waves relative to the uncontrolled dynamics. Last, we perform sensitivity analysis with respect to the duration of immunity, the infection fatality rate and the planning horizon. |
| Keywords: | COVID-19, economic epidemiology, social distancing, waning immunity, demographics, infection control, SEIRS. |
| JEL: | E61 I18 |
| Date: | 2020–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:20126&r=all |
| By: | Palma, J. G. |
| Abstract: | This paper returns to the Ricardian tradition of understanding the distribution of income as the outcome of the political articulation of conflict between rentiers, capitalists, bureaucrats and labour -in which history, politics and institutions matter as much (if not more) than economic ‘fundamentals’. Also, in this tradition economic underperformance arises mostly from the shift in distribution from operating profits to rents. The focus is on a key political economy question: why the rich stay rich, no matter what! This confirms the iron law of oligarchies: dysfunctional institutions tend to rebuild. In the case of Latin America, its élites' “ability to persist” relates to the fact that they have been able to enforce a “Southern-style” rule resembling a ‘stationary process’, whereby the unbalancing impact of shocks tends to have only limited life-spans -as oligarchies are able to landscape new scenarios to continue achieving their fairly immutable rent-seeking goals. They have used three main channels: forcing ‘Buchanan’-style constitutional and legal straitjackets to restrict the scope of change; resourcefulness and collective action for reengineering their distributional strategies to suit the new scenarios, and cleverly absorbing elements of opposing ideologies (such as now accepting the need for ‘social protection’) to maintain theirs hegemonic. Their trump cards are ruthlessness in the first, and “jogo de cintura e jeitinho” (fancy footwork) in the other two. The analysis of these channels is the main subject of this paper |
| Keywords: | income distribution, inequality, poverty, Palma ratio, “reverse catching-up”, ideology, Gramsci, Foucault, neo-liberalism, ‘new’ left, institutional persistence, Latin America, Chile, emerging Asia, US, Western Europe |
| JEL: | D31 E12 E22 E24 N16 N36 O50 P16 |
| Date: | 2020–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:20124&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper discusses Republic of Madagascar’s Request for Disbursement Under the Rapid Credit Facility (RCF). The coronavirus disease 2019 pandemic is having a severe impact on Madagascar’s economy. Due to dramatic declines in tourism and disruptions to manufacturing and extractive industry exports, as well as transport, communications, and services, real gross domestic product growth is likely to decline sharply. The fiscal situation is also deteriorating rapidly with additional health and social spending outlays and a significant shortfall in tax revenue. Fund support under the RCF is expected to help the authorities meet the urgent fiscal and external financing needs to mitigate the impact of the pandemic. The authorities are taking immediate measures to address the human and economic impact of the pandemic, while preserving macroeconomic stability. These include increases in health spending, help to the most vulnerable, support to the private sector, and actions to preserve the stability of the financial sector and maintain the flexible exchange rate regime. |
| Keywords: | Credit;Revenue administration;COVID-19 ;Banking;Budget planning and preparation;ISCR,CR,IMF support,financing,RCF disbursement,SDR,disbursement |
| Date: | 2020–04–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/100&r=all |
| By: | Lamia Bazzaoui; Jun Nagayasu; Ronald MacDonald |
| Abstract: | Previous empirical studies aiming to verify the relationship between the current account (CA) and government expenditures have produced mixed results across regions and countries. In this study, we investigate whether cyclicality affects this relationship, based on a sample of 51 countries and using quarterly and annual data from 2002Q1 to 2018Q4. We use a structural panel vector autoregression model (Pedroni, 2013) to analyze the relationship between the CA and aggregate and disaggregate government expenditures for different groups of countries. Our findings indicate that a negative impact on the CA due to aggregate government spending is only visible in countercyclical economies, suggesting the importance of cyclicality in explaining the dynamics of the present value model. However, cyclicality is not sufficient for explaining the link between disaggregate fiscal policy and the CA, due to substantial heterogeneity. A timeseries approach shows that subsidies play a significant role in the CA of Austria, Croatia, Spain, and Bolivia and that property income is a major CA determinant in countries with large external debts. Conversely, the largest components of public spending (compensation of employees, intermediate consumption, and social benefits) play a minor role. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:toh:dssraa:118&r=all |
