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Business and Economics > Production and Operations Management

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Cover IMF Working Papers
The Macroeconomic Effects of Large Immigration Waves
Philipp Engler
,
Ms. Margaux MacDonald
,
Mr. Roberto Piazza
, and
Galen Sher
We propose a novel approach to measure the dynamic macroeconomic effects of immigration on the destination country, combining the analysis of episodes of large immigration waves with instrumental variables techniques. We distinguish the impact of immigration shocks in OECD countries from that of refugee immigration in emerging and developing economies. In OECD, large immigration waves raise domestic output and productivity in both the short and the medium term, pointing to significant dynamic gains for the host economy. We find no evidence of negative effects on aggregate employment of the native-born population. In contrast, our analysis of large refugee flows into emerging and developing countries does not find clear evidence of macroeconomic effects on the host country, a conclusion in line with a growing body of evidence that refugee immigrants are at disadvantage compared to other type of immigrants.
Keywords:
Immigration; productivity; dynamic gains; immigration wave; immigration shock; immigration episode; OECD migration flow data; migration shock; Migration; Employment; Total factor productivity; Estimation techniques; Middle East
Cover IMF Working Papers
Here Comes the Change: The Role of Global and Domestic Factors in Post-Pandemic Inflation in Europe
Mahir Binici
,
Samuele Centorrino
,
Mr. Serhan Cevik
, and
Gyowon Gwon
Global inflation has surged to 7.5 percent in August 2022, from an average of 2.1 percent in the decade preceding the COVID-19 pandemic, threatening to become an entrenched phenomenon. This paper disentangles the confluence of contributing factors to the post-pandemic rise in consumer price inflation, using monthly data and a battery of econometric methodologies covering a panel of 30 European countries over the period 2002-2022. We find that while global factors continue to shape inflation dynamics throughout Europe, country-specific factors, including monetary and fiscal policy responses to the crisis, have also gained greater prominence in determining consumer price inflation during the pandemic period. Coupled with increasing persistence in inflation, these structural shifts call for significant and an extended period of monetary tightening and fiscal realignment.
Keywords:
Inflation; output gap; globalization; Phillips curve; dynamic factor model; fixed effect estimator; local projection method; inflation dynamics; consumer price inflation; fiscal policy response; inflation expectation; inflation process; commodity price; core CPI; Commodity prices; COVID-19; Energy prices; Global; Europe
Cover IMF Working Papers
The Macroeconomic Impacts of Digitalization in Sub-Saharan Africa: Evidence from Submarine Cables
Felix F. Simione
and
Yiruo Li
The Macroeconomic Impacts of Digitalization in Sub-Saharan Africa: Evidence from Submarine Cables
Keywords:
internet penetration; growth effect; macroeconomic impacts of digitalization; arrival IV; employment share; productivity database; Employment; Productivity; Digitalization; Estimation techniques; Labor productivity; Africa; Sub-Saharan Africa; Global
Cover IMF Working Papers
Steady as She Goes—Estimating Potential Output During Financial “Booms and Busts”
Mr. Helge Berger
,
Mr. Thomas Dowling
,
Mr. Sergi Lanau
,
Mr. Mico Mrkaic
,
Mr. Pau Rabanal
, and
Marzie Taheri Sanjani
Potential output—in the sense of the GDP level or path an economy can sustain over the medium term—is a crucial benchmark for policymakers. However, it is difficult to estimate when financial “booms and busts” are driving the real economy. This paper uses a simple multivariate filtering approach to illustrate the role financial variables play in driving potential or sustainable output. The results suggest that it moves more steadily during financial “boom and bust” periods than implied by conventional HP filter estimates, which tend to more closely follow actual GDP. A two-region, multisector New Keynesian DSGE model with financial frictions sheds light on the economic forces that could be behind the results obtained from the filter. This has important implications for policymakers.
Keywords:
WP; MVF output gap; boom and bust; Spain output gaps estimate; house price; MVF-implied output gap; Spain output gaps from a MVF Model; Potential output; Output gap; Credit; housing price movement; Housing prices; Financial frictions; Global
Cover IMF Working Papers
What Is in Your Output Gap? Unified Framework & Decomposition into Observables
Michal Andrle
This paper discusses several popular methods to estimate the ‘output gap’. It provides a unified, natural concept for the analysis, and demonstrates how to decompose the output gap into contributions of observed data on output, inflation, unemployment, and other variables. A simple bar-chart of contributing factors, in the case of multi-variable methods, sharpens the intuition behind the estimates and ultimately shows ‘what is in your output gap.’ The paper demonstrates how to interpret effects of data revisions and new data releases for output gap estimates (news effects) and how to obtain more insight into real-time properties of estimators.
