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Business and Economics > Production and Operations Management

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Cover IMF Staff Country Reports
Czech Republic: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper discusses perspectives on the Czech Republic’s structural productivity slowdown. The Czech economy has underperformed European peers in the post-pandemic period and economic convergence has come to a halt. This outcome is often attributed to the country’s links to specific slow growing trading partners and to its energy-intensive economic structure. A decline in productivity, along with a slower increase in the labor force has been a crucial factor. The paper focuses specifically on the challenge posed by declining productivity, uncovering multifaceted factors and dynamics at play. Empirical analysis suggests that further R&D investment could reduce gaps with the total factor productivity frontier, sector-specific bottlenecks should be addressed, and productivity-enhancing labor reallocation could be better supported by more targeted policies. Though structural transformation may be inevitable, it does not need to adversely affect productivity as observed in recent years. The Czech Republic may evolve towards a more mature, diversified economy with certain services playing an increasingly significant role.
Keywords:
macro News; macroeconomics news; ECB monetary policy surprise; EU TFP frontier; inflation expectation; Automobile industry; Total factor productivity; Productivity; Asset prices; Global; Europe; Eastern Europe
Cover IMF Staff Country Reports
Czech Republic: 2024 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. European Dept.
The 2024 Article IV Consultation highlights that the Czech Republic is evolving from a heavily manufacturing-based, export-oriented hub to a more mature and diversified economy. Non-auto manufacturing, energy, and construction, once important Czech engines of growth, have run out of steam, hampered by decelerating productivity growth, higher energy costs, and sluggish demand. The auto industry has shown resilience so far, but the required transition to electric vehicles and exposure to foreign competition are set to exert significant pressures in the coming years. After stagnating in 2022-23, the Czech economy is slowly recovering, as consumer spending is sustained by a rebound in real wages. Growth is poised to gain momentum as the policy mix becomes more supportive of economic activity and external demand gradually strengthens. Concrete actions should focus on facilitating the allocation of labor towards higher value-added sectors and firms, addressing the gender pay gap to boost labor participation, reducing administrative burden and red tape, accelerating digitalization, and promoting a more ambitious green transition.
Keywords:
currency of the Czech Republic; FSAP update; FSAP participation; services inflation; managing inflation risk; Inflation; Productivity; Labor markets; Central bank policy rate; Global
Cover IMF Working Papers
Drivers of Inflation in the Caucasus and Central Asia
Maria Atamanchuk
,
Alejandro Hajdenberg
,
Dalia Kadissi
,
Giulio Lisi
, and
Nasir H Rao
In parallel with global developments, inflation in the Central Asia and Caucasus (CCA) has exhibited large swings in recent years. This paper investigates inflation dynamics in the CCA and its main drivers and derives conclusions that can inform policymaking. The analysis is based on three empirical approaches. Inflation drivers and its dynamics are investigated through the estimation of a Phillips curve augmented with foreign factors and a panel vector autoregression. The paper also assesses the role of monetary policy in steering inflation outcomes by estimating a local projection model. The paper finds that external factors play a major role in determining CCA inflation dynamics, although domestic factors (e.g., demand conditions, expectations) also contribute. Monetary policy is found to have a statistically significant effect on inflation, including by moderating the impact of external drivers. The findings point to the need to continue strengthening policy frameworks to steer expectations and improve the effectiveness of monetary policy, while establishing adequate social safety nets to cushion the impact from global shocks.
Keywords:
Inflation; Caucasus and Central Asia; Phillips curve; panel VAR; local projection method; monetary policy; CCA inflation dynamics; inflation driver; Phillips Curve estimation; inflation development; inflation outcome; Food prices; Output gap; Nominal effective exchange rate; Oil prices; Global; Central Asia and the Caucasus
Cover IMF Staff Country Reports
Philippines: Selected Issues
