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Business and Economics > Production and Operations Management

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Cover Technical Assistance Reports
Botswana: Technical Assistance Report-Enhancing the Forecasting Policy and Analysis System at the Bank of Botswana
International Monetary Fund. Monetary and Capital Markets Department
At the request of Bank of Botswana, a Technical Assistance mission from the Monetary and Capital Markets (MCM) Department visited Gaborone, Botswana during May 27–31, 2024, to assist the authorities in enhancing their forecasting and policy analysis system (FPAS). The mission assessed and advised on both near-term and medium-term forecasting tools and models currently used by the Bank of Botswana. The mission team helped create a new centralized database and introduced a new flexible platform with a suite of models that expands and complements existing near-term forecasting models. The mission team also improved the medium-term forecasting framework by reviewing model calibration, introducing a fiscal block, and recommending further adjustments.
Keywords:
Monetary Policy; Forecasting and Policy Analysis System; Data Management; Near-term and Medium-term Forecasting Tools; Botswana.; IMF's Monetary; medium term forecasting tool; IMF Monetary; policy analysis system; IMF executive directors; Output gap; Infrastructure; Exchange rate arrangements; Central bank policy rate; Exchange rates; Global
Cover IMF Working Papers
China’s Path to Sustainable and Balanced Growth
Dirk V Muir
,
Natalija Novta
, and
Anne Oeking
After decades of high growth, the Chinese economy is facing headwinds from slowing productivity growth and a declining workforce that are projected to lower potential growth substantially in the longer term. We project China’s potential growth over the medium to long term, showing that potential growth could slow to around 3.8 percent on average between 2025-30 and to around 2.8 percent on average over 2031-40 in the absence of major reforms. We present a reform scenario with structural reforms to lift productivity growth and rebalancing China’s growth towards more consumption, that would help China transition to “high-quality”—balanced, inclusive, and green—growth. We use production function and general equilibrium modelling approaches to show that potential growth could remain at around 4.3 percent between 2025-40 under the reform scenario.
Keywords:
Potential growth; investment-led growth; rebalancing; demographic trends; structural reforms; reform scenario; General equilibrium modeling approach; reforming China's economy; tertiary sector; SOE productivity gap; Total factor productivity; Productivity; Consumption; Global value chains; Global; Southeast Asia
Cover IMF Working Papers
Public Perceptions of Canada’s Investment Climate: A Natural Language Processing-Based Approach
Flora Lutz
,
Yuanchen Yang
, and
Chengyu Huang
Canada’s muted productivity growth during recent years has sparked concerns about the country’s investment climate. In this study, we develop a new natural language processing (NPL) based indicator, mining the richness of Twitter (now X) accounts to measure trends in the public perceptions of Canada’s investment climate. We find that while the Canadian investment climate appears to be generally favorable, there are signs of slippage in some categories in recent periods, such as with respect to governance and infrastructure. This result is confirmed by both survey-based and NLP-based indicators. We also find that our NLP-based indicators would suggest that perceptions of Canada’s investment climate are similar to perceptions of U.S. investment climate, except with respect to governance, where views of U.S. governance are notably more negative. Comparing our novel indicator relative to traditional survey-based indicators, we find that the NLP-based indicators are statistically significant in helping to predict investment flows, similar to survey-based measures. Meanwhile, the new NLP-based indicator offers insights into the nuances of data, allowing us to identify specific grievances. Finally, we construct a similar indicator for the U.S. and compare trends across countries.
Keywords:
Investment Climate; Canada; Machine Learning; Sentiment Analysis; muted productivity growth; investmest climate; investment flow; NLP-based indicator; Climate finance; Competition; Infrastructure; Productivity; Mining sector; Global
Cover IMF Working Papers
Advancing India’s Structural Transformation and Catch-up to the Technology Frontier
Cristian Alonso
and
Margaux MacDonald
While India’s growth has been strong in recent decades, its structural transformation remains incomplete. In this paper, we first take stock of India’s growth to date. We find that economic activity has shifted from agriculture to services, but agriculture remains the predominant employer. Catch up to the technological frontier has been uneven, with limited progress in agriculture, but also in construction and trade, which have grown the most in terms of employment. We do find some Indian firms already operating at the technological frontier. These strong performers tend to be large firms. We then consider India’s employment challenge going forward. We find that India needs to create between 143-324 million jobs by 2050 and that doing so and with workers shifting towards more dynamic sectors could boost GDP growth by 0.2-0.5 percentage points. Structural reforms can help India create high-quality jobs and accelerate growth.
