This paper is the first attempt to directly explore the long-run nonlinear relationship between the
shadow economy and level of development. Using a dataset of 158 countries over the period from
1996 to 2015, our results reveal a robust U-shaped relationship between the shadow economy size
and GDP per capita. Our results imply that the shadow economy tends to increase when economic
development surpasses a given threshold or at least does not disappear. Our findings suggest that
special attention should be given to the country’s level of development when designing policies to
tackle issues related to the shadow economy.
This Selected Issues and Statistical Appendix paper on Kuwait focuses on recent development in investment companies (ICs) and the business environment in the country. ICs continue to be vulnerable to swings in financial and real estate markets. They continue to have large exposures to domestic, regional, and international equity and real estate markets. Local banks’ lending to ICs declined in 2010–11 owing to banks’ write-offs of ICs loans. The financial situation of many ICs remains precarious, and there are 15 listed investment companies in a dire situation.
This supplement provides background information on various aspects of capacity development (CD) for the main Board paper, The Fund’s Capacity Development Strategy—Better Policies through Stronger Institutions. It is divided into nine notes or sections, each focused on a different topic covered in the main paper. Section A explores the importance of institutions for growth, and the role the Fund can play in building institutions. Section B presents stylized facts about how the landscape for CD has changed since the late 1990s. Section C discusses the difficulties of analyzing CD data because of measurement issues. Section D provides a longer-term perspective on how Fund CD has responded to member needs. Section E contains information on previous efforts to prioritize CD, assesses Regional Strategy Notes (RSNs) and country pages, and suggests ways to strengthen RSNs, including by using the Fund’s surveillance products. Section F compares the technical assistance (TA) funding model proposed in the 2011