| By: | Westerhout, Ed (Tilburg University, School of Economics and Management) |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:ee384b1f-4e6f-4f30-821e-df7441ded4cf&r=all |
| By: | International Monetary Fund |
| Abstract: | This 2019 Article IV Consultation with Djibouti discusses that large-scale infrastructure investments and a rapid expansion of trade and logistics activities have fueled strong growth in recent years. The government has in recent years implemented large-scale investments to develop transport and logistics infrastructures. Combined with business climate reforms, this development strategy has fueled strong growth and positioned Djibouti well to become a regional trade and logistics hub. The IMF staff’s baseline projections assume a significant reduction in debt financed public investment. Growth is nonetheless projected to remain strong, driven by the rapid expansion in Ethiopia’s trade and a pickup in private investment. Fostering higher and inclusive growth and bolstering the external position require addressing impediments to private sector investment and improving external competitiveness. Critical reforms include further enhancing the business environment, promoting competition, and improving the governance and efficiency of public enterprises to lower factor costs, particularly in the telecommunications and electricity sectors. |
| Keywords: | Public debt;External debt;Debt service;Debt sustainability analysis;Current account balance;ISCR,CR,authority,debt,debt vulnerability |
| Date: | 2019–10–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/314&r=all |
| By: | Selin ÖZYURT; Simon CUEVA (TNK Economics) |
| Abstract: | Ecuador adoptó el dólar estadounidense como moneda de curso legal en enero de 2000, en un contexto de profunda crisis económica y política. Prácticamente dos décadas después, en diciembre de 2019, el Directorio Ejecutivo del Fondo Monetario Internacional (FMI) aprobó un desembolso total de 498 MUSD[1] después de la finalización de la segunda y tercera revisión en el marco del Acuerdo de Servicio Ampliado del Fondo. El acuerdo financiero con el FMI se concluyó en marzo de 2019, bajo la presidencia de Lenin Moreno, con el fin de dar respuesta a las crecientes necesidades de financiación externa del país. En el marco del programa macroeconómico apoyado por el FMI, las autoridades ecuatorianas se comprometieron a garantizar la sostenibilidad fiscal, reconstruir las reservas internacionales del Banco Central del Ecuador (BCE) y fortalecer las bases institucionales de la dolarización oficial. |
| Keywords: | Équateur |
| JEL: | E |
| Date: | 2020–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:avg:wpaper:es11316&r=all |
| By: | Caselli, Francesca; Grigoli, Francesco; Sandri, Damiano; Spilimbergo, Antonio |
| Abstract: | Overall mobility declined during the COVID-19 pandemic because of government lockdowns and voluntary social distancing. Yet, aggregate data mask important heterogeneous effects across segments of the population. Using unique mobility indicators based on anonymized and aggregate data provided by Vodafone for Italy, Portugal, and Spain, we find that lockdowns had a larger impact on the mobility of women and younger cohorts. Younger people also experienced a sharper drop in mobility in response to rising COVID-19 infections. Our findings, which are consistent across estimation methods and robust to a variety of tests, warn about a possible widening of gender and inter-generational inequality. |
| Keywords: | COVID-19,lockdown,mobility,gender,age |
| JEL: | E1 I1 H0 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:753&r=all |
| By: | Anna Houstecka; Dongya Koh; Raül Santaeulàlia-Llopis |
| Abstract: | Using nationally representative micro panel data on flu incidence from the Medical Expenditure Panel Survey in the United States, we show that employed individuals are on average 35.3% more likely to be infected with the virus. Wage earners are more likely to be infected than the unemployed by 30.1% and than individuals out of the labor force by 40.8%. Our results are robust to individual characteristics including vaccinations, health insurance and unobserved heterogeneity. Within the employed, we find an occupation-flu gradient—e.g. sales occupations show 34.1% higher probability of infection than occupations related to farming, fishing and forestry. As a potential mechanism behind this gradient, we study occupation-specific exposure to human contact interaction at work—a score that we construct based on O’NET occupational characteristics—which, as we show, determines flu incidence. All these effects increase with the aggregate flu incidence and are robust to firm size and across industries. |
| Keywords: | Contagion, flu, employment, unemployment, Occupations, industry, gradient, exposure, human contact, vaccines, lockdown, policy, macroeconomics |