Keywords:
Economywide Production; Potential Output; Labor Productivity; Employment; Structural Transformation; Technological Frontier.; frontier employment; India's employment challenge; technology frontier; growth decomposition; IMF staff estimate; industry level; Agricultural sector; Productivity; Global
Cover IMF Staff Country Reports
Republic of Slovenia: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper focuses on boosting productivity in Slovenia. Slovenia’s ageing population sets a constraint on the contribution of labor to gross domestic product in the end.Only achieve sustained increases in income and living standards can, therefore, through investment in physical and human capital and, more importantly, through enhancing productivity, historically the key growth driver. This paper summarizes historical trends in growth and productivity in Slovenia, examines the country’s strengths and weaknesses in terms of key factors affecting productivity identified in the literature. Since the scope for future labor contributions to growth in Slovenia is limited for demographic reasons—apart from further improvements to labor quality—the focus of economic growth policies should be on reinvigorating private investment, which has been low over the past decade, and pursuing labor and product market reforms that boost total factor productivity growth.
Keywords:
productivity trend; firm leverage; labor market indicator; I. shift share methodology; EU growth composition; Productivity; Total factor productivity; Labor force; Private investment; Europe; Central and Eastern Europe; Global
Cover IMF Working Papers
Assessing the Impact of Structural Reforms on Potential Output: The Case of Morocco
Hippolyte W. Balima
,
Olivier Bizimana
, and
Ananta Dua
This paper assesses Morocco’s potential output and the scope for structural reforms to reverse the downward trend in economic performance observed since the Global Financial Crisis. Using multivariate filtering (MVF) techniques, our analysis finds that the downward secular trend in potential growth was primarily driven by the decline in the contribution of labor inputs. We then combine production function and general equilibrium model approaches to provide estimates of the potential macroeconomic impact of Morocco’s structural reform agenda. The results suggest that the planned structural reforms could deliver sizable output gains in the medium to long term with reforms that would reduce the large gender gap in Morocco’s labor market yielding the greatest payoffs.
Keywords:
Economic growth; structural reforms; potential output; productivity; multivariate filter; dynamic stochastic general equilibrium models; fiscal policy; Morocco; production function approach; Morocco's agenda; reform multiplier; structural reform agenda; case of Morocco; Total factor productivity; Labor force participation; Production growth; Global
Cover Regional Economic Outlook, Middle East and Central Asia, October 2023
Regional Economic Outlook, Middle East and Central Asia, October 2023
Building Resilience and Fostering Sustainable Growth
International Monetary Fund. Middle East and Central Asia Dept.

Abstract

Across the Middle East and Central Asia, the combined effects of global headwinds, domestic challenges, and geopolitical risks weigh on economic momentum, and the outlook is highly uncertain. Growth is set to slow this year in the Middle East and North Africa region, driven by lower oil production, tight policy settings in emerging market and middle-income economies, the conflict in Sudan, and other country-specific factors. In the Caucasus and Central Asia, although migration, trade, and financial inflows following Russia’s war in Ukraine continue to support economic activity, growth is set to moderate slightly this year. Looking ahead, economic activity in the Middle East and North Africa region is expected to improve in 2024 and 2025 as some factors weighing on growth this year gradually dissipate, including the temporary oil production cuts. But growth is expected to remain subdued over the forecast horizon amid persistent structural hurdles. In the Caucasus and Central Asia, economic growth is projected to slow next year and over the medium term as the boost to activity from real and financial inflows from Russia gradually fades and deep-seated structural challenges remain unsolved. Inflation is broadly easing, in line with globally declining price pressures, although country-specific factors—including buoyant wage growth in some Caucasus and Central Asia countries—and climate-related events continue to make their mark. Despite some improvement since April, the balance of risks to the outlook remains on the downside. In this context, expediting structural reforms is crucial to boost growth and strengthen resilience, while tight monetary and fiscal policies remain essential in several economies to durably bring down inflation and ensure public debt sustainability.

