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Business and Economics > Production and Operations Management

You are looking at 1 - 10 of 226 items for :

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Cover IMF Working Papers
The Economic Costs of Temperature Uncertainty
Luca Bettarelli
,
Davide Furceri
,
Michael Ganslmeier
, and
Marc Schiffbauer
Beyond its environmental damage, climate change is predicted to produce significant economic costs. Combining novel high-frequency geospatial temperature data from satellites with measures of economic activity for the universe of US listed firms, this article examines a potentially important channel through which global warming can lead to economic costs: temperature uncertainty. The results show that temperature uncertainty—by increasing power outages, reducing labor productivity, and increasing the degree of exposure of firms to environmental and non-political risks, as well as economic uncertainty at the firm-level—persistently reduce firms’ investment and sales. This effect varies across firms, with those characterized by tighter financial constraints being disproportionally more affected.
Keywords:
Temperatures; Temperature Volatility; Uncertainty; Firms.; temperature uncertainty; impact of Temperature volatility; firms' characteristic; temperature data; firms' investment; Climate change; Labor productivity; Natural disasters; Employment; 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 Working Papers
Industrial Policy in Europe: A Single Market Perspective
Andrew Hodge
,
Roberto Piazza
,
Fuad Hasanov
,
Xun Li
,
Maryam Vaziri
,
Atticus Weller
, and
Yu Ching Wong
European countries are increasingly turning to industrial policy to address the challenge of geopolitical fragmentation, enhance productivity, and accelerate the green transition. Well-targeted industrial policy has the potential to correct market failures and support production efficiency by exploiting scale effects and internalizing knowledge externalities. But even the most carefully designed unilateral industrial policies risk generating negative production externalities in other countries, and, under certain conditions, may not even be welfare-enhancing for the implementing country. The reason is that negative externalities of unilateral industrial policy can drive European and international production patterns away from underlying comparative advantages, create regional or global over-supply, and result in changes in terms of trade that reduce domestic welfare. This suggests significant benefits from coordination. Structural modeling and case studies show that a coordinated approach within the European Union and with international trading partners on a narrowly defined and carefully designed set of industrial policies could unlock untapped benefits. Closer European integration would facilitate the adjustment of firms and workers to coordinated and well-targeted industrial policies and amplify their benefits.
Keywords:
Industrial policy; European Single Market; State Aid; EU aerospace industry export; EU single market; fishery block exemption regulation; State aid expenditure; single market perspective; Comparative advantage; Demand elasticity; Competition; Terms of trade; Europe; Global
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
Europe’s Shift to EVs Amid Intensifying Global Competition
Philippe Wingender
,
Jiaxiong Yao
,
Robert Zymek
,
Benjamin Carton
,
Diego A. Cerdeiro
, and
Anke Weber
European countries have set ambitious goals to reduce their carbon emissions. These goals include a transition to electric vehicles (EVs)—a sector that China increasingly dominates globally—which could reduce the demand for Europe’s large and interconnected auto sector. This paper aims to size up the tradeoffs between Europe’s shift towards EVs and key macroeconomic outcomes, and analyze which policies may sharpen or ease them. Using state-of-the-art macroeconomic and trade models we analyze a scenario in which the share of Chinese cars in EU purchases rises by 15 percent over 5 years as a result of both a positive productivity shock for car production in China and a demand shock that shifts consumer preferences towards Chinese cars (given China’s dominance in the EV sector). We find that for the EU as a whole, the GDP cost of this shift is small in the short term, in the range of 0.2-0.3 percent of GDP, and close to zero over the long term. Adverse short-run effects are more significant for smaller economies heavily reliant on the car sector, mainly in Central Europe. Protectionist policies, such as tariffs on Chinese EVs, would raise the GDP cost of the EV transition. A further increase in Chinese FDI inflows that results in a significant share of Chinese EVs being produced in Central European economies, on the other hand, would offset losses in these economies by supporting their shift from supplying the internal combustion engine (ICE) production chain to that of EVs.
