This Selected Issues paper discusses the assessment of economic activity in Togo in absence of quarterly GDP series. Togo collects about 40 macroeconomic indicators monthly that span a wide range of sectors of the economy. The selection of the variables for the economic activity index is conducted by finding the combination of variables. The indicators are aggregated into an index using a methodology used by the Conference Board. Then an economic activity index is constructed that effectively replicates the historical growth rates of real GDP in Togo. The selected index minimizes the deviations between the growth rates of the indicator and actual real GDP growth over 2002–13.
This Selected Issues paper employs a suite of models to determine the main drivers of inflation in Poland. Inflation in Poland has stayed below the lower bound of the target band for about two years with external shocks adding to downward pressure during 2014. The paper provides a range of inflation forecasts to assess the likelihood of protracted low inflation. The paper considers the main factors underlying recent inflation developments and assesses the importance of first-round indirect and second-round effects of external shocks for headline inflation. Using a variety of models, the paper also provides possible forecast paths for inflation in Poland.
Ms. Era Dabla-Norris, Mr. Alun H. Thomas, Mr. Rodrigo Garcia-Verdu, and Ms. Yingyuan Chen
This paper documents stylized facts on the process of structural transformation around the world and empirically analyzes its determinants using data on real value added by sector of economic activity (agriculture, manufacturing and services) for a panel of 168 countries over the period 1970-2010. The analysis points to large differences in sector shares both across and within regions as well as for countries at similar levels of economic development. Using both linear and quantile regression methods, it finds that a large proportion of the cross-country variation in sector shares can be accounted for by country characteristics, such as real GDP per capita, demographic structure, and population size. It also finds that policy and insitutional variables, such as product market reforms, openness to trade, human and physical capital, and finance improve the baseline model’s ability to account for the variation in sectoral shares across countries.
In this paper, the IMF's new Global Economy Model (GEM) is used to estimate the contribution of unbalanced growth to the decline in the share of goods production in Australia and New Zealand. The simulation results suggest that faster productivity growth in the tradable goods sector in Australia, New Zealand, and their major trading partners accounts for a significant portion of the relative decline in the importance of goods production. Over the 1995 to 2004 period, unbalanced growth explains more than 80 percent of the decline in goods production in both countries.
This paper investigates the relationship between the nominal exchange rate regime and the volatility of relative commodity prices. The analysis shows that the relationship depends upon both the market structure and the economic agent’s perception about future exchange rate movements. When the markets for manufactured goods are less competitive than the markets for primary commodities, the volatility of relative commodity prices rises when exchange rate uncertainty increases. If demand for manufactured goods is intertemporally dependent, even a small increase in exchange rate uncertainty can result in potentially large costs in terms of increased relative commodity price instability.
This paper shows that exchange rate variability promotes agglomeration of economic activity. Under flexible rates, firms located in large markets have lower variability of sales, reinforcing concentration of firms there. Empirical evidence on OECD countries demonstrates (1) that the negative effect of country size on variability of industrial production is stronger after the 1973 collapse of fixed rates and (2) for small (large) countries, exchange rates variability has a long-run negative (positive) effect on net inward FDI flows. Two implications arise: creating a currency area fosters agglomeration in the area, and a two-stage EMU may exacerbate the current uneven regional development.
Manoj Atolia, Mr. Prakash Loungani, Milton Marquis, and Mr. Chris Papageorgiou
This paper takes a fresh look at the current theories of structural transformation and the role of
private and public fundamentals in the process. It summarizes some representative past and
current experiences of various countries vis-a-vis structural transformation with a focus on the
roles of manufacturing, policy, and the international environment in shaping the trajectory of
structural transformation. The salient aspects of the current debate on premature
deindustrialization and its relation to a middle-income trap are described as they relate to the
path of structural transformation. Conclusions are drawn regarding prospective future paths for
structural transformation and development policies.