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  • Economic Development, Innovation, Technological Change, and Growth: General x
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Cover IMF Working Papers
Accounting for Climate Risks in Costing the Sustainable Development Goals
Rimjhim Aggarwal, Piergiorgio M Carapella, Tewodaj Mogues, and Julieth C Pico-Mejia
This paper evaluates the additional spending needed to meet core targets of selected Sustainable Development Goals (SDGs) while accounting for the associated cost to address climate risks. The SDGs under study are those related to human and physical capital development. An additional 3.8 percent of global GDP, or US$3.4 trillion, of public and private spending will be required by 2030 to achieve a strong performance in the selected SDGs while addressing associated climate risks. This includes an increase of 0.4 percent of global GDP (US$358 billion) compared to estimates that do not account for mitigation and adaptation needs within these sectors. LIDCs and SSA experience the highest climate-related cost augmentation relative to GDP, while EMEs (driven by large Asian emerging economies) bear the largest cost in absolute terms.
Keywords:
Sustainable Development Goals; Climate change; Spending; Expenditure; Health; Education; Water and sanitation; Electricity; Roads.; expenditure Needs; sanitation infrastructure Improvement; wash infrastructure improvement; road infrastructure; water infrastructure Improvement; Sustainable Development Goals (SDG); Infrastructure; Natural disasters; Global
Cover Regional Economic Outlook, Sub-Saharan Africa, October 2023
Regional Economic Outlook, Sub-Saharan Africa, October 2023
Light on the Horizon?
International Monetary Fund. African Dept.

Abstract

Still emerging from the COVID-19 pandemic, countries in sub-Saharan Africa have been hit by a sluggish global economy, worldwide inflation, high borrowing costs, and a cost-of-living crisis. In many cases, inflation is still too high, borrowing costs are still elevated, exchange-rate pressures persist, and political instability is an ongoing concern. To ensure that the coming rebound is more than just a transitory glimpse of sunshine, it is important for authorities to guard against a premature relaxation of stabilization policies, while also focusing on reforms to both claw back lost ground from the four-year crisis and also to create new space to address the region’s pressing development needs.

