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Business and Economics > Investments: Stocks

You are looking at 1 - 10 of 16 items for :

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Cover IMF Working Papers
What Happens if Central Banks Misdiagnose a Slowdown in Potential Output
Mr. Bas B. Bakker
In the last few decades, real GDP growth and investment in advanced countries have declined in tandem. This slowdown was not the result of weak demand (there has been no shift along the Okun curve), but of a decline in potential output growth (which has shifted the Okun curve to the left). We analyze what happens if central banks mistakenly diagnose the problem as insufficient demand, when it is actually a supply problem. We do this in a real model, in which inflation is not an issue. We show that aggressive central bank action may revive gross investment, but it will not revive net investment or growth. Moreover, low interest rates will lead to an increase in the capital output ratio, a low return on capital and high leverage. We show that these forecasts are in line with what has happened in major advanced countries.
Keywords:
WP; gross investment; cost of capital; Monetary policy; potential output; Solow-Swan; investment; investment rate; capital consumption; GDP growth; potential GDP; capital output ratio; Capital productivity; Production growth; Stocks; Labor force participation; Europe
Cover IMF Working Papers
Some Misconceptions about Public Investment Efficiency and Growth
Mr. Andrew Berg
,
Mr. Edward F Buffie
,
Ms. Catherine A Pattillo
,
Mr. Rafael A Portillo
,
Mr. Andrea F Presbitero
, and
Luis-Felipe Zanna
We reconsider the macroeconomic implications of public investment efficiency, defined as the ratio between the actual increment to public capital and the amount spent. We show that, in a simple and standard model, increases in public investment spending in inefficient countries do not have a lower impact on growth than in efficient countries, a result confirmed in a simple cross-country regression. This apparently counter-intuitive result, which contrasts with Pritchett (2000) and recent policy analyses, follows directly from the standard assumption that the marginal product of public capital declines with the capital/output ratio. The implication is that efficiency and scarcity of public capital are likely to be inversely related across countries. It follows that both efficiency and the rate of return need to be considered together in assessing the impact of increases in investment, and blanket recommendations against increased public investment spending in inefficient countries need to be reconsidered. Changes in efficiency, in contrast, have direct and potentially powerful impacts on growth: “investing in investing” through structural reforms that increase efficiency, for example, can have very high rates of return.
Keywords:
WP; capital stock; production function; rate of return
Cover IMF Working Papers
Incorporating Financial Sector Risk Into Monetary Policy Models: Application to Chile
Mr. Leonardo Luna
,
Mr. Dale F Gray
,
Jorge Restrepo
, and
Carlos Garcia
This paper builds a model of financial sector vulnerability and integrates it into a macroeconomic framework, typically used for monetary policy analysis. The main question to be answered with the integrated model is whether or not the central bank should include explicitly the financial stability indicator in its monetary policy (interest rate) reaction function. It is found in general, that including distance-to-default (dtd) of the banking system in the central bank reaction function reduces both inflation and output volatility. Moreover, the results are robust to different model calibrations: whenever exchange-rate pass-through is higher; financial vulnerability has a larger impact on the exchange rate, as well as on GDP (or the reverse, there is more effect of GDP on bank's equity - i.e., what we call endogeneity), it is more efficient to include dtd in the reaction function.
Keywords:
WP; interest rate; monetary policy; Financial vulnerability; central banking; asset volatility; bank assets; risk indicator; reaction function; monetary policy interest rate; Inflation; Asset valuation; Output gap; Financial sector risk; Stocks; Asia and Pacific
Cover IMF Working Papers
Spillovers of Domestic Shocks: Will They Counteract the “Great Moderation”?
Mr. Ashoka Mody
and
Ms. Alina Carare
Even prior to the extreme volatility just observed, output growth volatility-following protracted decline-was flattening or mildly rising in some countries. More widespread was an increasing tendency from the mid-1990s for shocks in one country to transmit rapidly to other countries, creating the potential for heightened global volatility. The higher sensitivity to foreign shocks, in turn, appears related to stepped-up vertical specialization associated with the integration of emerging markets in international trade. Increased international spillovers call for stronger ex post coordination mechanisms when shocks are large but the best ex ante prevention strategy probably is sensible national policies.
Keywords:
WP; global economy; GDP ratio; trade share
Cover Policy Papers
Cross-Cutting Themes in Major Article IV Consultations
International Monetary Fund
This paper is part of a broader on-going effort to bring a more cross-country perspective to bilateral surveillance, taking advantage of a cluster of Article IV consultations with five systemically important economies concluded in July. With the five economies—the United States, the Euro area, China, Japan, and the United Kingdom—accounting for two-thirds of global output and three quarters of capital flows, the nature of linkages and consistency of policy responses across the systemic five (S5) has important implications for the world economy.