Keywords:
Electric vehicles; green transition; trade; tariffs; global value chains.; protectionist policy response; GDP cost; EV share; Europe's shift; shift to electric vehicles; Foreign direct investment; Productivity; Imports; Europe; Global
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
Cover IMF Working Papers
Shedding Light on the Local Impact of Temperature
Da Hoang
,
Duong Trung Le
,
Ha Nguyen
, and
Nikola Spatafora
We use a new dataset to estimate the impact of temperature on economic activity at a more geographically and temporally disaggregated level than the existing literature. Analyzing 30-kilometer grid cells at a monthly frequency, temperature has a negative, highly statistically significant, and quantitatively large effect on output: a 1 °C increase in monthly temperature is associated with a 0.77 percent reduction in nighttime lights, a proxy for local economic activity. The effects of even a temporary increase in temperature persist for almost one year after the shock. Increases in temperature have an especially large, negative impact on growth in poorer countries, indicating that they are more vulnerable to the impact of climate change.
Keywords:
Climate change; temperature; economic growth; nighttime lights; B. data description; IMF working paper No. 24/178; impact of temperature; Google Earth engine; temperature shock; Productivity; Global
Cover IMF Staff Country Reports
Hungary: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper presents monetary policy analysis with a quarterly projection model (QPM) in Hungary. The standard QPM is adapted to reflect some specific features of the Hungarian economy and post-Covid set of shocks. Inflation is modelled in greater sectoral detail, including the separation of core goods and services, to capture differences in their drivers and dynamics and to model spillovers of shocks from one sector to another. Following a period of large interest rate reductions, the projections from the QPM suggest that the next phase of monetary policy normalization should proceed cautiously and more gradually. Results from the model should be used alongside other forms of analysis and expert judgement in determining the optimal path of monetary policy. Data should be watched keenly to assess the realism of the model’s projections.
Keywords:
income convergence; E. impulse response; convergence in Hungary; beta convergence; monetary policy shock; Inflation; Corporate sector; Income; Income inequality; Global; Europe
Cover IMF Staff Country Reports
Euro Area Policies: 2024 Annual Consultation-Press Release; Staff Report; and Statement by the Executive Director for Member Countries
International Monetary Fund. European Dept.
The 2024 Article IV Consultation explains that the euro area is recovering gradually, with a modest acceleration of growth projected for 2024, gathering further speed in 2025. Increasing real wages together with some drawdown of household savings are contributing to consumption, while the projected easing of financing conditions is supporting a recovery in investment. A modest pickup in growth is projected for 2024, strengthening further in 2025. This primarily reflects expected stronger consumption on the back of rising real wages and higher investment supported by easing financing conditions. Inflation is projected to return to target in the second half of 2025. The economy is confronting important new challenges, layered on existing ones. Beyond returning inflation to target and ensuring credible fiscal consolidation in high-debt countries, the euro area must urgently focus on enhancing innovation and productivity. Higher growth is essential for creating policy space to tackle the fiscal challenges of aging, the green transition, energy security, and defense.
Keywords:
EU institution; EU industrial; headline inflation; EU climate; two-sided inflation risk; Inflation; Labor markets; Fiscal consolidation; Europe; Global
Cover IMF Staff Country Reports
Burkina Faso: Selected Issues
International Monetary Fund. African Dept.
This Selected Issues paper highlights trends, impacts, and policy implications in Burkina Faso. Regional insecurity has also created increased cross-border displacement, both into and out of Burkina Faso. Burkina Faso has devised several policy responses, including in cooperation with international partners. Despite these measures, the persistent crisis of forced displacement means that the need for humanitarian assistance remains. A successful strategy for addressing the displacement crisis should be broad-based in terms of partners and approaches. Given the country's economic and financial challenges, an in-depth understanding is needed of the economic impact of forced displacement and possible solutions. In other countries, studies show positive economic outcomes to host regions of forced displacement. The inclusion of forced displaced persons in the Unified Social Register and national social nets programs would facilitate the implementation of assistance and, along with other national repositories help improve urban management and budget planning.
Keywords:
growth experience; C. socio-economic Impact; C. policy response; impact of climate change; agriculture productivity; Climate change; Productivity; Food security; Global; Sub-Saharan Africa