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Europe > Ukraine

You are looking at 1 - 10 of 104 items for :

  • Type: Journal Issue x
  • Energy: Demand and Supply; Prices x
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Cover IMF Working Papers
Designing Expenditure Policy Conditionality in IMF-Supported Programs
Emine Hanedar
and
Zsuzsa Munkacsi
This gap-filling paper provides granular advice on how to design quantitative and structural conditionality of IMF-supported programs in six expenditure policy areas: social assistance, energy subsidies, pension spending, health spending, education spending, and wage bill management. Such granular advice is based on a stocktaking exercise: an analysis of 105 programs approved between 2002 and July 2021 containing a ca. 1400 conditions. Conditions are key to identify outcomes or actions seen as critical for program success or monitoring, and so are essential for financial support countries can receive from the Fund.
Keywords:
IMF-supported programs; conditionality; expenditure policy; social assistance; energy subsidies; pension spending; health spending; education spending; wage bill management; policy conditionality; policy area; IMF working papers; reform plan; E. public health spending; Health care spending; Caribbean; North Africa; Middle East; East Africa; Europe
Cover IMF Staff Country Reports
Germany: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Germany
International Monetary Fund. European Dept.
The 2024 Article IV Consultation highlights that the German economy has begun to recover from the energy-price shock. Gradual economic recovery is expected to continue this year. With wage growth now exceeding inflation, private consumption is expected to drive recovery during 2024. High interest rates have boosted bank profitability, but part of this increase is likely temporary. High interest rates have exposed vulnerabilities in banks’ financing of commercial real estate activity. Risks to growth are broadly balanced, with both positive and negative surprises to consumer and investor sentiment possible. Inflation is expected to slowly fall to around 2 percent as lower wholesale energy prices continue to pass through supply chains and to end-users. Fiscal policy is tight, putting the debt-to-gross domestic product ratio on a downward path, although public investment is also relatively low. In order to stabilize labor supply, the authorities should make it easier for women to work full time. This means expanding access to reliable child- and eldercare services and exploring ways to reduce the effective marginal tax rate on second earners in married couples.
Keywords:
article IV consultation discussion; supervisory authority; currency of Germany; energy-price shock; state's ability; Inflation; Labor markets; Public investment spending; Commercial banks; Global
Cover IMF Working Papers
Greenflation or Greensulation? The Case of Fuel Excise Taxes and Oil Price Pass-through
JaeBin Ahn
Can a carbon tax reduce inflation volatility? Focusing on fuel excise taxes, this paper provides systematic evidence on their role as a shock absorber that helps mitigating the impact of global oil price shocks on domestic inflation. Exploiting substantial variation in fuel tax rates across 28 OECD countries over the period from 2014 to 2021, a simple idea that a per-unit, specific tax takes up a portion of the product price immune to cost shocks goes a long way toward explaining heterogeneity in the degree of oil price pass-through into domestic inflation across countries. A back-of-the-envelope calculation from the estimation results supports its quantitative significance---differences in fuel tax rates could explain about 30% of the variation in annual headline CPI inflation rates observed between the U.S. and U.K. during the 2021 inflation surge.
Keywords:
Fuel excise tax; gasoline tax; diesel tax; oil price pass-through; retail fuel price; inflation; greenflation; greensulation; inflation volatility; headline CPI inflation rates; oil price shock; back-of-the-envelope calculation; Oil prices; Fuel tax; Fuel prices; Excises; Global
Cover IMF Working Papers
Germany’s Foreign Direct Investment in Times of Geopolitical Fragmentation
Kevin Fletcher
,
Veronika Grimm
,
Thilo Kroeger
,
Aiko Mineshima
,
Christian Ochsner
,
Andrea F. Presbitero
,
Paul Schmidt-Engelbertz
, and
Jing Zhou