Keywords:
growth; inflation; public debt; external financing; commodity prices; structural reforms; investment; labor productivity; financial stability; stress testing; governance reform; GCC country; credit market reform; government effectiveness; reform package; Policy space; Emerging and frontier financial markets; Credit; Labor force participation; Middle East and Central Asia; Central Asia and the Caucasus; Middle East; North Africa; oil exporter; IMF staff calculation; CCA bank; sovereign-bank nexus; Fiscal stance; Current account balance; Commercial banks; Oil exports; Global
Cover IMF Working Papers
Unveiling the Hidden Impact of Urban Land Rents on Total Factor Productivity
Mr. Bas B. Bakker
This paper addresses the puzzling decline of Total Factor Productivity (TFP) levels in rapidly growing economies, such as Singapore, despite advancements in technology and high GDP per capita growth. The paper proposes that TFP growth is not negative; instead, standard growth decompositions have underestimated TFP growth by overestimating the contribution of capital, failing to account for the substantial part of capital income directed to urban land rents. This leads to an overestimation of changes in capital stock's contribution to growth and thereby an underestimation of TFP growth. A revised decomposition suggests that TFP growth in economies with high land rents and rapid capital stock growth, such as Singapore, has been considerably underestimated: TFP levels have not declined but increased rapidly.
Keywords:
Total Factor Productivity; Economic Growth; Capital Stock; Land Rents; Growth Decomposition; Urban Economics; Population Density; Diminishing Returns to Scale; Technological Progress; Singapore; TFP level; re-estimating TFP; land rent; decline of total factor productivity; Capital income; Stocks; Land prices; Asia and Pacific
Cover Selected Issues Papers
Impact of High Energy Prices on Germany’s Potential Output
Miss Yushu Chen
,
Ting Lan
,
Ms. Aiko Mineshima
, and
Jing Zhou
The surge in energy prices since Russia’s invasion of Ukraine has reduced the energy-intensive sector’s production in Germany, although the non-energy intensive sector’s production has held up thanks in part to firms’ efforts to improve energy efficiency. Energy prices are expected to remain elevated in the foreseeable future, compared to pre-war levels, adversely affecting firms’ productivity and thus lowering Germany’s potential output. Economic modeling suggests that this effect could be around 1¼ percent of GDP in staff’s baseline, with some uncertainty around this estimate, depending on the ultimate magnitude of the energy price shock and the degree to which increased energy efficiency can mitigate it. Policies can promote effective adjustment to the shock by increasing productivity and maintaining strong price incentives to conserve energy and invest in renewable energy production.
Keywords:
Germany; energy prices; energy efficiency; productivity; potential output; potential growth; directed technical change; price effect; price signal; surge in energy price; effect favor; optimization problem; energy efficiency response; Energy conservation; Fuel prices; Global
Cover Technical Notes and Manuals
User Manual for the DIGNAD Toolkit
Mr. Zamid Aligishiev
,
Cian Ruane
, and
Azar Sultanov
This note is a user’s manual for the DIGNAD toolkit, an application aimed at facilitating the use of the DIGNAD model (Debt-Investment-Growth and Natural Disasters) by economists with no to little knowledge of MATLAB and Dynare via a user-friendly Excel-based interface. DIGNAD is a dynamic general equilibrium model of a small open economy developed at the International Monetary Fund. The model can help economists and policymakers with quantitative assessments and policy scenario analysis of the macrofiscal effects of natural disasters and adaptation infrastructure investments in low-income developing countries and emerging markets. DIGNAD is tailored to disaster-prone countries, which typically are small countries or low-income countries that are particularly exposed to large climate shocks—countries where shocks that can disrupt the entire economy are frequent. However, DIGNAD can be relevant also for larger countries that may potentially be exposed to extreme climatic disasters in the future.
Keywords:
natural disasters; adaptation; resilient infrastructure; public investment; public investment efficiency; debt sustainability; DIGNAD toolkit; IMF copyright; DIGNAD model; GNU General Public License; third-party software; Infrastructure; Public investment spending; Total factor productivity; Depreciation; Sub-Saharan Africa