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Business and Economics > Finance: General

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Cover IMF Working Papers
Riding Unicorns: Startups and Venture Capital in Japan
Salih Fendoglu
and
TengTeng Xu
The startup ecosystem in Japan has seen gradual growth, supported by the government’s recent "Startup Development Five-Year Plan" and a significant interest from overseas venture capital. This paper lays out the startup financing ecosystem in Japan, with comparison to international peers, and studies potential drivers of startup financing and their relevance for startups’ performance. The results, based on country-level aggregate analysis, underscore the critical role of firm dynamism and entrepreneurship in supporting capital investment and firm valuations. Further analyses at the firm level suggest that equity funding helps startups innovate, grow, and successfully exit. Moreover, the impact of funding on the likelihood of a successful exit appears to be higher in cultures that seem to reward risk taking.
Keywords:
Startups; venture capital; Japan; firm dynamics; funding affect startup performance; startup ecosystem; helps startup; startup financing; TengTeng xu; Self-employment; Initial public offering; Development strategy; Global
Cover Selected Issues Papers
Startups and Venture Capital in Japan: How to Grow
Salih Fendoglu
and
TengTeng Xu
The startup ecosystem in Japan has seen gradual growth, supported by the government’s recent "Startup Development Five-Year Plan" and a significant interest from overseas venture capital. This paper lays out the startup financing ecosystem in Japan, with comparison to international peers, and studies potential drivers of startup financing and their relevance for startups’ performance. The results, based on country-level aggregate analysis, underscore the critical role of firm dynamism and entrepreneurship in supporting capital investment and firm valuations. Further analyses at the firm level suggest that equity funding helps startups innovate, grow, and successfully exit. Moreover, the impact of funding on the likelihood of a successful exit appears to be higher in cultures that seem to reward risk taking.
Keywords:
Inequality; labor market duality; wage gap; fiscal transfers; funding affect startup performance; startup ecosystem; helps startup; startup financing; TengTeng xu; Self-employment; Initial public offering; Development strategy; Global
Cover IMF Working Papers
Exposure to Artificial Intelligence and Occupational Mobility: A Cross-Country Analysis
Mauro Cazzaniga
,
Carlo Pizzinelli
,
Emma J Rockall
, and
Marina Mendes Tavares
We document historical patterns of workers' transitions across occupations and over the life-cycle for different levels of exposure and complementarity to Artificial Intelligence (AI) in Brazil and the UK. In both countries, college-educated workers frequently move from high-exposure, low-complementarity occupations (those more likely to be negatively affected by AI) to high-exposure, high-complementarity ones (those more likely to be positively affected by AI). This transition is especially common for young college-educated workers and is associated with an increase in average salaries. Young highly educated workers thus represent the demographic group for which AI-driven structural change could most expand opportunities for career progression but also highly disrupt entry into the labor market by removing stepping-stone jobs. These patterns of “upward” labor market transitions for college-educated workers look broadly alike in the UK and Brazil, suggesting that the impact of AI adoption on the highly educated labor force could be similar across advanced economies and emerging markets. Meanwhile, non-college workers in Brazil face markedly higher chances of moving from better-paid high-exposure and low-complementarity occupations to low-exposure ones, suggesting a higher risk of income loss if AI were to reduce labor demand for the former type of jobs.
Keywords:
Artificial intelligence; Employment; Occupations; Emerging Markets; AI adoption; college-educated worker; structural change; stepping-stone job; workers in Brazil; Labor markets; Wages; Labor force
Cover IMF Working Papers
Labor Market Exposure to AI: Cross-country Differences and Distributional Implications
Carlo Pizzinelli
,
Augustus J Panton
,
Ms. Marina Mendes Tavares
,
Mauro Cazzaniga
, and
Longji Li
This paper examines the impact of Artificial Intelligence (AI) on labor markets in both Advanced Economies (AEs) and Emerging Markets (EMs). We propose an extension to a standard measure of AI exposure, accounting for AI's potential as either a complement or a substitute for labor, where complementarity reflects lower risks of job displacement. We analyze worker-level microdata from 2 AEs (US and UK) and 4 EMs (Brazil, Colombia, India, and South Africa), revealing substantial variations in unadjusted AI exposure across countries. AEs face higher exposure than EMs due to a higher employment share in professional and managerial occupations. However, when accounting for potential complementarity, differences in exposure across countries are more muted. Within countries, common patterns emerge in AEs and EMs. Women and highly educated workers face greater occupational exposure to AI, at both high and low complementarity. Workers in the upper tail of the earnings distribution are more likely to be in occupations with high exposure but also high potential complementarity.
Keywords:
Artificial intelligence; Employment; Occupations; Emerging Markets; impact of artificial intelligence; exposure to AI; labor market exposure; employment share; educated worker; Labor markets
Cover IMF Working Papers
Market Power, Growth, and Inclusion: The South African Experience
Mr. Vimal V Thakoor
Before the pandemic, the South African economy remained stuck in low gear, with anemic growth, stagnant private investment, and a shrinking tradable sector. Subdued growth has raised unemployment, poverty, and inequality, hindering inclusion efforts. The pandemic has worsened economic and social vulnerabilities. Economic recovery and social inclusion hinge critically on structural reforms to boost competiveness and growth. Product markets represent a cornerstone of the reform strategy. Firms have used their market power to drive up prices and limit competition. Important state-owned monopolies provide low-quality services, while representing a fiscal drag. Existing regulations inhibit the entry of both domestic and foreign firms. Addressing product markets constraints could boost per capita growth by 1 percentage point—adding about 2½ percentage points to headline growth—and foster greater inclusion.
Keywords:
WP; market power; product market; firm; market concentration; mark-up; Competition; state owned enterprises; structural reforms; product markets; labor markets; South Africa; market structure; value chain; product market reform; growth performance; firm markup; market share; SMES space; market power abuse; uncompetitive firm; Commodity markets; Private investment; Job creation; Africa; Global; South Africa inflation differential
Cover IMF Working Papers
Liquidity Choice and Misallocation of Credit
Mr. Ehsan Ebrahimy
This paper studies a novel type of misallocation of credit between investments of varying liquidity. One type of investment is more liquid, i.e., its return is more pledgeable, and the other is more productive. Low liquidities of both investment types imply that the allocation of credit is constrained inefficient and that there is overinvestment in the liquid type. Constrained inefficient equilibria feature non-positive, i.e., one less than or equal the economy’s growth rate, and yet too high interest rate, too much investment and too little consumption. Financial development can reduce long-term welfare and output in a constrained inefficient equilibrium if it raises the liquidity of the liquid type. I show a maximum liquid asset ratio or a simple debt tax can achieve constrained efficiency. Introducing government bonds can make Pareto improvement whenever it does not raise the interest rate.
Keywords:
WP; Pareto efficiency; open economy; credit market; liquid type; investment project; investment-tototal investment ratio; aggregate investment portfolio; interest rate decrease; investment demand; world interest rate; Self-employment; Liquidity; Sovereign bonds; Credit; Financial sector development
Cover Policy Papers
Enhancing the Role of SMEs in the Arab World—Some Key Considerations
Vahram Stepanyan
,
Gohar Abajyan
,
Anta Ndoye
, and
Ms. Marwa Alnasaa
Small and medium-sized enterprises (SMEs) are a cornerstone of Arab economies, accounting for over 90 percent of all businesses and providing a major source of new job creation. Governments across the Arab World recognize the important role that SMEs can play in delivering higher and more inclusive growth. Many have rightly placed SME development at the center of growth and jobs strategies to meet the needs of young populations. Authorities have initiated policy interventions and schemes to support SME development. But progress so far has been patchy, and more comprehensive policy action is needed. Fostering vibrant and competitive SMEs that contribute to employment opportunities and high value-added output requires various stakeholders to deliver on a broad range of factors. Arab governments need a holistic policy approach that addresses the gaps in access to finance, creates an enabling business environment, and upgrades human capital and infrastructure. The approach should also promote an entrepreneurial mindset.
Keywords:
PP; SME development; SME support scheme; control group SMES; SME policy; SME sector; SME activity; SME constraint; SME access; SME data availability; SME needs; Small and medium enterprises; Self-employment; Business environment; Financial inclusion; Public sector; Global
Cover IMF Working Papers
Identifying Constraints to Financial Inclusion and Their Impact on GDP and Inequality: A Structural Framework for Policy
Ms. Era Dabla-Norris
,
Yan Ji
,
Robert M. Townsend
, and
Ms. Filiz D Unsal
We develop a micro-founded general equilibrium model with heterogeneous agents to identify pertinent constraints to financial inclusion. We evaluate quantitatively the policy impacts of relaxing each of these constraints separately, and in combination, on GDP and inequality. We focus on three dimensions of financial inclusion: access (determined by the size of participation costs), depth (determined by the size of collateral constraints resulting from limited commitment), and intermediation efficiency (determined by the size of interest rate spreads and default possibilities due to costly monitoring). We take the model to a firm-level data from the World Bank Enterprise Survey for six countries at varying degrees of economic development—three low-income countries (Uganda, Kenya, Mozambique), and three emerging market countries (Malaysia, the Philippines, and Egypt). The results suggest that alleviating different financial frictions have a differential impact across countries, with country-specific characteristics playing a central role in determining the linkages and tradeoffs between inclusion, GDP, inequality, and the distribution of gains and losses.
Keywords:
WP; participation cost; Gini coefficient; cost of capital; intermediation cost; Financial inclusion; inequality; income distribution; hetergenous agents; optimal contract; credit regime; lending interest rate; Self-employment; Credit; Income inequality; Collateral
Cover The IMF at 70:
The IMF at 70:
Making the Right Choices—Yesterday, Today, and Tomorrow
International Monetary Fund