| JEL: | J01 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1225&r=all |
| By: | David E. Altig; Jeffrey C. Fuhrer; Marc Giannoni; Thomas Laubach |
| Abstract: | In early 2019, the Federal Open Market Committee (FOMC or the Committee) launched a comprehensive review of its monetary policy framework (MPF)—the strategies, tools, and communication practices employed by the Federal Reserve to achieve its congressionally mandated goals of maximum employment and price stability. |
| Date: | 2020–08–27 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2020-08-27&r=all |
| By: | International Monetary Fund |
| Abstract: | This Technical Assistance report on Ukraine discusses a more sustainable fiscal consolidation. The Ukrainian authorities have recently adopted a broad Public Financial Management System Reform Strategy, paving the way to decisive action in critical areas including medium-term budgeting, analysis and management of fiscal risks, and public investment management. Fiscal policy in Ukraine has been hampered by the lack of a medium-term orientation for the State Budget. Medium-term macroeconomic forecasts are regularly produced, but these are not well integrated with budget planning, which remains mostly incremental and annual in scope. Recent reform initiatives have prioritized the development of a medium-term budget framework to the forefront of the reform agenda; however, additional steps are required for it to be fully implemented. Ukraine has undertaken a range of reforms in public investment management, designed to tackle some of its weaker institutions. Nevertheless, the strategic planning process remains unfit for purpose and does not facilitate prioritization of capital investment projects. |
| Keywords: | Fiscal risks;Budget planning and preparation;Medium-term budget frameworks;Public investment and public-private partnerships (PPP);Public financial management (PFM);ISCR,CR,local government,assurance processes,General government debt,PFM strategy,IMF government finance statistics |
| Date: | 2019–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/355&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper highlights Pakistan’s Request for Purchase Under the Rapid Financing Instrument (RFI). With the near-term outlook deteriorating sharply, the authorities have swiftly put in place measures to contain the impact of the shock and support economic activity. Crucially, health spending has been increased and social support strengthened. While uncertainty remains high, the near-term economic impact of coronavirus disease 2019 is expected to be significant, giving rise to large fiscal and external financing needs. The IMF support will help to provide a backstop against the decline in international reserves and provide financing to the budget for targeted and temporary spending increases aimed at containing the pandemic and mitigating its economic impact. In response to the crisis, the government of Pakistan has taken swift action to halt the community spread of the virus and introduced an economic stimulus package aimed at accommodating the spending needed to tackle the health emergency and supporting economic activity. |
| Keywords: | Public debt;External debt;COVID-19 ;Public sector;Fiscal stance;ISCR,CR,financing,IMF support,emergency,debt,health emergency |
| Date: | 2020–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/114&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper focuses on Albania’s Request for Purchase Under the Rapid Financing Instrument (RFI). The RFI provides rapid financial assistance to member countries facing an urgent balance of payments need, without the need for a full-fledged economic program or reviews. A sizeable increase in the fiscal deficit of 2020 is necessary to limit the impact of coronavirus disease 2019 (COVID-19). It will be critical to ensure adequate spending for healthcare and support for the people and firms that are hurt by the COVID-19 pandemic. The Albanian authorities remain committed to ensuring macroeconomic stability. Once the shocks have been overcome, it will be important to keep public debt on a clear downward path. The IMF staff supports the authorities’ request for financial assistance under the RFI to address the urgent balance of payments need due to exogenous shocks related to the 2019 earthquake and the COVID-19 pandemic. The balance of payments financing need is expected to be temporary. |
| Keywords: | Public debt;External debt;Balance of payments need;COVID-19 ;Monetary base;ISCR,CR,earthquake,COVID-19 Pandemic,GDP |
| Date: | 2020–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2020/118&r=all |
| By: | International Monetary Fund |
