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Business and Economics > Production and Operations Management

You are looking at 1 - 10 of 48 items for :

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Cover IMF Working Papers
Dynamic Development Accounting and Relative Income Traps
Patrick A. Imam
and
Jonathan R. W. Temple
Previous research suggests that economy-wide poverty traps are rarely observed in the data. In this paper, we explore a related hypothesis: low-income countries rarely improve their position relative to the US. Using finite state Markov chains, we show that upwards mobility is indeed limited. Since capital-output ratios are similar across countries, and human capital is also converging, the persistence of low relative income seems to originate in the persistence of low relative TFP. We study the dynamics of relative TFP and how they interact with absolute levels of human capital, casting new light on the future of convergence.
Keywords:
Economic growth; development accounting; low-income trap; poverty trap; income trap; state Markov chains; country sample; OECD member country; relative TFP; Total factor productivity; Human capital; Growth accounting; Income; Capital productivity; Global
Cover IMF Working Papers
Geoeconomic Fragmentation and International Diversification Benefits
Tatsushi Okuda
and
Tomohiro Tsuruga
This paper applies the two-country open-economy model with trade in stocks and bonds of Coeurdacier et al. (2010) to quantify the loss of international diversification benefits for major advanced economies, which have a significant presence in international financial markets, under geoeconomic fragmentation. We perform counterfactual simulations under different hypothetical fragmentation scenarios in which these economies are unable to trade with geopolitically distant countries, as measured by voting disagreement on foreign policy issues at the United Nations General Assembly meetings during 2012-2021. The simulation results imply a potentially significant loss of international diversification benefits of financial openness for the considered advanced economies by limiting trading to partner countries that are geopolitical allies with highly synchronized business cycles.
Keywords:
Geopolitical risk; financial integration; international risk sharing; diversification benefit; output volatility; volatility of Macro-Financial Variables; simulation result; investment efficiency process; Total factor productivity; Business cycles; Consumption; International capital markets; Output gap; Global
Cover IMF Working Papers
Is Inflation Good for Business? The Firm-Level Impact of Inflation Shocks in the Baltics, 1997-2021
Serhan Cevik
,
Alice Fan
, and
Sadhna Naik
Using a large panel of firm-level data, this paper provides an analysis of how inflation shocks in the Baltics between 1997 and 2021 affected total factor productivity (TFP), gross profitability, and net fixed investment in nonfinancial sectors. First, we find that inflation and inflation volatility had mixed effects on TFP growth, profitability and net fixed investment in the first year as well as over the medium term, albeit at a dissipating rate. Second, focusing on subsamples, we find that inflation shocks had differential effects on large versus small firms. Third, we explore sectoral heterogeneity in how firms responded to inflation shocks and observe significant variation across tradable and non-tradable sectors. Finally, estimates from a state-dependent model suggest that firms’ response to inflation shocks varied with the state of the economy. The results suggest that nonfinancial firms in the Baltics have been agile in adjusting to inflation shocks, possibly by either transferring higher production costs to consumers or substituting inputs. Given the differences in the level and nature of the recent inflation shock and the sample period on which our analysis is based, empirical findings presented in this paper might not necessarily apply to the latest bout of inflation in the Baltics.
Keywords:
Inflation; firm performance; productivity; profitability; fixed investment; Baltics; Estonia; Latvia; Lithuania; inflation shock; inflation volatility; IMF working paper No. 24/43; nonfinancial firm; impact of inflation; affected total factor productivity; Total factor productivity; Economic recession
Cover IMF Working Papers
The Shifting and Steepening of Phillips Curves During the Pandemic Recovery: International Evidence and Some Theory
Tryggvi Gudmundsson
,
Chris Jackson
, and
Rafael A Portillo
We study the global inflation surge during the pandemic recovery and the implications for aggregate and sectoral Phillips curves. We provide evidence that Phillips curves shifted up and steepened across advanced economies, and that differences in the inflation response across sectors imply the relative price of goods has been pro-cyclical this time around rather than a-cyclical as during previous cycles. We show analytically that these three features emerge endogenously in a two-sector new-Keynesian model when we introduce unbalanced recoveries that run against a supply constraint in the goods sector. A calibrated exercise shows that the resulting changes to the output-inflation relation are quantitatively important and improve the model's ability to replicate the inflation surge during this period.
Keywords:
Inflation; Phillips Curves; COVID-19; inflation surge; output-inflation relation; sectoral Phillips curves; inflation response; goods price; Output gap; Business cycles; Economic recession; Global
Cover IMF Working Papers
Too Low for Too Long: Could Extended Periods of Ultra Easy Monetary Policy Have Harmful Effects?
