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Business and Economics > Production and Operations Management

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Cover Selected Issues Papers
Growth and Production Network in Chile: Chile
Si Guo
Productivity growth depends not only on technological innovation but also on production networks that amplify its impact. Theory and cross-country evidence indicate a positive relationship between productivity growth and the use of intermediate inputs, a measure of network connectedness. We find that Chile’s intermediate input utilization is significantly lower than that of OECD peers, such as Korea and the Czech Republic, and declined during 2008-21. This is primarily due to weak domestic producer connections and the smaller presence of the manufacturing sector. We argue that diversifying exports from mining, reducing trade costs, and improving contract enforcement could strengthen network linkages and boost growth.
Keywords:
Chile; Productivity; Input-output; production network; D. input-output linkage; A. growth slowdown; network linkage; aggregate productivity growth; Exports; Manufacturing; Total factor productivity; Eastern Europe; Global
Cover IMF Working Papers
Europe’s Productivity Weakness: Firm-Level Roots and Remedies
Oyun Erdene Adilbish
,
Diego A. Cerdeiro
,
Romain A Duval
,
Gee Hee Hong
,
Luca Mazzone
,
Lorenzo Rotunno
,
Hasan H Toprak
, and
Maryam Vaziri
Europe faces a well-known productivity malaise, with a large and widening aggregate productivity gap relative to the U.S. In this paper, we provide a novel diagnosis of the firm-level roots of Europe’s productivity growth slowdown through an analysis of data covering the universe of firms in Europe and the U.S over their life cycles. Compared to their U.S. counterparts, we identify critical performance gaps among both Europe’s frontier firms and young high-growth firms. Our firm-level analyses reveal that smaller markets and limited market-based financing are key bottlenecks for frontier European firms, while skill shortages and insufficient risk capital, such as venture capital, hinder the formation and subsequent growth of young firms in Europe. These findings suggest that removing remaining intra-Europe barriers to accelerate factor and product markets integration, alongside national reforms to facilitate swifter resource reallocation and enhance human capital, could help revive Europe’s productivity growth.
Keywords:
Firm-level productivity; business dynamism.; EU accession; productivity weakness; productivity problem; frontier firm; trade Barries; firm Size; Productivity; Trade balance; Trade barriers; Total factor productivity; Europe
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
Chile: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
2024 Selected Issues
Keywords:
input-output linkage; housing wealth effect; growth slowdown; real estate sector; risk assessment; Pension spending; Exports; Mortgages; Loans; Global; Eastern Europe
Cover IMF Staff Country Reports
Czech Republic: 2024 Article IV Consultation-Press Release; and Staff Report
International Monetary Fund. European Dept.
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. Higher value-added sectors, including ICT services, are constrained by lack of skilled labor and limited access to capital, undermining their ability to compete in global markets.
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 Staff Country Reports
Czech Republic: Selected Issues
International Monetary Fund. European Dept.
2024 Selected Issues
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
Republic of Poland: Selected Issues
International Monetary Fund. European Dept.
2024 Selected Issues
Keywords:
D. pension inequity; convergence success; firm investment trend; B. pension projection; E. pension funds' role; pension benefit; Pension spending; Pensions; Productivity; Aging; Total factor productivity; Global; Europe
Cover IMF Staff Country Reports
Finland: 2025 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Finland
International Monetary Fund. European Dept.
The economy has begun to recover from the 2023 recession, but the strength of the rebound is hindered by still weak construction investment and tepid growth among trading partners. Falling energy prices and weak domestic demand have temporarily reduced inflation below 2 percent. The economic recovery is expected to gain momentum in 2025, but downside risks, especially from abroad, remain elevated.
Keywords:
Ministry of Finance estimate; R&D expenditure; transparency policy; population growth boost housing demand; FIN-FSA favor; Finland's economy; strengthening growth momentum; Productivity; Fiscal stance; Baltics; Global
Cover IMF Working Papers
Competitiveness and Productivity in the Baltics: Common Shocks, Different Implications
Saioa Armendariz
,
Carlos de Resende
,
Alice Fan
,
Gianluigi Ferrucci
,
Bingjie Hu
,
Sadhna Naik
, and
Can Ugur
This paper examines competitiveness and productivity in the Baltics. Focusing on recent developments, it asks why Russia’s war in Ukraine led to a prolonged recession and strong decline in competitiveness in Estonia, while Latvia and Lithuania shielded their economies more effectively. The paper starts by documenting a deterioration in export performance across the region. Using a constant share decomposition, it finds that, unlike in Latvia and Lithuania, Estonia’s declining export share has been mainly linked to a reduction in the ‘intensive margin’—a sign of weakening external competitiveness and declining relative productivity. Multivariate filtering techniques and estimates of the real effective exchange rates based on historical productivity trends, consistent with Balassa-Samuelson, confirm that differences in long-term total factor productivity growth have affected external competitiveness. While Estonia’s post-GFC slowdown in productivity growth and real exchange rate appreciation have eroded its competitive edge, Latvia and Lithuania have shown greater resilience, aided by more balanced real effective exchange rates and, for Lithuania, stronger corporate balance sheets. A micro-econometric analysis further reveals that resource misallocation, particularly in the services sector, has been a key driver of declining productivity in the region. These findings underscore the need for targeted reforms to improve allocative efficiency, boost productivity, and restore competitiveness in the Baltic region.
Keywords:
Export shares; Competitiveness; Productivity; Baltics; export share; productivity in the Baltic; resource misallocation; productivity trend; TFP dynamics; TFP deceleration; Total factor productivity; Real effective exchange rates; Real exchange rates; 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