| Abstract: | This paper on Colombia focuses on reforming energy pricing. Rising fiscal challenges in Colombia can risk derailing the government from their commitment to meet both its headline deficit target of 2.4 percent in 2019 and its structural deficit target by 2022, under the existing fiscal rule. The government is committed to embark on a reform strategy that aims at safeguarding the fiscal framework. Energy subsidy reform is one element of the government’s strategy to address fiscal pressures. Carefully designed reforms entail a gradual phasing out of subsidies in the case of fuel products and, in the case of electricity, an improvement in the targeting over the medium term. Illustrative simulations presented in this report highlight the fiscal and distributional impacts of different reform options. Simulations show that net fiscal gains could be achieved both for electricity and fuel products, while reducing distortions. The mission identified reform options to reduce energy subsidies while at the same time improve their targeting. The approach differs across sectors. |
| Keywords: | Energy subsidies;Fuel prices;Inflation;Electricity;Communications in revenue administration;ISCR,CR,retail price,communication campaign,stabilization fund |
| Date: | 2019–11–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/344&r=all |
| By: | Chong-En Bai; Chang-Tai Hsieh; Zheng Michael Song; Xin Wang |
| Abstract: | We use administrative registration records with information on the owners of all Chinese firms to document the importance of “connected” investors, defined as state-owned firms or private owners with equity ties with state-owned firms, in the businesses of private owners. We document a hierarchy of private owners: the largest private owners have direct investments from state-owned firms, the next largest private owners have equity investments from private owners that themselves have equity ties with state owners, and the smallest private owners do not have any ties with state owners. The network of connected private owners has expanded over the last two decades. The share of registered capital of connected private owners increased by almost 20 percentage points between 2000 and 2019, driven by two trends. First, state owned firms have increased their investments in joint ventures with private owners. Second, private owners with equity ties to state owners also increasingly invest in joint ventures with other (smaller) private owners. The expansion in the “span” of connected owners from these investments with private owners may have increased aggregate output of the private sector by 4.2% a year between 2000 and 2019. |
| JEL: | E0 F0 O0 P0 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28170&r=all |
| By: | Kilian Huber; Volker Lindenthal; Fabian Waldinger |
| Abstract: | Large-scale increases in discrimination can lead to dismissals of highly qualified managers. We investigate how expulsions of senior Jewish managers, due to rising discrimination in Nazi Germany, affected large corporations. Firms that lost Jewish managers experienced persistent reductions in stock prices, dividends, and returns on assets. Aggregate market value fell by roughly 1.8 percent of German GNP because of the expulsions. Managers who served as key connectors to other firms and managers who were highly educated were particularly important for firm performance. The findings imply that individual managers drive firm performance. Discrimination against qualified business leaders causes first-order economic losses. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8736&r=all |
| By: | International Monetary Fund |
| Abstract: | This technical note on macroprudential policy framework and tools on France highlights that the institutional arrangements provide adequate powers to ensure Haut conseil de stabilité financière’s (HCSF) ability to act; however, some tools remain outside its legal domain. The report also discusses that The HCSF should evaluate effects of tools introduced to mitigate risks from corporate leverage. The HCSF should continue to monitor vulnerabilities in the corporate sector and once enough data is available, evaluate the impact on the tools introduced on: resilience of the financial system; and corporate borrowing behavior. A sectoral systemic risk buffer, calibrated to corporate exposures, could be considered if vulnerabilities intensify. A fiscal measure that incentivizes corporates to finance through equity rather than debt would affect both bank and market-based finance. Such a measure would have an impact on the demand for credit, rather than its supply. The macroprudential policy toolkit should be strengthened further. |
| Keywords: | Macroprudential policy;Systemic risk;Insurance companies;Financial sector stability;Macroprudential policy instruments;ISCR,CR,member institution,BNP Paribas,HCSF dashboard indicator,home equity,market share |
| Date: | 2019–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/327&r=all |
| By: | Dzung Bui (Philipps University Marburg); Lena Draeger (Leibniz University of Hannover); Bernd Hayo (Philipps University Marburg); Giang NghiemŸ (Leibniz University of Hannover) |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:202049&r=all |
| By: | Mirco Rubin (EDHEC Business School); Dario Ruzzi (Bank of Italy) |