Mr. Etibar Jafarov
and
Enrico Minnella
Extended periods of ultra-easy monetary policy in advanced economies have rekindled debates about the zombification of weak companies and its impact on resource allocation, economic growth, inflation, and financial stability. Using both firm-level and macroeconomic data, we find that recessions are a critical factor in the rapid increase in the number of zombie firms. Expansionary monetary policy can help reduce zombification when interest rates are at the zero lower bound (ZBL), but a too-accommodative monetary policy for extended periods is associated with a higher probability of zombification. Small and medium enterprises are more likely to become zombie firms. This raises concerns about the sustainability of too-easy monetary policy implementation, especially in countries where growth is lackluster. Our findings imply a tradeoff between conducting a countercyclical monetary policy, which also helps contain the increase in the number of zombie firms in cyclical downturns, and using an expansionary monetary policy for long periods, which may lead to a combination of low interest rates, low growth, and high financial vulnerability. Such a tradeoff is not a concern currently when most countries are tightening their monetary policy stance, but policymakers should be mindful of it during future recessions.
Keywords:
Too Low for Too Long; Zombie Firms; Financial Stability; zombie firm; countercyclical monetary policy; monetary policy stance; sectoral zombie share; share of zombie; Economic recession; Output gap; Global financial crisis of 2008-2009; Monetary expansion; Unconventional monetary policies; Global
Cover IMF Staff Country Reports
Republic of Kazakhstan: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
Selected Issues
Keywords:
partner diversification; trend growth; governance vulnerability; trend output growth; CIS economy; Total factor productivity; Business cycles; Budget planning and preparation; Fiscal risks; Global; Europe; Central Asia and the Caucasus
Cover IMF Staff Country Reports
Republic of Kazakhstan: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
This Selected Issues paper on the Republic of Kazakhstan focuses on revisiting trend output growth. Trend growth in Kazakhstan has decreased to 2–3 percent due to declining contributions of labor and total factor productivity (TFP). Coronavirus disease 2019 (COVID-19) may have reduced the long-term trend GDP level, but it is unlikely to have affected trend GDP growth. Structural reforms to reduce the state footprint in the economy, strengthen public and corporate governance, diversify the economy and exports away from extractive sectors, and promote technological change, are critical to increase future trend GDP growth. The monthly trend-cycle decomposition developed in this Selected Issues Paper may help expand the information set available to policymakers when taking base rate policy decisions. COVID-19 has depressed both trend level and growth in the short term through headwinds to labor, capital, and TFP. It could also affect long-term trend growth through the destruction of human capital, but it is too early to assess the statistical significance of this effect. In any case, structural reforms will be needed to increase trend growth. Priorities include reducing the state footprint, strengthening public and corporate governance, and economic and trade diversification. Increasing the share of investment, including foreign direct investment in nonextractive industries should promote R&D, innovation, and higher TFP.
Keywords:
partner diversification; trend growth; governance vulnerability; trend output growth; CIS economy; Total factor productivity; Business cycles; Budget planning and preparation; Fiscal risks; Global; Europe; Central Asia and the Caucasus
Cover IMF Staff Country Reports
Australia: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Australia
International Monetary Fund. Asia and Pacific Dept
Strong health and economic policies allowed for quick economic recovery from initial COVID-19-related lockdowns in 2020. Renewed outbreaks and lockdowns have created setbacks since mid-2021, with disproportionate impacts on some regions, sectors, and workers. Accommodative macroeconomic policies have been instrumental in cushioning the economic impact.
Keywords:
territory government; CPI expenditure weight; economic plan; employment service; monetary policy support; ABS implementation; COVID-19; Housing; Housing prices; Economic recovery; Productivity; Global
Cover IMF Working Papers
After-Effects of the COVID-19 Pandemic: Prospects for Medium-Term Economic Damage
Mr. Philip Barrett
,
Miss Sonali Das
,
Giacomo Magistretti
,
Evgenia Pugacheva
, and
Mr. Philippe Wingender
The COVID-19 pandemic has led to a severe global recession with differential impacts within and across countries. This paper examines the possible persistent effects (scarring) of the pandemic on the economy and the channels through which they may occur. History suggests that deep recessions often leave long-lived scars, particularly to productivity. Importantly, financial instabilities—typically associated with worse scarring—have been largely avoided in the current crisis so far. While medium-term output losses are anticipated to be lower than after the global financial crisis, they are still expected to be substantial. The degree of expected scarring varies across countries, depending on the structure of economies and the size of the policy response. Emerging market and developing economies are expected to suffer more scarring than advanced economies.
Keywords:
output loss; long-lived scar; after-effects of the COVID-19 pandemic; financial crisis recession; recession type; Economic recession; COVID-19; Total factor productivity; Global
Cover IMF Working Papers
Competition, Innovation, and Inclusive Growth
Reda Cherif
and
Fuad Hasanov
We provide an overview of the theories and empricial evidence on the complex relationship among innovation, competition, and inclusive growth. Competition and innovation-led growth are critical to drive productivity gains and support broad-based growth. However, new technologies and trends in market concentration are stifling future innovation while contributing to the marked increase in inequality. Beyond consumer welfare in a narrow market, competition policy should adapt to this new reality by considering the spillover and dynamic effects of market power, especially on firm entry, innovation, and inequality. Innovation policies should tackle not only government failures but also market failures.
Keywords:
Inequality; inclusive growth; competition; market power; innovation; Big Tech; rise of market power; growth policy; firm markup; superstar firm; panel data; Income inequality; Income; Productivity; Sub-Saharan Africa; laggard firm; market concentration; frontier firm; state intervention; firms enter; innovation policy; competition policy; productivity gain