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Vu Chau
,
Marina Conesa Martinez
,
Taehoon Kim
, and
John A Spray
We study the inflationary impacts of pandemic lockdown shocks and fiscal and monetary stimulus during 2020-2022 using a novel harmonized dataset of sectoral producer price inflation and input-output linkages for more than 1000 sectors in 53 countries. The inflationary impact of shocks is identified via a Bartik shift-share design, where shares reflect the heterogeneous sectoral exposure to shocks and are derived from a macroeconomic model of international production network. We find that pandemic lockdowns, and subsequent reopening policies, were the most dominant driver of global inflation in this period, especially through their impact on aggregate demand. We provide a decomposition of lockdown shock by sources, and find that between 20-30 percent of the demand effect of lockdown/reopening is due to spillover from abroad. Finally, while fiscal and monetary policies played an important role in preventing deflation in 2020, their effects diminished in the recovery years.
Miss Sonali Das
and
Mr. Volodymyr Tulin
This paper studies private investment in India against the backdrop of a significant investment decline over the past decade. We analyze the potential causes of weaker investment at the firm level, using both firm-level financial statements and a novel dataset on firms’ investment project decisions, and find that financial frictions have played a role in the slowdown. Firms with higher financial leverage invest less, as do firms with lower earnings relative to their interest expenses. Consistent with the notion of credit constraints leading to pro-cyclical investment, we also find that firms with higher leverage are (i) less likely to undertake new investment projects, (ii) less likely to complete investment projects once begun, and (iii) undertake shorter-term investment projects.
Mr. Jaromir Benes
,
Kevin Clinton
,
Asish George
,
Joice John
,
Mr. Ondrej Kamenik
,
Mr. Douglas Laxton
,
Pratik Mitra
,
G.V. Nadhanael
,
Hou Wang
, and
Fan Zhang
India formally adopted flexible inflation targeting (FIT) in June 2016 to place price stability, defined in terms of a target CPI inflation, as the primary objective of monetary policy. In this context, the paper draws on Indian macroeconomic developments since 2000 and the experience of other countries that adopted FIT to bring out insights on how credible policy with an emphasis on a strong nominal anchor can reduce the impact of supply shocks and improve macroeconomic stability. For illustrating the key issues given the unique structural characteristics of India and the policy options under an FIT framework, the paper describes an analytical framework using the core quarterly projection model (QPM). Simulations of the QPM are carried out to illustrate the monetary policy responses under different types of uncertainty and to bring out the importance of gaining credibility for improving monetary policy efficacy.
Ms. Natalia T. Tamirisa
,
Mr. Prakash Loungani
, and
Mr. Herman O. Stekler
We document information rigidity in forecasts for real GDP growth in 46 countries over the past two decades. We investigate: (i) if rigidities are lower around turning points in the economy, such as in times of recessions and crises; (ii) if rigidities differ across countries, particularly between advanced countries and emerging markets; and (iii) how quickly forecasters incorporate news about growth in other countries into their growth forecasts, with a focus on how advanced countries‘ growth forecasts incorporate news about emerging market growth and vice versa.
International Monetary Fund. External Relations Dept.
Murilo Portugal, Agustin Carstens, Kyrgyz Republic, HIPC, central Asia, Indonesian debt, Saudi Arabian economy, Peter Kenen, European Central Bank, ECB, Danish economy, flexicurity,Burundi's economy, aid volatility, Indian and China, Doing Business.