Keywords:
PP; bank; support; central bank; U.K. report; bank asset protection scheme; bank financing guarantee plan; debt ratio; cost of capital; bank support; increase U.K. bank disclosure; U.K. contribution; monetary policy; Financial statements; Commercial banks; Potential output; Stocks; Global; Europe
Cover IMF Staff Country Reports
Iceland: Selected Issues
International Monetary Fund
Given its small size and openness, the Icelandic economy has been subject to large shocks. Systematic coordination of monetary and fiscal policy, however, could help improve the inflation-output variability trade-off. The fiscal rule is designed to simultaneously ensure a consistently countercyclical fiscal stance and achieve a stable public debt target. The parameter values of the model are estimated from the quarterly data using a Bayesian technique. To assess how the introduction of the fiscal policy changes the inflation-output variability trade-off in Iceland, the paper compares the efficiency policy frontiers.
Keywords:
ISCR; CR; reaction function; inflation-output variability trade-off; countercyclical fiscal policy; output-inflation variability tradeoff; Icelandic bank; Credit risk; Stocks; Loans; Inflation; Global
Cover IMF Working Papers
Why is Micro Evidenceon the Effects of Uncertainty Not Replicated in Macro Data?
Domenico Lombardi
and
Stephen Bond
This study investigates the relationship between uncertainty and investment using U.K. data at different levels of aggregation. Motivated by a comparative econometric analysis using a firm-level panel and aggregate time-series data, we analyze the implications of aggregating nonlinear microeconomic processes. Replicating firm-level evidence that uncertainty influences investment dynamics proves to be challenging. Even using perfectly consistent data sources, this requires both exact aggregation of the underlying micro equations, and controlling for the unobserved influences on investment that are commonly subsumed into time dummies in panel studies. These conditions are unlikely to be satisfied in most aggregate econometric studies.
Keywords:
WP; time series; Aggregation; Investment; Uncertainty; investment equation; investment dynamics; error correction term; investment decision; investment data; Manufacturing; Stocks; Time series analysis; Production growth; Bonds; Global
Cover IMF Working Papers
Growth and Recovery in Mongolia During Transition
Mr. Kevin C Cheng
This paper studies Mongolia's experience of growth and recovery during the first decade of its transition to a market-based system and compares it with those of other transition economies. Mongolia, like most other transition economies, experienced a painful, initial "transformational recession" before the economy began to recover, with efficiency gains the main source of growth during the early stages of transition. Mongolia's transition process has been relatively smooth compared with other transition economies, probably reflecting the combined effects of some favorable initial conditions, coupled with the early adoption of appropriate adjustment policies and market-oriented reforms.
Keywords:
WP; Mongolia; process; economy; deflator; transition; growth accounting; transition economy; output performance; growth performance; depreciation rate; transition process; output recovery; sources of growth; primary sector; Total factor productivity; Stocks; Production growth; Central and Eastern Europe
Cover IMF Staff Country Reports
United States: Selected Issues
International Monetary Fund
This Selected Issues paper presents updated IMF staff estimates of potential output growth for the United States, using data through 2001 that incorporates the full cyclical upswing of the 1990s and the subsequent mild recession, as well as taking into account the revisions to the national accounts released in July 2000. The paper also reviews recent investment trends and provides estimates of the extent to which the capital stock has deviated from its long-term equilibrium.
Keywords:
ISCR; CR; earnings; firm; spending; TFP growth; trend TFP; policy action; company official; interest rate cut; BEA rule; NBER recession index; Stocks; Budget planning and preparation; Potential output; Tariffs; Productivity; Global; Western Hemisphere; Sub-Saharan Africa; Middle East; East Africa
Cover IMF Working Papers
Real Convergence to EU Income Levels: Central Europe From 1990 to the Long Term
Mr. Guorong Jiang
,
Mr. Peter Doyle
, and
Louis Kuijs
The paper discusses factors likely to shape the nature and pace of economic growth of five Central European transition countries now engaged in accession to the European Union. It is organized around the standard growth accounting framework. The paper reviews the growth of these countries since 1990 and draws lessons from the growth experiences of other regions since the 1950s, shedding light on long-term growth prospects for these countries. It discusses a set of growth calculations and highlights the key uncertainties in them.
Keywords:
WP; TFP growth; GDP ratio; State intervention; TFP result; Transition; EU accession; growth; growth accounting; Central Europe; investment ratio; TFP performance; output ratio; investment climate; Total factor productivity; Stocks; Productivity; Production growth; Western Europe; East Asia; Eastern Europe; Europe