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Business and Economics > Finance: General

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  • Type: Journal Issue x
  • Economic Growth and Aggregate Productivity: General x
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Cover IMF Working Papers
Government Debt and Growth: The Role of R&D
Can Sever
Economic growth in the advanced economies (AEs) has been slowing down since the early 2000s, while government debt ratios have been rising. The recent surge in debt at the onset of the Covid-19 pandemic has further intensified concerns about these phenomena. This paper aims to offer insight into the high-debt low-growth environment in AEs by exploring a causal link from government debt to future growth, specifically through the impact of debt on R&D activities. Using data from manufacturing industries since the 1980s, it shows that (i) government debt leads to a decline in growth, particularly in R&D-intensive industries; (ii) the differential effect of government debt on these industries is persistent; and (iii) more developed or open financial systems tend to mitigate this negative impact. These findings contribute to our understanding of the relationship between government debt and growth in AEs, given the role of technological progress and innovation in economic growth.
Keywords:
Government debt; fiscal policy; economic growth; R&D; innovation; financial development; economic growth in the advanced economies; R&D activity; impact of debt; debt level; affect tax dynamics; Financial sector development; Manufacturing; Productivity; Aging; Global
Cover IMF Staff Country Reports
Republic of Congo: Request for an Extension of the Extended Credit Facility Arrangement-Staff Report
International Monetary Fund. African Dept.
This paper focuses on Congo’s Request for an Extension of the Extended Credit Facility Arrangement. The extension seeks to allow sufficient time to complete the sixth (and final) review. Preliminary data suggest that program performance at end-June 2024 was mixed. All end-June 2024 quantitative performance criteria were met, but the continuous zero ceiling on new external arrears was breached while several indicative targets were missed. The authorities reaffirmed their commitment to fiscal prudence to alleviate ongoing liquidity pressures and preserve the gains achieved under the Extended Credit Facility (ECF). Fiscal consolidation will continue in 2025 supported by improved nonhydrocarbon revenue mobilization and expenditure rationalization, while protecting targeted poverty-reducing spending. The authorities concurred that laying the foundations for a sustainable and inclusive growth requires stepping up the implementation of structural reforms to strengthen debt management practices, enhance governance, accelerate economic diversification, and build a climate-proof economy. IMF supports the authorities’ request for an extension of the ECF arrangement.
Keywords:
IMF's transparency policy; ECF arrangement; liquidity pressure; ECF review; reform progress; filets Sociaux; Inclusive growth; Government debt management; Revenue mobilization; Liquidity
Cover IMF Working Papers
Stepping Up Venture Capital to Finance Innovation in Europe
Nathaniel G Arnold
,
Guillaume Claveres
, and
Jan Frie
Relative to the US, productivity growth and investment in R&D in lagging in the EU, where it is more difficult to finance and scale up promising, innovative startups. Many of the most successful EU startups move elsewhere for financing, causing the EU to lose out on both the direct growth benefits and positive spillovers from these innovative firms. The EU could nurture innovative startups by accelerating the development of its venture capital (VC) ecosystem. Reducing regulatory frictions, especially ones that deter pensions funds and insurers from investing in VC, combined with well-designed tax incentives for R&D investments could help accelerate the development of the VC sector. These and other key CMU initiatives, such as the consolidation of stock markets and reforming and harmonizing insolvency regimes, will take time. Given the urgency to boost innovation, giving public financial institutions like the European Investment Fund a more active and expanded role in kickstarting VC markets where needed and in familiarizing investors with the VC asset class can be a helpful interim step.
Keywords:
Startups; Venture capital; Productivity; Capital Markets Union; EU startup; kickstarting VC market; startup financing stage; EU legislation; VC sector; Pension spending; Stock markets; Mutual funds; Insurance companies; Pensions; Europe
Cover Selected Issues Papers
Lifting productivity in Oman: The Role of Structural Reforms
Muayad Ismail
and
Haytem Troug
Oman’s potential nonhydrocarbon real GDP growth has trended downward since the global financial crisis, with a negative contribution from total factor productivity. This paper estimates productivity gains associated with structural reforms and identifies key binding constraints and reform priorities to boost productivity in Oman. Our results show that reforms to reduce the state’s footprint and strengthen institutions, as well as product market reforms, should be prioritized and packaged together to magnify productivity gains from labor market and financial sector reforms. These findings could inform the planning and implementation of the ongoing structural reform agenda envisaged under Oman Vision 2040.
