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Wai-Yip Alex Ho and Chun-Yu Ho
We find that from 1995 to 2002 in China, the dispersion of wealth decreased, the moneywealth ratio increased for all wealth levels and the aggregate money-output ratio increased. We develop a two-asset dynamic general equilibrium model in which households face a portfolio adjustment cost and a borrowing constraint. We find that financial development lowers the dispersion of wealth by reducing the precautionary motive of households. In addition, tight monetary policies increase the value of money and thus increase the moneywealth ratio for all wealth levels and the aggregate money-output ratio.
Mr. Jonathan David Ostry and Mr. Andrew Berg
This note raises the IMF’s profile on a number of issues related to inequality, unemployment, governance, etc. It builds on earlier empirical work that examined correlations between growth downbreaks/duration of growth spells and a range of macro/policy/institutional factors. This paper is designed to be more accessible, more policy oriented, and focused squarely on the issue of inequality and the sustainability of growth. It will reference the literature that has gained prominence in the wake of the global crisis, and the possible links between the crisis and rising inequality in countries at the epicenter of the crisis. The analytical findings will also be connected to real world policy narratives in certain countries, to provide texture to the results and enhance policy relevance. The paper will argue that, based on the empirical findings, more equality in the income distribution is associated with longer-lived growth spells. Broad redistributive policies are not necessarily pro-growth, however, as these can have strong disincentive effects. The paper’s policy discussion is appropriately cautious, therefore, offering only tentative ideas, for example, active labor market policies and more attention to human capital investments designed to avoid conflicts between efficiency and equity perspectives.
Mr. Calixte Ahokpossi, Laurence Allain, and Giovanna Bua
This paper uses the propensity matching score approach to assess the impact of the IMF’s debt limits policy (DLP) on borrowing behavior in countries eligible to borrow from its concessional lending window. The paper finds that countries under the DLP borrow significantly higher amounts of concessional resources. However, there is no evidence that the DLP significantly impacts the level of non-concessional borrowing nor the terms of such borrowing. This result is confirmed by the heterogeneity analysis, suggesting that the level of development, rather than concessionality requirements, is the key driver of non-concessional borrowing.
Ms. Heloisa Marone
In trend with a global pattern and following recommendations of the World Bank and the International Finance Corporation (IFC), the number of stock markets in African countries has increased dramatically over the last ten years. Despite a scarcity of studies on the impact of stock markets on these economies, some policymakers have been arguing in favor of stock exchanges (national or regional) in eastern and southern Africa. The creation of such exchanges may be a premature project as they might lack an actual economic rationale. The present case study, for instance, suggests that the Lusaka Stock Exchange (LuSE) has little effect on the larger Zambian economy.