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper focuses on potential growth and demographic dividend in Philippines. Output and employment in the Philippines were severely impacted by the coronavirus disease 2019 pandemic. While the Philippines recovered strongly after the pandemic, there is some evidence of scarring in output, and labor productivity remains below pre-pandemic trends. A comparison between the Philippines and peer countries along structural areas key to supporting higher growth can inform reform efforts to support higher growth. Strengthening anti-corruption efforts, while enhancing the legal system, regulatory quality, and improving the rule of law would support business certainty. At a structural level, the Philippines is on the cusp of a demographic transition but must close important structural gaps to take advantage of this potential dividend and boost growth. Under current policy settings, potential growth projections are estimated to be between 6.0–6.3 percent in the medium term. An upside scenario, which assumes ambitious and well-sequenced structural reforms, shows that growth could reach 7.0–7.5 percent over a longer time horizon.
Keywords:
supply and demand inflation decomposition; supply and demand food inflation decomposition; inflation volatility; inflation expectation; services inflation decomposition; supply and demand goods inflation decomposition; Inflation; Total factor productivity; Human capital; Labor productivity; Global; Asia and Pacific
Cover IMF Working Papers
G3MOD: A Multi-Country Global Forecasting Model
Iaroslav Miller
,
Daniel Baksa
,
Philippe D Karam
, and
Tugrul Vehbi
This paper develops G3MOD, a semi-structural gap-trend model designed for frequent external sector forecasts crucial in macroeconomic forecasting. Focused on the G3 economies (US, Euro Area, and China) and the rest of the world, G3MOD leverages insights from central banks’ policy models, to consistently translate external forecasts such as the IMF’s World Economic Outlook into a Quarterly Projection Model format. The model offers flexible simulations and policy assessments and is structured around trade and financial linkages. G3MOD supports model-based forecasts and risk evaluations, helping central banks integrate external forecasts and scenarios into their own forecasts, thus generating timely macroeconomic projections. Its calibration ensures alignment with historical data, economic coherence, and robust predictive capability, and it has been validated against major global projection models. The complete set of codes, calibrated parameter values, and supporting programs are posted with this working paper.
Keywords:
Quarterly Projection Model; Forecasting and Policy Analysis; Monetary Policy; Macroeconomic Modeling; forecasting accuracy; macroeconomic forecasting; risk evaluation; demand shock; Inflation; Output gap; Commodity prices; Nominal effective exchange rate; Real exchange rates; Global
Cover IMF Working Papers
Quarterly Projection Model for the Bank of Ghana: Extensions and Applications
Philip Abradu-Otoo
,
Joseph K. Acquah
,
James Attuquaye
,
Simon Harvey
,
Francis Loloh
,
Shalva Mkhatrishvili
,
Valeriu Nalban
,
Daniel Ngoh
,
Victor Osei
, and
Michael Quansah
The paper documents the latest extensions of the Bank of Ghana’s Quarterly Projection Model (QPM), used regularly to produce policy analysis and forecasts in support of the Bank’s policy processes. The decomposition of GDP allows to separate the agriculture and oil sectors, driven by exogenous and international developments, from non-agriculture non-oil activities, which are more relevant from the central bank’s perspective of assessing the business cycle position. Inter-sectoral price spillovers and their role in the formation of inflation expectations are explicitly accounted, with important policy implications. Specific model applications – including impulse response functions and simulations of shocks that affect agricultural production, e.g., those caused by climate disruptions; and counterfactual simulations to evaluate recent policy choices – highlight the usefulness of the extended QPM in providing a more detailed account of the economic developments, enhance forecast coverage, and broaden its underlying narrative, thus strengthening the BOG’s forward-looking policy framework.
Keywords:
Ghana; Forecasting and Policy Analysis; Quarterly Projection Model; Monetary Policy; Transmission Mechanism; A. impulse response; impulse response function; reaction function; policy analysis; Bank of Ghana's Quarterly Projection Model; price spillover; Inflation; Output gap; Inflation targeting; Real interest rates; Global
Cover Regional Economic Outlook, Middle East and Central Asia, October 2024
Regional Economic Outlook, Middle East and Central Asia, October 2024
Navigating the Evolving Geoeconomic Landscape
International Monetary Fund. Middle East and Central Asia Dept.