Keywords:
Economic diversification; productivity; Oman; structural reforms; productivity gain; Lifting productivity; hydrocarbon real GDP growth; reform priority; product market reform; Commodity markets; Labor markets; Total factor productivity; Global
Cover Selected Issues Papers
Gender Inequality in the WAEMU: Current Situation and Opportunities
Can Sever
This paper documents the current state of gender inequalities in the WAEMU by focusing on outcomes (health, education, labor market and financial inclusion) and opportunities (economic rights). The findings show that despite significant progress toward gender equality over the last three decades, there are still prevalent gender-based disparities, which prevent women from fulfilling their economic potential. Both empirical and model-based estimates suggest that the WAEMU can reap substantial economic gains by mitigating the existing gender gaps in schooling and labor market outcomes. Hence, achieving gender equality remains a macro-critical goal for the region. Going forward, the need for specific policies supportive of gender equality may vary in each member country, but a multifaceted and holistic approach is needed to unleash the related economic potential in the WAEMU as a whole.
Keywords:
gender inequality; B. gender inequalities in the WAEMU; IMF WAEMU; C. economic gains; WAEMU lag; Gender inequality; Women; Financial inclusion; Gender diversity; Global
Cover Policy Papers
The Managing Director's Global Policy Agenda, Spring Meetings 2024: Rebuild, Revive, Renew
International Monetary Fund
The global economy has shown remarkable resilience, and appears headed for a soft landing. But buffers have been eroded, growth prospects are lackluster, and vulnerable countries are at risk of falling further behind. While inflation has fallen, it remains above target in many countries. Against this background, the key policy priorities are to: (i) rebuild buffers; (ii) revive medium-term growth; and (iii) renew the IMF’s commitment to ensure that our policies, lending toolkit, and governance are fit for purpose. Central banks need to finish the job on inflation, carefully managing its descent to target. With a soft landing in sight, policymakers’ focus needs to shift to fiscal consolidation to safeguard public finances. Reviving growth prospects will require accelerating structural reforms and joint efforts by countries to tackle transformational challenges. Firmly grounded in its mandate, working with its members, and in partnership with other international organizations, the IMF will continue to serve its members with policy advice, financial lifelines, and capacity development to help safeguard their economic and financial stability, a foundation for inclusive and sustainable growth.
Keywords:
Policy agenda; IMF surveillance; IMF-WTO dialogue; global Policy agenda; quota resource; lending capacity; Fiscal consolidation; Inclusive growth; Financial sector stability; Financial sector risk; Artificial intelligence; Global
Cover IMF Staff Country Reports
Togo: Demande d’un accord de 42 mois au titre de la facilité élargie de crédit-communiqué de presse; rapport des services du FMI; analyse de viabilité de la dette; annexe d’information; déclaration de l’administrateur pour le Togo
International Monetary Fund. African Dept.
Bien que sa croissance ait bien résisté aux chocs ces dernières années, le Togo fait face à un niveau élevé d’insécurité alimentaire et d’attaques terroristes, et ses besoins en matière de développement demeurent considérables. Les déficits budgétaires et la dette ont augmenté, ce qui a eu pour effet d’annuler la baisse de l’endettement obtenue au cours de la période de l’accord FEC de 2017–20, de réduire la marge de manoeuvre budgétaire et les réserves permettant d’absorber les chocs, et de contribuer aux vulnérabilités au sein de l’Union économique et monétaire ouestafricaine (UEMOA). Deux banques sous-capitalisées, l’une publique et l’autre récemment privatisée, font peser des risques sur la stabilité du secteur financier et sur les finances publiques. Les autorités sollicitent un soutien financier de 200 % de la quote-part du Togo (293,60 millions de DTS) dans le cadre d’un accord au titre de la FEC d’une durée de 42 mois.
Keywords:
Objectif du programme ECF; Le Fonds; Accord ECF; Programme ECF; un soutien financier; fonction gouvernementale; la viabilité de la dette; Banques commerciales; Global; Afrique occidentale.
Cover IMF Staff Country Reports
Togo: Request for a 42-Month Arrangement Under the Extended Credit Facility-Press Release; Staff Report; and Statement by the Executive Director for Togo
International Monetary Fund. African Dept.
