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International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper assesses the current strength of the balance sheets of large banks in Belize and takes stock of progress made on the regulatory, supervisory, and crisis management frameworks since the 2011 Financial Sector Assessment Program (FSAP). The improvement in financial stability indicators was boosted by implementation of key FSAP recommendations. The Central Bank strengthened provisioning and loan classification standards. The new rules force banks to focus more on the borrower’s capacity to repay the loan rather than on the value of collaterals. The regulatory, supervisory, and crisis management frameworks as well as the financial infrastructure could be further strengthened. The supervision department of the Central Bank could be strengthened with examiners specializing in information technologies (IT) with the view of ensuring the integrity of banks’ IT systems. Asset quality reviews and forward-looking stress tests could complement current supervisory practices and improve Central Bank’s assessments of banks’ balance sheets.
International Monetary Fund. European Dept.
This Selected Issues paper analyzes the high household savings in Sweden. Preliminary evidence suggests that the large increase in savings after the financial crisis may reflect the rising cost of elder care. Econometric analysis appears to confirm anecdotal explanations that extended life expectancy and a preference for higher-quality residential care have contributed to higher savings. Further analysis using more granular data is needed to test alternative hypotheses for the rise in household savings. Anecdotal reports also indicate that parental assistance in young people’s home purchases could be behind the increased saving and serves as an additional bequest motive. Investigating this possibility would benefit significantly from household level data.
Ms. Thornton Matheson and Mr. Pall Kollbeins
In contrast to most Scandinavian countries, Iceland allocates the income of closely held businesses (CHBs) between capital and labor based on administratively set minimum wages rather than an imputed return to book assets.  This paper  contrasts the relative tax burdens of the current minimum wage system with asset-based allocation methods, and finds that switching to an asset-based method could increase tax revenues from CHBs in a generally progressive manner.  Predictably, the shift would also raise the tax burden of skilled labor-intensive industries more than it would that of capital-intensive industries.
Fiorella Padoa-Schioppa
This paper presents a microeconomic theoretical model of union optimizing behavior which is then used to test the relevance of the tax-push hypothesis for wage formation in nine Western European countries. Two factors—the compensation and the progressivity effects—are shown by the model to account for the effect (if any) of tax rates on wage formation. A wage equation tested for the period 1960-1988 shows that in general small open economies have negligible compensation and progressivity effects, while in larger economies direct, indirect and social security tax rates are transferred onto the real labor cost. All countries show a weakening of the tax shifting starting at the end of the 1970s or the beginning of the 1980s.
Mr. Ramana Ramaswamy and Mr. Bob Rowthorn
The main focus of the “wage bargaining” literature has been on the factors promoting real wage flexibility at the macro level. This paper, in contrast, examines the microeconomic issues of wage bargaining. More specifically, this paper appraises the following questions: (a) what are the conditions under which a firm prefers decentralized to centralized bargaining?, (b) what are the characteristic features of firms which prefer decentralized to centralized bargaining?, and (c) has the proportion of firms which prefer decentralized bargaining increased over time? These questions are examined in an efficiency wage model with insider-outsider features. This paper provides useful theoretical insights for understanding the issues involved in shifting from centralized to decentralized wage bargaining.
Mr. Alun H. Thomas
The literature on the relationship between the unemployment rate and wage bargaining fails to separate the offsetting effects of a reduction in competition associated with centralized bargaining and the increased awareness of unemployment externalities. This paper uses OECD data to distinguish these effects. While wages have become more sensitive to changes in the unemployment rate in countries that have switched to centralized wage-bargaining arrangements, the industry wage is not particularly sensitive to internal factors (relative price and productivity shifts) in economies with centralized/industry-level bargaining arrangements. The latter effect dominates in terms of persistently high unemployment and weaker growth.
International Monetary Fund. External Relations Dept.

IMF Economic Reviews 1998: 3. Compilation of Public Information Notices (PINs) covering September-December 1998.

RAMANA RAMASWAMY

This paper argues that Sweden’s structural problems of slow productivity growth and high wage inflation can be linked in an important way to the institutional features of its labor market, which is characterized by a combination of centralized bargaining and wage equalization. In particular, Sweden’s high wage inflation in the 1980s was due to the combined impact of the breakdown of the leading role assigned to the traded goods sector in wage determination and high wage drift. Slow productivity growth is attributed to the inappropriateness of the policy of wage equalization in an environment in which flexible work practices have become increasingly important.

Mr. Ramana Ramaswamy and Robert Rowthorn

This compilation of summaries of Working Papers released during January-June 1993 is being issued as a part of the Working Paper series. It is designed to provide the reader with an overview of the research work performed by the staff during the period. Authors of Working Papers are normally staff members of the Fund or consultants, although on occasion outside authors may collaborate with a staff member in writing a paper. The views expressed in the Working Papers or their summaries are, however, those of the authors and should not necessarily be interpreted as representing the views of the Fund. Copies of individual Working Papers and information on subscriptions to the annual series of Working Papers may be obtained from IMF Publication Services, International Monetary Fund, 700 19th Street, Washington, D.C. 20431. Telephone: (202) 623-7430 Telefax: (202) 623-7201