Abstract

Economic growth in the Middle East and North Africa and Caucasus and Central Asia regions is projected to strengthen in the near term, but only to the extent that current challenges abate. Ongoing conflicts and oil production cuts are dampening economic performance, and medium-term growth prospects have weakened over the past two decades. Moreover, high uncertainty looms, with key risks including escalating conflicts, increased geoeconomic fragmentation, and commodity price volatility. To boost growth and create jobs—especially for women and youth—reform priorities include strengthening governance, encouraging private sector investment, and advancing financial development.

Keywords:
Middle East; North Africa; Caucasus; Central Asia; Gaza; Sudan; Lebanon; trade patterns; economic growth; reforms; growth prospects; shocks; conflicts; uncertainty; economic performance; growth prospects; risks; oil production cuts; OPEC+; investment; geoeconomic fragmentation; IMF; governance; medium-term; capital deepening; women; youth; employment; commodity price volatility; private sector; financial development; CCA region; CCA economy; CCA country; IMF staff calculation; oil exporter; Total factor productivity; Financial sector development; Oil exports; Inflation; Labor force participation; East Africa; Central Asia and the Caucasus; Global
Cover Regional Economic Outlook, Europe, October 2024
Regional Economic Outlook, Europe, October 2024
A Recovery Short of Europe’s Full Potential
International Monetary Fund. European Dept.

Abstract

Europe’s economy is recovering, benefiting from a strong crises’ response. Yet, the recovery is falling short of its full potential. Uncertainty about persistent core inflation, policy directions, and geopolitical conflicts is dampening the near-term outlook. In the longer term, perennially weak productivity growth—a result of limited scale and business dynamism–-amid new headwinds from fragmentation and climate change are holding back growth potential. Steady macro policies are needed to navigate an uncertain environment. This requires transitioning to a neutral monetary policy stance and reducing fiscal deficits without jeopardizing the recovery. Policymakers also need to tackle barriers to higher potential growth. A larger and more integrated single market for goods, services, and capital will incentivize investment, innovation, and generate scale benefits. Deepening European integration will also strengthen economic resilience by insulating businesses and labor markets from global fragmentation pressures. These are formidable policy challenges, but now is the time to bring Europe to its full potential.

Keywords:
Growth; inflation; outlook; potential growth; uncertainty; risk; macroeconomic policy; monetary policy; fiscal policy; financial sector policy; structural policy; EU climate; productivity slump; EU financing; governance framework; EU funds; EU country; competitiveness reform; value chain; inflation expectation; EU level; EU budget; CESEE region; Productivity; Purchasing power parity; Fiscal consolidation; Europe; Global
Cover IMF Working Papers
Mending the Crystal Ball: Enhanced Inflation Forecasts with Machine Learning
Yang Liu
,
Ran Pan
, and
Rui Xu
Forecasting inflation has become a major challenge for central banks since 2020, due to supply chain disruptions and economic uncertainty post-pandemic. Machine learning models can improve forecasting performance by incorporating a wider range of variables, allowing for non-linear relationships, and focusing on out-of-sample performance. In this paper, we apply machine learning (ML) models to forecast near-term core inflation in Japan post-pandemic. Japan is a challenging case, because inflation had been muted until 2022 and has now risen to a level not seen in four decades. Four machine learning models are applied to a large set of predictors alongside two benchmark models. For 2023, the two penalized regression models systematically outperform the benchmark models, with LASSO providing the most accurate forecast. Useful predictors of inflation post-2022 include household inflation expectations, inbound tourism, exchange rates, and the output gap.
Keywords:
Core inflation; forecasting; machine learning models; LASSO; Japan; household inflation expectation; forecasting inflation; machine learning method; Annex I. machine learning; enhanced inflation; Inflation; Machine learning; Econometric models; Output gap
Cover Technical Assistance Reports
Ghana: Technical Assistance Report-Report on Developing the Forecasting and Policy Analysis System (FPAS) at the Bank of Ghana (BOG)
International Monetary Fund. Institute for Capacity Development
and
International Monetary Fund. African Dept.
This technical assistance (TA) report presents the outcomes of the multi-year Bank of Ghana (BOG) Forecasting and Policy Analysis System (FPAS) TA project, conducted between late-2019 and mid-2024 over a total of seven missions, three in-person and four virtual. The project has focused on upgrading and building new institutional capacity for model-based policy analysis and macroeconomic forecasting, along its integration into monetary policy processes and external communications. BOG staff has made remarkable progress and built a strong skillset in providing analytical support to the policymakers. Model-based work plays an important role in the BOG internal deliberations and represents the key input in forward-looking monetary policy formulation, including in regular external communications. Remaining recommendations relate to ensuring FPAS work sustainability and further streamline external communications.
Keywords:
Monetary policy; Inflation targeting; Central banks; Inflation; Output gap; Exchange rate; Monetary policy transmission; Ghana.; IMF TA project team; BOG forecasting team; TA team; BOG's Forecasting and Policy Analysis System; TA mission; Exchange rates; Agricultural sector; Global