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International Monetary Fund. Western Hemisphere Dept.

estimates. 4. In this context, this paper uses the Business Cycle Accounting (BCA) methodology to quantify the role that labor market distortions have had in the observed evolution of GDP and other macroeconomic variables . Intuitively, this methodology asks: by how much one would need to distort a standard growth model so that it is able to replicate the observed data? In this paper we allow for four different types of distortions, each one affecting an equilibrium condition of the growth model: efficiency (total factor productivity), labor, capital and bond

International Monetary Fund. Western Hemisphere Dept.

just 3½ percent below. 4. The analysis relies on the Business Cycle Accounting (BCA) methodology and aims to identify key distortions or wedges behind the observed dynamics for GDP and other macroeconomic variables . Intuitively, this methodology asks: by how much one would need to distort a standard growth model so that it is able to replicate the observed data? In this paper we allow for four different types of distortions, each one affecting a particular equilibrium condition of the growth model: efficiency (total factor productivity) wedge, labor wedge

International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper for Chile describes the postcrisis recovery experience. The recovery from the 2008–2009 global crisis has been markedly different both among advanced and emerging economies. The steady improvement in the labor wedge-distortions related to the consumption leisure decision helped support the recovery. In Chile, the growth generated by this improvement, was sufficient to overcome the relatively weak performance of efficiency (TFP). Chile’s recovery has been characterized by strong investment growth, 0.8 percentage points higher than the precrisis trend. The establishment of the Financial Stability Council in 2011 is an important step to ensure close coordination among the institutions involved in Chile’s financial prudential framework.
International Monetary Fund. Western Hemisphere Dept.
This Selected Issues paper addresses key areas that would contribute to maintaining macroeconomic stability and inclusive growth. Strong economic growth in Colombia has significantly reduced poverty, but has had limited impact on reducing inequality. Strong growth and social programs have helped reduce poverty. Going forward, efforts to further strengthen education, pension, and tax systems stand to yield important social gains, as recognized by the national development plan. Labor market distortions have declined in recent years, but challenges remain. The elimination of infrastructure gaps will also play a key role in sustaining strong and broad-based growth, and supporting further economic diversification.
Suparna Chakraborty and Mr. Robert Dekle

the rest of the world, our model misses much of the action in the evolution of the U.S. current account when we assume no change in global financial integration. We thus conduct the following counterfactual experiment: What would be the pattern in the financial liberalization in the rest of the world, ϕ F , if we are to match the evolution of the U.S. current account? Does this derived pattern accord with the actual financial liberation that has taken place? The principle behind this accounting exercise is related to the business cycle accounting (BCA) methodology

International Monetary Fund. Research Dept.
Studies of the impact of trade openness on growth are based either on crosscountry analysis—which lacks transparency—or case studies—which lack statistical rigor. This paper applies a transparent econometric method drawn from the treatment evaluation literature (matching estimators) to make the comparison between treated (that is, open) and control (that is, closed) countries explicit while remaining within a statistical framework. Matching estimators highlight that common cross-country evidence is based on rather far-fetched country comparisons, which stem from the lack of common support of treated and control countries in the covariate space. The paper therefore advocates paying more attention to appropriate sample restriction in crosscountry macro research.