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Europe > Bulgaria

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Cover Selected Issues Papers
Labor Force Participation in Romania
Florian Misch and Mr. Alexander Pitt
Labor force particiaption (LFP) in Romania is—at 66.8 percent in 2022—significantly lower than the EU average, especially among women and less educated people. With a declining working-age population, rasing LFP could yield signifcant benefits including by boosting long-term growth, mitigating the fiscal impact of an ageing society, and reducing inequality. Key policies to boost LFP include provision of affordabel high-quality childcare, and improving education standards.
Keywords:
Labor force participation; gender gap; demographics; IMF staff calculation; copyright page; rase LFP; policy implication; EU LFP level; Romania's LFP gender gap; Women; Aging; Western Europe
Cover IMF Staff Country Reports
Romania: Selected Issues
International Monetary Fund. European Dept.
Selected Issues
Keywords:
IMF staff calculation; energy mix; C. climate policy; policy pathway; EU LFP level; Romania team; Greenhouse gas emissions; Renewable energy; Women; Global; Western Europe
Cover IMF Working Papers
Optimal Taxation of Inflation
Damien Capelle and Yang Liu
When inflation originates from distributional conflicts, shifts in inflation expectations, or energy price shocks, monetary policy (MP) is a costly stabilization instrument. We show that a tax on inflation policy (TIP), which would require firms to pay a tax proportional to the increase in their prices, would effectively correct externalities in firms’ pricing decisions, tackle excessive inflation and reduce output volatility, without exacerbating price distortions. While proposals from the 1970s saw TIP as a substitute to MP, we find that it is a complement, with TIP addressing markups and inflation expectation shocks, and MP addressing demand shocks.
Keywords:
Inflation; Markup Shock; Monetary Policy; Tax on Inflation; Taxbased Incomes Policies; Externality; inflation expectation shock; excessive inflation; energy price shock; price distortion; Phillips curve; Output gap; Wage adjustments; Wages; Sticky prices; Western Europe
Cover IMF Working Papers
Inflation Dynamics in Bulgaria: The Role of Policies
Anh D. M. Nguyen, Hajime Takizawa, and Iglika Vassileva
This paper analyses inflation dynamics in Bulgaria using different complementary econometrics technics. We find that common factors play a large role in the EU’s inflation variation but impact individual countries differently due to country-specific factors. Greater weight of energy and food in Bulgaria’s CPI basket amplifies the impact of shocks on headline inflation. Furthermore, second-round effects in Bulgaria are likely pronounced, associated with a higher inflation persistence compared to the EU countries. Recent ECB monetary tightening has been insufficient for Bulgaria and its transmission is weak. Fiscal policy supported the recovery from the COVID crisis but added to inflation.
Keywords:
Inflation; Monetary policy; Fiscal policy; ECB interest rates; Phillips curve; Principal Component Analysis; VARl Sign restrictions.; inflation dynamics; HICP inflation; ECB Policy rate; inflation variation; inflation development; inflation in EU country; Energy prices; Inflation persistence; Food prices; Global
Cover IMF Working Papers
ECB Euro Liquidity Lines
Silvia Albrizio, Iván Kataryniuk, Luis Molina, and Jan Schäfer
Central bank liquidity lines have gained momentum since the global financial crisis as a crosscurrency liquidity management tool. We provide a complete timeline of the ECB liquidity line announcements and study their signalling and spillback effects. The announcement of an ECB euro liquidity line decreases the premium paid by foreign agents to borrow euros in FX markets relative to currencies not covered by these facilities by 51 basis points. Consistent with a stylized model, bank equity prices increase by around 1.75% in euro area countries highly exposed via banking linkages to countries whose currencies are targeted by liquidity lines.
Keywords:
liquidity facilities; central bank swap and repo lines; spillbacks.; ECB liquidity line announcement; ECB Euro liquidity line; cross-currency liquidity management tool; central bank liquidity line; Liquidity; Currencies; Currency markets; Currency swaps; Asset prices; Global
Cover IMF Staff Country Reports
Romania: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Romania
International Monetary Fund. European Dept.
