Ruud A. de Mooij, Dinar Prihardini, and Mr. Emil Stavrev
Luxembourg receives ample investment from multinational corporations, in part due to some attractive features in its international tax rules. Around 95 percent of these foreign investments pass through Luxembourg via companies performing holding and/or intra-group financing activities. While their contribution to Luxembourg’s economy is modest relative to their large overall balance sheets, they still generate around 3 percent of GDP in tax revenue, create almost 4500 direct jobs, and spend almost 3 percent of GDP on salaries and purchases of business services. Ongoing changes in the international corporate tax framework pose risks to these economic contributions, which this paper attempts to quantify. It also discusses options for reforms in Luxembourg’s tax system that could help offset adverse revenue and economic effects.
In this paper we analyze the dynamics among past major pandemics, economic growth, inequality, and social unrest. We provide evidence that past major pandemics, even though much smaller in scale than COVID-19, have led to a significant increase in social unrest by reducing output and increasing inequality. We also find that higher social unrest, in turn, is associated with lower ourput and higher inequality, pointing to a vicious cycle. Our results suggest that without policy measures, the COVID-19 pandemic will likely increase inequality, trigger social unrest, and lower future output in the years to come.
This paper proposes that the Executive Board approve the disbursement of a second 6-month tranche of CCRT debt service relief to 28 of the 29 members, covering the period October 14, 2020 through April 13, 2021, given staff’s assessment that sufficient financial resources are available.2 In this context, the paper also provides brief updates for each beneficiary country on its policy responses to the pandemic and staff’s assessment of these policies and the use of resources freed up by debt service relief. It also provides an update on the finances of the CCRT and the fundraising efforts to secure adequate resources for grant assistance in the future. Based on grant pledges to date, resources are not sufficient to extend CCRT relief beyond the proposed second sixth-month period.
Giancarlo Corsetti, Joao B. Duarte, and Samuel Mann
We study the transmission of monetary shocks across euro-area countries using a dynamic factor model and high-frequency identification. We develop a methodology to assess the degree of heterogeneity, which we find to be low in financial variables and output, but significant in consumption, consumer prices, and variables related to local housing and labor markets. Building a small open economy model featuring a housing sector and calibrating it to Spain, we show that varying the share of adjustable-rate mortgages and loan-to-value ratios explains up to one-third of the cross-country heterogeneity in the responses of output and private consumption.
This Technical Assistance (TA) report on Georgia is on Residential Property Price Indices (RPPI) Mission. The contents of this report constitute technical advice provided by the IMF staff to the authorities of Georgia in response to their request for TA. The Second Phase of the G-20 Data Gaps Initiative and guidance on Financial Soundness Indicators identify RPPI as a critical ingredient of financial stability policy analysis and macroprudential measures. National Statistics Office of Georgia (Geostat) is aiming at compiling a quarterly RPPI covering new flats and new detached houses for the capital city, Tbilisi. The mission implemented successfully the programs developed in R based on the IMF’s draft for the RPPI Practical Compilation Guide with the available data. The mission provided some guidance on the use of scanner data (SD) on the consumer price index (CPI) compilation. As per request of the Geostat Director, the mission also addressed the use of SD. The introduction of SD should be made on a stepwise approach to avoid huge impacts on the CPI and to make it more manageable, reliable, and safe.
Katharina Bergant, Michael Fidora, and Martin Schmitz
We analyse euro area investors' portfolio rebalancing during the ECB's Asset Purchase
Programme at the security level. Our empirical analysis shows that euro area investors (in
particular investment funds and households) actively rebalanced away from securities
targeted under the Public Sector Purchase Programme and other euro-denominated debt
securities, towards foreign debt instruments, including `closest substitutes', i.e. certain
sovereign debt securities issued by non-euro area advanced countries. This rebalancing
was particularly strong during the first six quarters of the programme. Our analysis also
reveals marked differences across sectors as well as country groups within the euro area,
suggesting that quantitative easing has induced heterogeneous portfolio shifts.