Gail Cohen, João Tovar Jalles, Mr. Prakash Loungani, Ricardo Marto, and Gewei Wang
We provide a comprehensive analysis of the relationship between greenhouse gas (GHG) emissions and GDP in China using both aggregate and provincial data. The Kuznets elasticity is about 0.6 for China, higher than that in advanced countries but below that of major emerging markets. The elasticity is somewhat lower for consumption-based emissions than for production-based emissions, providing mild evidence consistent with the “pollution haven” hypothesis. The Kuznets elasticity is much lower for the last three decades than for the three previous decades, suggesting a longer-term trend toward decoupling as China has become richer. Further evidence of this comes from provincial data: richer provinces tend to have smaller Kuznets elasticities than poorer ones. In addition to the trend relationship, we find that the Environmental Okun's Law holds in China.
Gail Cohen, João Tovar Jalles, Mr. Prakash Loungani, and Ricardo Marto
Recent discussions of the extent of decoupling between greenhouse gas (GHG) emissions and
real gross domestic product (GDP) provide mixed evidence and have generated much debate.
We show that to get a clear picture of decoupling it is important to distinguish cycles from
trends: there is an Environmental Okun's Law (a cyclical relationship between emissions and
real GDP) that often obscures the trend relationship between emissions and real GDP. We show
that, once the cyclical relationship is accounted for, the trends show evidence of decoupling in
richer nations—particularly in European countries, but not yet in emerging markets. The picture
changes somewhat, however, if we take into consideration the effects of international trade, that
is, if we distinguish between production-based and consumption-based emissions. Once we add
in their net emission transfers, the evidence for decoupling among the richer countries gets
weaker. The good news is that countries with underlying policy frameworks more supportive of
renewable energy and supportive of climate change tend to have greater decoupling between
trend emissions and trend GDP, and for both production- and consumption-based emissions.
Giulia Bettin, Mr. Andrea F Presbitero, and Mr. Nikola Spatafora
This paper examines how international remittances are affected by structural characteristics, macroeconomic conditions, and adverse shocks in both source and recipient economies. We exploit a novel, rich panel data set, covering bilateral remittances from 103 Italian provinces to 107 developing countries over the period 2005-2011. We find that remittances are negatively correlated with the business cycle in recipient countries, and increase in response to adverse exogenous shocks, such as natural disasters or large declines in the terms of trade. Remittances are positively correlated with economic conditions in the source province. Nevertheless, in the presence of similar negative shocks to both source and recipient economies, remittances remain counter-cyclical with respect to the recipient country.
This paper discusses a request from Samoa's authorities for a Disbursement Under the Rapid-Access Component of the Exogenous Shocks Facility (ESF-RAC). The tsunami that hit Samoa on September 29, 2009 has undercut Samoa’s economic resilience and prospects for a quick recovery from the global recession. Real GDP is likely to contract in 2010. The authorities have requested a disbursement equivalent to 50 percent of quota (SDR 5.8 million) under the IMF’s ESF-RAC. IMF staff supports the request on Samoa’s low public debt and credible commitment to sound macroeconomic policies.
The sharp increase in debt in the Caribbean since the mid-1990s has focused attention on the conduct of fiscal policy in the region. This paper aims to diagnose how fiscal policy has behaved during this period by looking at three main cycles of the economy: the business, election, and natural disaster cycles. Our main findings suggest that fiscal policy has been mostly procyclical in the region, while disasters have been heavily "insured" by foreign transfers. The "when it rains, it pours" phenomena suggested by Kaminsky, Reinhart and Vegh (2004) seems to take place in the Caribbean.
This Selected Issues paper on the Eastern Caribbean Currency Union (ECCU) underlies key features of business cycles. To obtain new measures of classical and growth cycles, simple rules were applied to date turning points in the classical business cycle, and a recently developed frequency domain filter was used to estimate the growth cycle. At the regional level, the ECCU countries are facing two shocks, i.e., the depreciation of the U.S. dollar and the depreciation of the Dominican Republic’s peso. The countries of the ECCU have experienced modest erosion in their price and nonprice competitiveness.