Hui Jin, La-Bhus Fah Jirasavetakul, and Baoping Shang
This paper, using Moldova as an example, presents a systematic approach to assess the efficiency and equity of public education spending, identify sources of inefficiencies and inequality, and formulate potential reform options. The analytical framework combines international benchmarking with country-specific analysis—such as microeconomic analysis based on household survey data—and can provide important insights into diagnosing and reforming education systems. The analysis finds significant scope to improve both efficiency and equity of the education sector in Moldova. Potential reform measures include further consolidating the oversized school network, reducing overstaffing, and better targeting government subsidies. The current remuneration policy could also be improved to attract high quality teachers and incentivize performance.
Mr. Ralph Chami, Ekkehard Ernst, Connel Fullenkamp, and Anne Oeking
We present cross-country evidence on the impact of remittances on labor market outcomes.
Remittances appear to have a strong impact on both labor supply and labor demand in
recipient countries. These effects are highly significant and greater in size than those of
foreign direct investment or offcial development aid. On the supply side, remittances reduce
labor force participation and increase informality of the labor market. In addition, male and
female labor supply show significantly different sensitivities to remittances. On the demand
side, remittances reduce overall unemployment but benefit mostly lower-wage, lowerproductivity
nontradables industries at the expense of high-productivity, high-wage tradables
sectors. As a consequence, even though inequality declines as a result of larger remittances,
average wage and productivity growth declines, the latter more strongly than the former
leading to an increase in the labor income share. In fragile states, in contrast, remittances
impose a positive externality, possibly because the tradables sector tends to be
underdeveloped. Our findings indicate that reforms to foster inclusive growth need to take
into account the role of remittances in order to be successful.
Government compensation and employment policies are important for the efficient delivery of public services which are crucial for the functioning of economies and the general prosperity of societies. On average, spending on the wage bill absorbs around one-fifth of total spending. Cross-country variation in wage spending reflects, in part, national choices about the government’s role in priority sectors, as well as variations in the level of economic development and resource constraints.
External shocks pose major challenges to fiscal policy makers through lower output and large fiscal imbalances. This paper analyzes the case of Moldova, which faced parallel crises a decade apart: the Russian crisis of 1998 and the global financial crisis of 2008-2009. The country went through large fiscal adjustments during these crises and launched important fiscal reforms. The paper reviews the crises and reform experience. In particular, it aims to explain the motivation for reforms, describe reform design and implementation, and provide an understanding of their outcomes. The paper also catalogues the form and size of international assistance for Moldova.
The composition of short-term and medium-term adjustment measures will facilitate sufficient short-term adjustment flexibility, and be consistent with medium-term fiscal sustainability. Improving debt resolution instruments will help the banks to regain confidence in lending. Meanwhile, there is a need to consider improvements in its liquidity framework. The main factors that shaped the economic growth model in Moldova in the last decade and the risks of the current growth model are outlined. Public policies can promote growth by identifying and addressing the most binding constraints to development.
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.
Ms. Sharmini Coorey, Mr. Mauro Mecagni, and Mr. Erik Offerdal
In light of the persistence of moderate inflation in many transition economies, this paper analyzes whether inflation resulted from insufficiently tight financial policies and wage pressures or from the protracted adjustment of relative prices. Using a new database for 21 countries, the effect of relative price variability on inflation is estimated within a framework controlling for nominal and real shocks. Money and wage growth were the most important determinants of inflation; relative price variability had a sizable effect at high inflation during initial liberalization and a small effect at moderate inflation. Cost recovery may contribute to variability, particularly in the advanced stages of the transition.