Global geopolitical tensions have risen in recent years, and European energy prices have been volatile following Russia’s invasion of Ukraine. Some analysts have suggested that these shifting conditions may significantly affect FDI both to and from Germany. To shed light on this issue and other factors affecting German FDI, we leverage two detailed and complementary FDI datasets to explore recent trends in German FDI and how it is affected by geopolitical tensions and energy prices. In doing so, we also develop a new measure of geopolitical alignment. Our main findings include the following: (i) the post-pandemic recovery in Germany’s inward and outward FDI has been weaker than in the US or the rest of the European Union (EU27) as a whole; (ii) Germany’s outward FDI linkages with geopolitically distant countries have been weakening since the Global Financial Crisis; (iii) the relationship between Germany’s outward FDI and geopolitical distance has become more pronounced over the last six years; (iv) Germany’s outward FDI to China-Russia bloc countries is more sensitive to recent geopolitical developments compared with that to US-bloc countries; and (v) Germany’s outward FDI in energy-intensive sectors decreases as destination countries’ energy costs increase, but energy costs do not appear to have a statistically significant effect on outward FDI in non-energy intensive sectors.
Keywords:
Germany; foreign direct investment; geopolitical fragmentation; Annex I. FDI stock; outward FDI; FDI dataset; FDI activity; Germany's FDI; Fuel prices; Energy prices; Imports; Global
Cover IMF Working Papers
Understanding Inflation Dynamics: The Role of Global Shocks in CEMAC
Johanna Tiedemann
,
Olivier Bizimana
,
Lluis Dalmau
, and
Martin Ambassa
As in the rest of the world, inflation in CEMAC surged more quickly and persistently than expected during the 2021–23 period. This paper examines the drivers of inflation dynamics and the contribution of global shocks to inflation persistence in CEMAC. We use a Phillips curve framework combined with the local projections method. Our results confirm the prominent role of global factors in driving inflation dynamics. Global commodity food and oil price fluctuations, and shipping costs are the main factors explaining the large variability in headline inflation. Further, we find that global price shocks have sizable and persistent effects on domestic headline inflation, with differences in the magnitude and speed of pass-through. The pass-through from commodity food price fluctuations to headline inflation is higher and more persistent than that of other global price shocks, reflecting the large share of food in the consumption baskets, which makes inflation more vulnerable to direct effects of international food shocks, but also larger second-round effects.
Keywords:
Inflation; underlying inflation; Phillips curve; commodity prices; shipping costs; CEMAC; inflation dynamics; price shock; commodity food price fluctuation; baseline result; inflation expectation; inflation development; Oil prices; Commodity price shocks; Food prices; Global
Cover IMF Working Papers
Who Pays the Bill? Distributional and Fiscal Consequences of Elevated Inflation in Thailand
Piyaporn Chote
,
Corinne C Delechat
,
Thanaphol Kongphalee
,
Vatsal Nahata
,
Mouhamadou Sy
,
Pym Manopimoke
, and
Tamon Yungvichit
This paper analyzes the distributional impacts of inflation in Thailand. For that aim, the paper uses rich micro-survey data on 46,000 Thai households to study the effect of the recent elevated inflation on poverty, its distributional effects on different income levels, and the fiscal cost to compensate households from real income losses. To study the multidimensional impact of inflation, the paper also studies how inflation differentially affects households through the consumption, income, and wealth channel. The analysis shows that under a baseline scenario, poverty in Thailand could increase by 1.3 percentage points—about 900,000 people—in the absence of government intervention. Targeted fiscal support to only compensate households that are below the national poverty line from rising inflation amount to 0.05 percent of GDP. However, fiscal support to compensate relatively rich households, defined as those above the median of the income distribution, amount to 1.4 percent of GDP. Moreover, due to high levels of debt, richer households benefit from inflation relative to poorer households. Finally, the paper also delves into policy responses undertaken by the Thai government and Asian and emerging economies to mitigate elevated inflation.
Keywords:
Inflation; poverty; inflation dynamics; income effect; fiscal cost.; elevated inflation; inflation component; rising prices; energy price; Income; Energy prices; Consumption; Food prices; Global; Asia and Pacific
Cover IMF Staff Country Reports
Malta: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Malta