This paper discusses Togo’s Request for a 42-Month Arrangement under the Extended Credit Facility (ECF). Togo continues to face headwinds, following a series of shocks in recent years. The ECF-arrangement will help accelerate poverty reduction, maintain macroeconomic stability, and catalyze further external financing, benefitting Togo and thereby contributing to the macroeconomic and external stability in the West African Economic and Monetary Union (WAEMU). The authorities will strengthen debt sustainability through a large fiscal consolidation in line with a dual fiscal anchor. By providing and catalyzing concessional financing for budget purposes, the program will help ease trade-offs between enhancing inclusion through higher social spending and strengthening debt sustainability. It will also help maintain macroeconomic and external stability in the WAEMU. In order to support growth and limit fiscal and financial sector risks, the authorities will strengthen public financial management, improve the business environment, and ensure the reform of the remaining state-owned bank that was not completed under preceding programs.
Keywords:
ECF program objective; The Fund; ECF arrangement; ECF program; financial support; government function; Debt sustainability; Commercial banks; Global; West Africa
Cover IMF Working Papers
Dollar Exchange Rate volatility and Productivity Growth in Emerging Markets: Evidence from Firm Level Data
Kodjovi M. Eklou
This paper examines the impact of Dollar exchange rate volatility on firm productivity in Emerging Markets economies (EMs). Using firm level data covering 16 EMs over the period 1998 -2019, the paper shows that dollar exchange rate volatility reduces firm productivity growth. Exploring channels, its finds that the results are driven by countries with low level of financial development, high dollar invoicing, high bilateral trade with the US, high collective bargaining coverage and open capital account. Exploring the role of policy, it finds that Foreign Exchange Interventions (FXI) dampen this impact on firm productivty. Further, exploiting firm level data, the paper shows that dollar exchange rate volatility operates also through the financial friction channel, reducing contemporaneous investments, especially at firms with low liquidity buffers and weak balance sheet (high leverage). The role of financial frictions is confirmed through the finding that younger firms, more likely to face financial constraints, are also found to be more vulnerable to dollar exchange rate volatility. In addition, we also find evidence of a large and persistent effect on firms with highly irreversible investment, lending support for the real option channel of uncertainty on the dollar exchange rate. These findings are robust to a battery of tests, including controlling for uncertainty, financial crises and using an instrumental variable strategy exploiting US monetary policy shocks as an exogenous source of variation in dollar exchange rate volatility.
Keywords:
Dollar exchange rate; volatility; Productivity growth; Investment; Firm heterogeneity and spillovers; dollar exchange rate volatility; exchange rate volatility; firm Level data; dollar invoicing; volatility shock com; Exchange rates; Productivity; Financial sector development; Total factor productivity; Employment protection; Global
Cover Promoting Inclusive Growth in the Middle East and North Africa
Promoting Inclusive Growth in the Middle East and North Africa
Challenges and Opportunities in a Post-Pandemic World

Abstract

Despite some pre-pandemic gains in poverty reduction, literacy, and lifespans, many economies in the Middle East and North Africa (MENA) have struggled to ensure that the benefits of economic development and diversification accrue equitably to all segments of their populations. Among the main issues that remain unresolved are the high share of inactive youth (who are not engaged in employment, education, or training); large gaps in economic opportunities for women; fragmented social protection systems; and underdeveloped private sectors with tight regulation, absence of a level playing field, and limited access to credit that stifle the creation of new firms and growth, employment, and incomes. The COVID-19 pandemic not only risks wiping out some of the progress made in the region over the past decades, but could also exacerbate inequality in a durable way. There is evidence that the impact of the pandemic has been uneven across groups, with the recession having a disproportionate effect on the low-skilled, the young, women, and migrant workers in employment and incomes. With widespread inequality, high unemployment, and the expected entry of 27 million young people into the labor force over the next 10 years, countries across the MENA region need to evolve their economic models to boost job creation and make sure that the benefits of economic development are shared more widely among all their citizens. This book’s objective is to reassess the inclusive growth agenda in the MENA region in light of the rapidly changing pandemic-influenced world. It argues that countries need to embrace global trade and technological advances and evolving demographics at home as an opportunity to successfully implement policies that foster higher and more inclusive growth. It underscores that a return to the old social contract is neither desirable nor feasible. The book presents a comprehensive view of policies suited to the regional context that would boost job-rich and inclusive growth within a resilient macroeconomic policy framework. Its goal is to provide guidance to policymakers in the region to frame how best to promote inclusive growth, including in their engagement with all stakeholders.

Keywords:
inequality; inclusive growth; gender; job creation; private sector development; MENA; climate change; SOE; financial inclusion; future of work; MENA region; MENA country; IMF staff calculation; MENAP country; MENA policymaker; Labor markets; Middle East; North Africa; East Africa; Caribbean; Global