International Monetary Fund. Finance Dept. and International Monetary Fund. Statistics Dept.
This paper presents the annual update of the quota database and extends the database by one year through 2018. The paper provides an overview of the data and of the methodology and covers the quota formula variables and calculated quota shares based on the current quota formula.
This paper uses an individual-level survey conducted by the Edelman Trust Barometer in mid-April for 11 advanced and emerging market economies to examine perceptions of government performance in managing the health and economic crisis, beliefs about the future, and attitudes about redistribution. We find that women, non-college educated, the unemployed, and those in non-teleworkable jobs systematically have less favorable perceptions of government responses. Personally experiencing illness or job loss caused by the pandemic can shape people’s beliefs about the future, heightening uncertainties about prolonged job losses, and the imminent threat from automation. Economic anxieties are amplified in countries that experienced an early surge in infections followed by successful containment, suggesting that negative beliefs can persist. Support for pro-equality redistributive policies varies, depending on personal experiences and views about the poor. However, we find strong willingness to provide social safety nets for vulnerable individuals and firms by those who have a more favorable perception of government responses, suggesting that effective government actions can promote support for redistributive policies.
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper explores policies to drive diversification for Saudi Arabia. Diversification is needed to create jobs for Saudis and to mitigate the impact of uncertainty in oil markets. Although the business climate should be improved, and remaining infrastructure gaps addressed, reforms need to go beyond these areas. Diversification in Saudi Arabia that creates jobs for nationals could be held back by the effects of relatively high wages and their impact on cost competitiveness. Creative solutions are needed to address the impact of high government wages and employment on competitiveness. Industrial policy could help overcome the incentives that encourage companies to focus on the nontradable sector, but should be handled carefully, keeping lessons from other countries’ experiences in mind. Export orientation and competition are crucial mechanisms to ensure discipline. Strengthening human capital to raise productivity and provide workers with the skills needed in the private sector will be essential to success.
International Monetary Fund. Strategy, Policy, &, Review Department, and International Monetary Fund. Fiscal Affairs Dept.
This paper reviews the experience with the fiscal space assessment framework that was piloted during 2017–18. In 2016, staff proposed an operational definition of fiscal space and a new four-stage framework for its assessment. These were discussed informally by the Board in June, and a Board paper “Assessing Fiscal Space: An Initial Consistent Set of Considerations” incorporating Directors’ views was published in December. Fiscal space was narrowly defined as the room for undertaking discretionary fiscal policy relative to existing plans without endangering market access and debt sustainability. The framework was developed in response to the need to provide a more systematic approach to assessing fiscal space in the Fund’s surveillance. It was designed as a tool to inform the availability of fiscal space over a 3 to 4 year horizon for discretionary action, as opposed to the optimality of its use. Indeed, it was stressed that the availability of space does not necessarily mean that it should be used or should not be further expanded. The framework was piloted in the Article IV consultations of 34 advanced economies and emerging markets, comprising almost 80 percent of global GDP in PPP terms.
provide a powerful lift to growth—both in the short and the long term—if they are well aligned with individual country conditions . These include an economy’s level of development, its position in the economic cycle, and its available macroeconomic policy space to support reforms. The larger a country’s output gap, the more it should prioritize structural reforms that will support growth in the short term and the long term—such as product market deregulation and infrastructure investment.
Macroeconomic support can help make reforms more effective, by bringing forward long-term gains or alleviating their short-term costs . Where monetary policy is becoming over-burdened, domestic policy coordination can help make macroeconomic support more effective. Fiscal space, where it exists, should be used to offset short-term costs of reforms. And where fiscal constraints are binding, budget-neutral reform packages with positive demand effects should take priority.
Some structural reforms can themselves help generate fiscal space. For example, IMF research finds that by boosting output, product market deregulation can help lower the debt-to-GDP ratio over time. Formulating a medium-term plan that clarifies the long-term objectives of fiscal policy can also help increase near-term fiscal space.
With nearly all G-20 economies operating at below-potential output, the IMF is recommending measures that both boost near-term growth and raise long-term potential growth. For example:
? In advanced economies, these measures include shifting public spending toward infrastructure investment (Australia, Canada, Germany, United States (US)); promoting product market reforms (Australia, Canada, Germany, Japan, Korea, Italy) and labor market reforms (Canada, Germany, Japan, Korea, United Kingdom (UK), US); and fiscal structural reforms (France, UK, US). Where there is fiscal space, lowering employment protection is also recommended (Korea).
? Recommendations for emerging markets (EMs) focus on raising public investment efficiency ( India, Saudi Arabia, South Africa), labor market reforms (Indonesia, Russia, Saudi Arabia, South Africa, Turkey), and product market reforms (China, Saudi Arabia, South Africa), which would boost investment and productivity within tighter budgetary constraints particularly if barriers to trade and FDI were eased (Brazil, India, Indonesia). Governance (China, South Africa) and other institutional reforms are also crucial. Where policy space is limited, adjusting the composition of fiscal policy can create space to support reforms ( Argentina, India, Mexico, Russia).
? Some commodity-exporting EMs (Brazil, Russia, Saudi Arabia, South Africa) are facing acute challenges, with output significantly below potential and an urgent need to rebuild fiscal buffers. To bolster growth, Fund staff recommends product market and legal reforms to improve the business climate and investment; trade and FDI liberalization to facilitate diversification; and financial deepening to boost credit flows.
IMF advice also aims to promote inclusiveness and macroeconomic resilience. The Fund recommends a targeted expansion of social spending toward vulnerable groups (Mexico), social spending for the elderly poor ( Korea), and upgrading social programs for the nonworking poor (US). Recommendations to bolster macrofinancial resilience include expanding the housing supply (UK), resolving the corporate debt overhang (China, Korea), coordinating a national approach to regulating and supervising life insurers (US), and reforming monetary frameworks (Argentina, China).
Janko Cizel, Jon Frost, Aerdt G. F. J. Houben, and Peter Wierts
Macroprudential policy is increasingly being implemented worldwide. Its effectiveness in influencing bank credit and its substitution effects beyond banking have been a key subject of discussion. Our empirical analysis confirms the expected effects of macroprudential policies on bank credit, both for advanced economies and emerging market economies. Yet we also find evidence of substitution effects towards nonbank credit, especially in advanced economies, reducing the policies’ effect on total credit. Quantity restrictions are particularly potent in constraining bank credit but also cause the strongest substitution effects. Policy implications indicate a need to extend macroprudential policy beyond banking, especially in advanced economies.