Abstract

International Monetary Fund Managing Director Christine Lagarde delivered this speech at the World Bank/IMF Annual Meetings in Washington, D.C., on October 10, 2014.

Keywords:
SPE; international community; jobs crisis; financial risk; world GDP; job; labor market policy; job market; job creation; members of the IMF; Employment; Current account deficits; Financial sector stability; Emerging and frontier financial markets; Job creation; Global
Cover Policy Papers
Managing Director’s Global Policy Agenda to the International Monetary and Financial Committee
International Monetary Fund
Over the past five years much has been done to avoid the worst and stave off a great depression. While the recovery has been disappointing until recently, there are some encouraging signs that activity is strengthening in advanced economies. Breaking the cycle of growth shortfalls and recurring market jitters requires carefully managing multiple transitions that are already underway. These transitions include the normalization of global financial conditions; a shift in global growth dynamics, and a rebalancing of global demand; and the completion of reforms to the international financial system. Much more ambitious reform implementation and policy coherence are needed to address these challenges and avoid five more years of growth disappointments.
Keywords:
PP; policy; Fund; EME; labor market; risk; downside risk; governance structure; long-standing labor market; sustainability risk; B. emerging market economies; spillover risk; fund resource; stability risk; market volatility; Fiscal consolidation; Emerging and frontier financial markets; Job creation; Structural reforms; Global