Keywords:
economic conditions; economic forecasting; Africa economic development; economic policy; sub-Saharan Africa; inflation expectation; inflation-depreciation spiral; funding squeeze; food price inflation; IMF financing arrangement; consumption basket; sub-Saharan Africa face; inflation fall; Inflation; Exchange rates; Food prices; Central bank policy rate; Government debt management; Global
Cover IMF Working Papers
Constructing a Positive Shock: Growth Through the Lens of Option Pricing
Mehmet Cangul
Low-income economies face negative shocks whose frequency and disproportionate impact overcome growth trajectories, producing a negative drift. COVID-19 was the latest such episode. To escape this negative drift, and build a durable recovery, there is a need for a counter-balancing force: to construct a positive shock. Growth is realized through decisions that fall under two categories, routine and non-linear. While routine decisions modify existing economic behavior along the same path, non-linear decisions describe riskier options that involve transformation. Option pricing theory can be useful to describe the latter, and construct the positive shock required to escape the negative drift.
Keywords:
positive shock; option pricing growth model; escape speed; growth model; option pricing theory; routine decision; riskier option; Asset prices; Return on investment; COVID-19
Cover IMF Working Papers
Crouching Beliefs, Hidden Biases: The Rise and Fall of Growth Narratives
Reda Cherif, Marc Engher, and Fuad Hasanov
The debate among economists about an optimal growth recipe has been the subject of competing “narratives.” We identify four major growth narratives using the text analytics of IMF country reports over 1978-2019. The narrative “Economic Structure”—services, manufacturing, and agriculture—has been on a secular decline overshadowed by the “Structural Reforms”—competitiveness, transparency, and governance. We observe the rise and fall of the “Washington Consensus”—privatization and liberalization— and the rise to dominance of the “Washington Constellation,” a collection of many disparate terms such as productivity, tourism, and inequality. Growth theory concepts such as innovation, technology, and export policy have been marginal while industrial policy, which was once perceived positively, is making a comeback.
Keywords:
Narratives; industrial policy; growth; manufacturing; services; Washington Consensus; structural reforms
Cover IMF Working Papers
And Schumpeter Said, "This is How Thou Shalt Grow": Further Quest for Economic Growth in Poor Countries
Mr. Philippe Beaugrand
The paper reviews the “stylized facts” on economic growth gathered by Easterly and Levine in their 2001 joint paper and illustrates some of the points made on the basis of data from the IMF’s World Economic Outlook on real growth and per capita GDP since 1970. The data show that the growth performance of many poor countries has been disappointing: most of the “developing” world, especially sub-Saharan Africa, has been getting poorer while the advanced economies have been getting richer. To reverse this trend requires finding ways to raise total factor productivity in poor countries; in turn, this implies letting entrepreneurs innovate—in the Schumpeterian sense—in order to bring about structural changes in the economy. The conclusion highlights several essential steps in creating a favorable environment for innovation and growth.
Keywords:
WP; country; economic growth; Net creditors country; per capita income; Developing Countries; Growth; Innovation; Entrepreneurship; Schumpeter; J.A.; poor country; diminishing returns; nonfuel exporter; circular flow; returns to scale; Self-employment; Personal income; Oil; Sub-Saharan Africa; Asia and Pacific; Africa; Middle East
Cover IMF Working Papers
The Challenge of Diversification in the Caribbean
Mr. A. Salehizadeh, Mr. Peter Berezin, and Mr. Elcior Santana
It is typically assumed that countries in the Caribbean suffer from a lack of output and export diversification. Contrary to this popular perception, we find no evidence that output variability is higher in Caribbean countries than in larger, more diversified, developing economies. In addition, we find no evidence that export earnings are more volatile in the Caribbean economies than elsewhere. In fact, export earnings are quite stable in the Caribbean, reflecting the fact the region is rather unique in that most of its export earnings are generated from service exports, which tend to be considerably less volatile than goods exports.
Keywords:
WP; developing country; foreign direct investment; rate of return; Caribbean country; growth; Caribbean; diversification; consumption; risk-sharing; informatics firm; risk pooling; construction company; information processing company; production diversification; information technology company; physical capital; telecommunications company; firms in core market; Export earnings; Income; Agricultural commodities; North America
Cover IMF Working Papers
Determinants of, and the Relation Between, Foreign Direct Investment and Growth: A Summary of the Recent Literature
Mr. Ewe-Ghee Lim
This paper summarizes recent arguments/findings on two aspects of foreign direct investment (FDI): its correlation with economic growth and its determinants. The first part focuses on recent literature regarding positive spillovers from FDI while the second deals with the determinants of FDI. The paper finds that while substantial support exists for positive spillovers from FDI, there is no consensus on causality. On determinants, the paper finds that market size, infrastructure quality, political/economic stability, and free trade zones are important for FDI, while results are mixed regarding the importance of fiscal incentives, the business/investment climate, labor costs, and openness.
Keywords:
WP; parent firm; production cost; efficiency spillover; FDI investor; economic growth; factor cost; FDI inflow; FDI policy; horizontal FDI; foreign direct investment; determinants; growth contribution; Foreign corporations; Spillovers; Tax incentives; Exports; Asia and Pacific; Global
Cover IMF Working Papers
Fiscal Policy and Long-Run Growth
Mr. Vito Tanzi and Mr. Howell H Zee
This paper discusses in a systematic and comprehensive way the existing literature on the relationship between the growth of countries’ economies and various public finance instruments, such as tax policy, expenditure policy, and overall budgetary policy, from the perspectives of allocative efficiency, macroeconomic stability, and income distribution. It reviews both the conceptual linkages between each of the instruments and growth and the empirical evidence on such relationships. It broadly concludes that fiscal policy could play a fundamental role in affecting the long-run growth performance of countries.
Keywords:
WP; income; public expenditure; capital; private sector; growth theory; physical capital; growth effect; private sector productivity; public finance; fiscal policy variable; rate of change; transmission mechanism; unforeseen public expenditure; income equality; income taxation; externality effect of public expenditure; Human capital; Income distribution; Income inequality
Cover Regional Economic Outlook, Sub-Saharan Africa, October 2023
Light on the Horizon?
International Monetary Fund. African Dept.

Abstract

Still emerging from the COVID-19 pandemic, countries have been hit by a sluggish global economy, worldwide inflation, high borrowing costs, and a cost-of-living crisis. As a result, growth in 2023 is expected to fall for the second year in a row to 3.3 percent from 4.0 percent last year. But a long-awaited rebound is on the horizon. Inflation is falling, public finances are stabilizing, and growth is poised to increase to 4.0 percent next year. Still, even though the outlook is less ominous, it is too early to celebrate. In many cases, inflation is still too high, borrowing costs are still elevated, exchange-rate pressures persist, and political instability is an ongoing concern. To ensure that the coming rebound is more than just a transitory glimpse of sunshine, it is important for authorities to guard against a premature relaxation of stabilization policies, while also focusing on reforms to both claw back lost ground from the four-year crisis and also to create new space to address the region’s pressing development needs.

Keywords:
exchange rate pressure; inflation in sub-Saharan Africa; food inflation; value chain
Cover Regional Economic Outlook, Sub-Saharan Africa, October 2023
Regional Economic Outlook, Sub-Saharan Africa, October 2023
Light on the Horizon?
International Monetary Fund. African Dept.

Abstract

Still emerging from the COVID-19 pandemic, countries in sub-Saharan Africa have been hit by a sluggish global economy, worldwide inflation, high borrowing costs, and a cost-of-living crisis. In many cases, inflation is still too high, borrowing costs are still elevated, exchange-rate pressures persist, and political instability is an ongoing concern. To ensure that the coming rebound is more than just a transitory glimpse of sunshine, it is important for authorities to guard against a premature relaxation of stabilization policies, while also focusing on reforms to both claw back lost ground from the four-year crisis and also to create new space to address the region’s pressing development needs.

Keywords:
economic conditions; economic forecasting; Africa economic development; economic policy; sub-Saharan Africa; inflation expectation; inflation-depreciation spiral; funding squeeze; food price inflation; IMF financing arrangement; consumption basket; sub-Saharan Africa face; inflation fall; Inflation; Exchange rates; Food prices; Central bank policy rate; Government debt management; Global