This paper analyzes why the Middle East and North Africa (MENA) region has lagged in growth and globalization. Despite attempts to spur recovery and initiate structural reforms, many countries in the region remain on a slow growth path, effectively sidelined from globalization and the benefits of closer economic integration with the rest of the world. The benefits from oil failed to generate a sustained growth dynamic or bring about greater regional economic integration. The paper highlights that the slowdown in economic reforms is a key factor for the economic depression in the MENA region.
This Selected Issues paper and Statistical Appendix on Bhutan underlie the macroeconomic impact of Tala, rapid private sector credit growth, and macroeconomic risks. In Bhutan, as the bulk of Tala-related flows go through the government accounts, this requires an appropriate fiscal stance and skillful expenditure management. Strong economic growth will require and lead to a deepening and further development of the financial system in Bhutan. The financial sector seems to be relatively shielded from adverse events, although risks remain.
This Selected Issues paper on Bolivia reports that it has experienced major increases in its gas reserves, production, and exports. Not only have their levels increased significantly, but also there have been extensive regulatory changes, which range from the privatization of the mid-1990s to the increase in the government’s tax take from the hydrocarbons industry. The government has reached new agreements with foreign oil companies that will allow foreign companies to continue recovering part of their old investments.
International Monetary Fund. External Relations Dept.
With the expected doubling of aid to Africa by 2010, the continent’s policymakers will face a host of macroeconomic challenges. How recipients and their development partners can address these challenges was the focus of a workshop hosted by the IMF and the U.K. Department for International Development (DfID) in Washington April 19-20. African finance ministers, central bank governors and other officials, donors, academics, and representatives from multilateral development institutions took up seven issues that recipients of sharply increased aid are likely to deal with.
International Monetary Fund. External Relations Dept.
Over the next decade, African countries are expected to be the largest beneficiaries of increased donor aid, which is intended to improve their prospects of achieving the Millennium Development Goals. To help these countries assess the macroeconomic implications of increased aid and respond to the associated policy challenges, the IMF has published a study by its African Department: Macroeconomic Challenges of Scaling Up Aid to Africa: A Checklist for Practitioners.
June 2011: The Q&A in this issue features seven questions on the global trade collapse of 2008-09 (by Rudolfs Bems); the research summaries are "The Impact of the Great Recession on Emerging Markets" (by Ricardo Llaudes, Ferhan Salman, and Mali Chivakul) and "The Missing Link between Dutch Disease, Appreciation, and Growth (by Nicolás E. Magud and Sebastián Sosa). The issue also lists the contents of the June 2011 issue of the IMF Economic Review, Volume 59 Number 2; visiting scholars at the IMF during April-June 2011; and recent IMF Working Papers and Staff Discussion Notes.
The paper models the incentives for a self-interested government to implement "good policies". While good policies lead to investment and growth, they reduce the government's ability to increase supporters' consumption. The model predicts that resource abundance is conductive to poor policies and, consequently, to low investment. The implications of the model are broadly supported by evidence on sub-Saharan African countries. In particular, countries that are rich in natural resources tend to have lower institutional quality and worse macroeconomic and trade policies.
This paper examines the effect that windfalls from international commodity price booms have on net foreign assets in a panel of 145 countries during the period 1970-2007. The main finding is that windfalls from international commodity price booms lead to a significant increase in net foreign assets, but only in countries that are homogeneous. In polarized countries, net foreign assets significantly decreased. To explain this asymmetry, the paper shows that in polarized countries commodity windfalls lead to large increases in government spending, political corruption, and the risk of expropriation, with no overall effect on GDP per capita growth. The paper's findings are consistent with theoretical models of the current account that have a built-in voracity effect.
Recent empirical studies have shown an inverse relation between natural resource intensity and long-term growth, implying that the natural resources generally impede economic growth through various channels (the “natural resource curse”). This paper departs from these studies by exploring the intersectoral linkages between oil and non-oil sectors in a cross-country perspective. The paper shows that the applicability of “natural resource curse” across oilbased economies should be treated with caution as the externalities of the oil sector highly depend on the countries’ degree of oil-intensity. In particular, the results show that, in low oil-intensity economies, the incentives to strengthen both fiscal and private sector institutions lead to positive inter-sectoral externalities. In contrast, weaker incentives in high oil-intensity economies adversely affect fiscal and private sector institutions and consequently lead to negative inter-sectoral externalities.
This paper investigates the impact of long-run terms-of-trade shocks. Analytically, we show that, if capital goods are largely importable or the labor supply is sufficiently elastic, then natural-resource booms increase aggregate investment and worsen the current account, but Dutch ‘Disease’ effects are weak. We then examine 18 oil-exporting developing countries during 1965-89. Favorable terms-of-trade shocks increase investment and (especially government) consumption, but reduce medium-term savings; hence, the current account deteriorates. Nontradable output increases, in response to real appreciations, but Dutch Disease effects are strikingly absent. Investment, consumption, and nontradable output respond more to a terms-of-trade decline than to an increase.