Keywords:
WP; least squares; output gap; linear filters; observable decomposition; DSGE; output gap estimate; B. output gap estimation; output gap estimation method; backward-looking output gap equation; output gap estimator; inflation expectation; output gap estimation approach; Potential output; Inflation; Capacity utilization; Estimation techniques
Cover IMF Working Papers
Efficiency-Adjusted Public Capital and Growth
Mr. Sanjeev Gupta
,
Mr. Alvar Kangur
,
Mr. Abdoul A Wane
, and
Mr. Chris Papageorgiou
This paper constructs an efficiency-adjusted public capital stock series and re-examines the public capital and growth relationship for 52 developing countries. The results show that public capital is a significant contributor to economic growth. Although the estimated coefficient for the income share of public capital is larger in middle- than in low-income countries, the opposite is true for the marginal product of public capital. The quality of public investment, as measured by variables capturing the adequacy of project selection and implementation, are statistically significant in explaining variations in economic growth, a result mainly driven by low-income countries.
Keywords:
WP; production function; public capital; Public capital stock; public investment efficiency; appraisal; selection; implementation; evaluation of public investment; growth accounting; investment process; ICRG investment profile; process carry; investment effort; management process; Public investment spending; Stocks; Capital productivity; Estimation techniques
Cover IMF Working Papers
Public Debt and Growth
Jaejoon Woo
and
Mr. Manmohan S. Kumar
This paper explores the impact of high public debt on long-run economic growth. The analysis, based on a panel of advanced and emerging economies over almost four decades, takes into account a broad range of determinants of growth as well as various estimation issues including reverse causality and endogeneity. In addition, threshold effects, nonlinearities, and differences between advanced and emerging market economies are examined. The empirical results suggest an inverse relationship between initial debt and subsequent growth, controlling for other determinants of growth: on average, a 10 percentage point increase in the initial debt-to-GDP ratio is associated with a slowdown in annual real per capita GDP growth of around 0.2 percentage points per year, with the impact being somewhat smaller in advanced economies. There is some evidence of nonlinearity with higher levels of initial debt having a proportionately larger negative effect on subsequent growth. Analysis of the components of growth suggests that the adverse effect largely reflects a slowdown in labor productivity growth mainly due to reduced investment and slower growth of capital stock.
Keywords:
WP; debt; coefficient; estimation; SGMM
Cover IMF Working Papers
Simulating Inflation Forecasting in Real-Time: How Useful Is a Simple Phillips Curve in Germany, the UK, and the US?
Mr. Jens R Clausen
and
Bianca Clausen
This paper simulates out-of-sample inflation forecasting for Germany, the UK, and the US. In contrast to other studies, we use output gaps estimated with unrevised real-time GDP data. This exercise assumes an information set similar to that available to a policymaker at a given point in time since GDP data is subject to sometimes substantial revisions. In addition to using real-time datasets for the UK and the US, we employ a dataset for real-time German GDP data not used before. We find that Phillips curves based on ex post output gaps generally improve the accuracy of inflation forecasts compared to an AR(1) forecast but that real-time output gaps often do not help forecasting inflation. This raises the question how operationally useful certain output gap estimates are for forecasting inflation.
Keywords:
WP; GDP; output gap series
Cover IMF Working Papers
Sources of Inflation in Sub-Saharan Africa
Mr. Shanaka J Peiris
and
Régis Barnichon
This paper explores the sources of inflation in Sub-Saharan Africa by examining the relationship between inflation, the output gap, and the real money gap. Using heterogeneous panel cointegration estimation techniques, we estimate cointegrating vectors for the production function and the real money demand function to recover the structural output and money gaps for seventeen African countries. The central finding is that both gaps contain significant information regarding the evolution of inflation, albeit with a larger role played by the money gap. There is no significant evidence of asymmetry in the relationship.
Keywords:
WP; money gap; excess demand; Inflation; Phillips curve; Money Demand; Panel Cointegration; Growth Accounting; panel money demand estimation; money demand function; Phillips Curve Panel GMM; inflation movement; output gap measure; Output gap; Demand for money; Potential output; Estimation techniques; Sub-Saharan Africa; integration estimation technique; Cointegration regression
Cover IMF Working Papers
On the Properties of Various Estimators for Fiscal Reaction Functions
Oya Celasun
and
Mr. Joong S Kang
This paper evaluates the bias of the least-squares-with-dummy-variables (LSDV) method in fiscal reaction function estimations. A growing number of studies estimate fiscal policy reaction functions-that is, relationships between the primary fiscal balance and its determinants, including public debt and the output gap. A previously unexplored methodological issue in these estimations is that lagged debt is not a strictly exogenous variable, which biases the LSDV estimator in short panels. We derive the bias analytically to understand its determinants and run Monte Carlo simulations to assess its likely size in empirical work. We find the bias to be smaller than the bias of the LSDV estimator in a comparable autoregressive dynamic panel model and show the LSDV method to outperform a number of alternatives in estimating fiscal reaction functions.
Keywords:
WP; mover accent