| Abstract: | This paper quantifies the effects of equity tail risk on the US government bond market. We estimate equity tail risk as the option-implied stock market volatility that stems from large negative jumps as in Bollerslev, Todorov and Xu (2015), and assess its value in reduced-form predictive regressions for Treasury returns and an affine term structure model for interest rates. We document that the left tail volatility of the stock market significantly predicts one-month-ahead excess returns on Treasuries both in- and out-of-sample. The incremental value of employing equity tail risk as a return forecasting factor can be of economic importance for a mean-variance investor trading bonds. The estimated term structure model shows that equity tail risk is priced in the US government bond market. Consistent with the theory of flight-to-safety, we find that Treasury prices increase and funds flow from equities into bonds when the perception of tail risk is higher. Our results concerning the predictive power and pricing of equity tail risk extend to major government bond markets in Europe. |
| Keywords: | bond return predictability, equity tail risk, bond risk premium, flight-to-safety, affine term structure model |
| JEL: | C52 C58 G12 E43 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1311_20&r=all |
| By: | International Monetary Fund |
| Abstract: | This technical note evaluates the domestic macroprudential policy framework in Malta and provides recommendations to strengthen it. It assesses: the domestic institutional arrangements; the systemic risk monitoring framework; and the macroprudential policy toolkit. It also assesses current financial vulnerabilities in Malta to develop specific policy recommendations. The paper also reviews the current domestic institutional arrangements and provides recommendations and discusses the existing systemic risk monitoring framework and provides options to enhance it further. The legal backing of inter-agency coordination could be further strengthened. The report highlights that the planned introduction of borrower-based measures is a welcome step to proactively address a build-up of vulnerabilities in the housing and household sectors. There is scope to refine the design of the planned borrower-based measures to reduce uncertainty over policy effects. The Central Bank of Malta plans to introduce borrower-based measures to proactively address the potential build-up of vulnerabilities in the housing and household sectors. |
| Keywords: | Loans;Mortgages;Macroprudential policy;Financial sector stability;Banking;ISCR,CR,bank,loan,mortgage,lending |
| Date: | 2019–11–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2019/349&r=all |
| By: | van der Plaat, Mark; Spierdijk, Laura |
| Abstract: | Recourse is often included in loan sales and securitization in order to reduce potential problems arising from information asymmetries. Recent literature has shown, however, that recourse was ineffective in preventing such problems. In this paper we empirically study the recourse cyclicality hypothesis, which states that recourse is only effective in signaling asset quality and thereby reducing information asymmetries in a recession. Using data between 2001 and 2016 on U.S. commercial banks, we find that recourse is only effective in signaling asset quality during a recession. When the economy is booming, recourse is ineffective and cannot prevent the build-up of risky assets on- and off-balance sheet of banks. Our results are robust to several specifications. |
| Keywords: | Recourse; Loan Sales; Securitization; Asymmetric Information; Adverse Selection; Moral Hazard; Credit Risk; Banking; Cyclicality |
| JEL: | G21 G32 |
| Date: | 2020–12–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104718&r=all |
| By: | Angus Deaton; Paul Schreyer |
| Abstract: | In March 2020, the International Comparison Project published its latest results, for the calendar year 2017. This round presents common-unit or purchasing-power-parity data for 137 countries on Gross Domestic Product and its components. We review a number of important issues, what is new, what is not new, and what the new data can and cannot do. Of great importance is the lack of news, that the results are broadly in line with earlier results from 2011. We consider the relationship between national accounts measures and health, particularly in light of the COVID-19 epidemic which may reduce global inequality, even as it increases inequality within countries. We emphasize things that GDP cannot do, some familiar—like its silence on distribution—and some less familiar—including its increasing detachment from national material wellbeing in a globalized world where international transfers of capital and property rights can have enormous effects on GDP, such as the 26 percent increase in Ireland’s GDP in 2015. |
| JEL: | E01 F10 F62 I15 I31 P22 Y1 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28177&r=all |