After a solid recovery from the pandemic, Romania is now, like other EU countries, facing strong headwinds related to the war in Ukraine. Output reached pre-crisis levels in H1 2021 and growth in Q1 2022 was strong. But inflation has risen rapidly, and the external and fiscal positions are weak. The authorities are implementing a support package of energy price caps and subsidies for vulnerable groups.
Keywords:
inflation expectation; EU membership; inflation outlook; EU accession; EU funds; cap scheme; Inflation; Fiscal stance; Energy prices; Consumer price indexes; Europe; Global
Cover IMF Staff Country Reports
Bulgaria: Selected Issues
International Monetary Fund. European Dept.
Selected Issues
Keywords:
GHG emissions projection; D. policy option; climate mitigation goal; consumption effect; GHG emissions in transport; Greenhouse gas emissions; Electricity; Carbon tax; Non-renewable resources; Global
Cover IMF Staff Country Reports
Bulgaria: 2022 Article IV Consultation - Press Release; and Staff Report for Bulgaria
International Monetary Fund. European Dept.
The economy showed resilience through the pandemic, but the war in Ukraine has clouded the outlook, heightened uncertainty, and increased downside risks. With policy support, growth rebounded in 2021 despite the lingering COVID-19 crisis and protracted political uncertainty that hampered investment. Inflation accelerated significantly, pushed by global factors and strong domestic consumption. GDP growth is projected to slow below 3 percent and average inflation to exceed 12 percent in 2022. In this context, policies must navigate difficult trade-offs as they need to support activity, meet needs from the war, and contain inflation, while raising living standards, reducing inequalities, and supporting the green transition.
Keywords:
excise rate cut; budget composition; CPI series; General government operation; potential GDP; pension calculation; Inflation; Income; Consumer price indexes; Imports; COVID-19; Global; Europe; Southern Europe; Eastern Europe
Cover IMF Working Papers
Strengthening Public Expenditure Efficiency: Investment and Social Spending in Bulgaria
Mr. Jean-Jacques Hallaert and Keyra Primus
The scope for increasing public spending to meet Bulgaria’s development needs is limited by low revenue. Increasing the efficiency of spending is, therefore, crucial. This paper discusses how this can be achieved in four areas (public investment, social protection, health, and education). The methodology is based on a triple benchmarking. First, the level of public expenditure in each category is compared to other European countries. Second, the impact of spending is assessed against other European countries. Third, the input mix is analyzed to understand what components are responsible for the level of spending and for the quality of outcomes. Based on these results, the paper provides policy options for expenditure reform.
Keywords:
Public Expenditure; Efficiency; Public Expenditure Reform; Public investment; Social Protection; Education; Health; Social Spending; Bulgaria; EU fund absorption; efficiency frontier; public expenditure efficiency; expenditure development; development needs; Public investment spending; Social protection spending; Global; Europe
Cover IMF Working Papers
Weather Shocks and Exchange Rate Flexibility
Mr. Selim A Elekdag and Maxwell Tuuli
This paper assesses the stabilization properties of fixed versus flexible exchange rate regimes and aims to answer this research question: Does greater exchange rate flexibility help an economy’s adjustment to weather shocks? To address this question, the impact of weather shocks on real per capita GDP growth is quantified under the two alternative exchange rate regimes. We find that although weather shocks are generally detrimental to per capita income growth, the impact is less severe under flexible exchange rate regimes. Moreover, the medium-term adverse growth impact of a 1 degree Celsius increase in temperature under a pegged regime is about –1.4 percentage points on average, while under a flexible regime, the impact is less than one half that amount (–0.6 percentage point). This finding bolsters the idea that exchange rate flexibility not only helps mitigate the initial impact of the shock but also promotes a faster recovery. In terms of mechanisms, our findings suggest that the depreciation of the nominal exchange rate under a flexible regime supports real export growth. In contrast to standard theoretical predictions, we find that countercyclical fiscal policy may not be effective under pegged regimes amid high debt, highlighting the importance of the policy mix and precautionary (fiscal) buffers.
Keywords:
Exchange rate regimes; Economic growth; Climate change; weather shock; growth impact; regime s; decline in government expenditure growth; peg exchange rate regime; temperature shock; government consumption growth; regime window; Exchange rate arrangements; Exchange rate flexibility; Conventional peg; Exchange rate adjustments; Emerging and frontier financial markets; Global