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Zidong An, Mr. John C Bluedorn, and Gabriele Ciminelli
The negative and stable relationship between an economy’s aggregate demand conditions and overall unemployment is well-documented. We show that there is a large degree of heterogeneity in the cyclical sensitivities of unemployment across worker and economy groups. First, unemployment is more than twice as sensitive to aggregate demand in advanced as in emerging market and developing economies. Second, youth’s unemployment is twice as sensitive as that of adults’. Third, women’s unemployment is significantly less sensitive to demand than men’s in advanced economies. These findings point to the highly unequal impacts of the business cycle across worker and economy groups.
Mrs. Paola Ganum and Mr. Vimal V Thakoor
Covid-19 has exacerbated economic and social vulnerabilities across Sub-Saharan Africa (SSA). There is a risk that growth could be lower for longer, with a setback to development. Post-pandemic reforms thus become even more important, especially with constrained scope for fiscal and monetary stimuli. Reforms could boost per capita growth by an additional 0.3-1.3 percentage points, relative to the 1.9 percent average since 2010. Such growth would reduce per capita income doubling time from 37 years to about 22 years. Low-income countries stand to gain the most from reforms. The largest gains come from governance, products markets, and factor accumulation. Importantly, these reforms can be implemented in the post-pandemic environment characterized by weaker social and distributional outcomes.
International Monetary Fund. Asia and Pacific Dept
This Article IV Consultation highlights that Australia experienced only a minor downturn after the end of the mining investment and commodity price boom but, as elsewhere, the adjustment and rebalancing has been slow, with below-target inflation and low wage growth amid economic slack. Macro-financial vulnerabilities relating to high household debt and low housing affordability have become major concerns after a recent housing boom. The baseline forecasts entail a soft landing in the housing market, but a stronger market correction remains a risk. Overall, near-term risks to growth are to the downside, mirroring the global risk picture, with the impact of shocks potentially being amplified by high household debt. The IMF staff welcomes the authorities’ continued commitment to working actively with international partners to promote the global multilateral trading system. Macroeconomic policy support should remain in place until full employment and inflation in the target range are firmly within reach. The structural policy agenda appropriately targets innovation, infrastructure gaps, tax reform, and energy policy, although progress has been limited in some areas.
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper examines the adjustment of Australian labor markets to the recent adverse shocks. Australia’s labor markets were not severely impacted by the global financial crisis and are adjusting smoothly to the sizeable commodity prices bust and mining investment downturn. However, some labor market indicators suggest persistent weaknesses. There does not appear to be a significant increase in structural employment in the wake of the commodity prices bust and mining investment decline. Increased flexibility in average hours per worker has likely moderated employment reduction in downturns and prevented a larger increase in unemployment in the wake of the mining investment downturn. At the same time, elevated underemployment signals additional slack, and is likely weighing down wage growth.
International Monetary Fund. Asia and Pacific Dept
This 2016 Article IV Consultation highlights that Australia has enjoyed robust growth despite the commodity price and mining investment bust. The moderate impact of the large shocks since 2011 highlights the resilience of the economy and strong policy frameworks. Recent structural reforms have focused on fostering innovation. The National Innovation and Science Agenda includes measures to boost innovation and entrepreneurship in the high-tech sector, including through tax breaks. Legislation is being prepared for key components of the Harper Review, which has identified a number of reforms to boost competition and productivity in the services sectors, and to strengthen competition policy broadly.
International Monetary Fund
Structural policies have become a prominent feature of today’s macroeconomic policy discussion. For many countries, lackluster economic growth and high unemployment cloud the outlook. With fewer traditional policy options, policymakers are increasingly focused on the complementary role of structural policies in promoting more durable job-rich growth. In particular, the G20 has emphasized the essential role of structural reforms in ensuring strong, sustainable and balanced growth. Against this backdrop, the 2014 Triennial Surveillance Review (TSR) called for further work to enhance the Fund’s ability to selectively provide more expert analysis and advice on structural issues, particularly where there is broad interest among member countries. The purpose of this paper is to engage the Board on staff’s post-TSR work toward strengthening the Fund’s capacity to analyze and, where relevant, offer policy advice on macro-relevant structural issues.
Mr. Shekhar Aiyar and Mr. Rodney Ramcharan
How important is luck in determining labor market outcomes? We address this question using a new dataset of all international test cricketers who debuted between 1950 and 1985. We present evidence that a player’s debut performance is strongly affected by an exogenous source of variation: whether the debut series is played at home or abroad. This allows us to identify the role of luck - factors unrelated to ability - in shaping future career outcomes. We find that players lucky enough to debut at home perform significantly better on debut. Moreover, debut performance has a large and persistent impact on long run career outcomes. We also make headway in empirically distinguishing between competing explanations for why exogenous initial conditions exercise a persistent impact on career performance
International Monetary Fund
In this paper, we first introduce investment-specific technology (IST) shocks to an otherwise standard international real business cycle model and show that a thoughtful calibration of them along the lines of Raffo (2009) successfully addresses the "quantity", "international comovement", "Backus-Smith", and "price" puzzles. Second, we use OECD data for the relative price of investment to build and estimate these IST processes across the U.S and a "rest of the world" aggregate, showing that they are cointegrated and well represented by a vector error correction model (VECM). Finally, we demonstrate that when we fit such estimated IST processes in the model instead of the calibrated ones, the shocks are actually not as powerful to explain any of the four montioned puzzles.
International Monetary Fund
The first section of this paper is an attempt to examine the interest rate channel of monetary policy transmission in Moldova and to estimate the strength and the speed of the interest rate pass-through. The next section provides a background on Moldovan financial markets, liquidity conditions, and the current framework of monetary policy. The following section sets out the formal model used to estimate the strength and the speed of the pass-through, and the last session discusses results.