International Monetary Fund. European Dept.
The 2023 Article IV Consultation highlights that Malta has experienced an impressive recovery from the pandemic and demonstrated resilience to shocks resulting from Russia’s invasion of Ukraine. The challenge for the medium term is to ensure a robust policy framework to foster strong, socially- and environmentally-sustainable, and inclusive growth. Risks to the outlook are tilted to the downside in part due to spillover effects from a possible escalation of Russia’s war in Ukraine or of the Israel–Gaza conflict, as well as a deeper-than-expected economic downturn in Europe. Domestically, wage and inflationary pressures could be higher and more persistent. On the upside, lower-than-expected commodity prices would help decelerate inflation, ease fiscal pressures, and boost growth. Key priorities include containing demand pressures by accelerating fiscal consolidation, exiting gradually from the current fixed energy price policy while protecting vulnerable groups, maintaining financial stability, and boosting structural reform efforts. Boosting productivity will be imperative to achieve strong, socially-and environmentally sustainable, and inclusive growth.
Keywords:
IMF staff calculation; government energy policy; SDDS preparation; lower-than-expected commodity price; anti-corruption framework; Energy prices; Inflation; External sector statistics; Global; Europe
Cover IMF Working Papers
Geoeconomic Fragmentation: What’s at Stake for the EU
Chikako Baba
,
Ting Lan
,
Ms. Aiko Mineshima
,
Florian Misch
,
Magali Pinat
,
Asghar Shahmoradi
,
Jiaxiong Yao
, and
Ms. Rachel van Elkan
Geoeconomic fragmentation (GEF) is becoming entrenched worldwide, and the European Union (EU) is not immune to its effects. This paper takes stock of GEF policies impinging on—and adopted by—the EU and considers how exposed the EU is through trade, financial and technological channels. Motivated by current policies adopted by other countries, the paper then simulates how various measures—raising costs of trade and technology transfer and fossil fuel prices, and imposition of sectoral subsidies—would affect the EU economy. Due to its high-degree of openness, the EU is found to be exposed to GEF through multiple channels, with simulated losses that differ significantly across scenarios. From a welfare perspective, this suggests the need for a cautious approach to GEF policies. The EU’s best defence against GEF is to strengthen the Single Market while advocating for a multilateral rules-based trading system.
Keywords:
Geoeconomic fragmentation; cross-border restrictions; trade; innovation; multinational production; energy; European Union; Single Market; EU economy; EU integration; EU foreign direct investment linkage; EU State aid; Manufacturing; Foreign direct investment; Fuel prices; Comparative advantage; Exports; Global
Cover Regional Economic Outlook, Europe, November 2023
Regional Economic Outlook, Europe, November 2023
Restoring Price Stability and Securing Strong and Green Growth
International Monetary Fund. European Dept.

Abstract

Europe is at a turning point. After last year’s crippling energy price shock caused by Russia’s invasion of Ukraine, Europe faces the difficult task of restoring price stability now while securing strong and green growth in the medium term. Economic activity has started to cool and inflation to fall as a result of monetary policy action, phasing-out supply shocks, and falling energy prices. Sustained wage growth could, however, delay achieving price stability by 2025. Failing to tackle inflation now will risk additional growth damage in a world exposed to structural shocks from fragmentation and climate change. These global headwinds add to Europe’s long-standing productivity and convergence problems. To lift Europe’s potential for strong and green growth, countries need to remove obstacles to economic dynamism and upgrade infrastructure. This will strengthen business-friendly conditions and investment. Cooperation at the European level and with international partners will position Europe as a leader in the climate transition and support economic stability across the continent.

Keywords:
inflation; growth; monetary policy; labor; headline inflation; core inflation; coverage ratio; IMF staff calculation; inflation expectation; capitalization rate; Emerging and frontier financial markets; Central bank policy rate; Energy prices; Labor markets; Europe; Global
Cover IMF Working Papers
Demand vs. Supply Decomposition of Inflation: Cross-Country Evidence with Applications
Melih Firat
and
Otso Hao
What are the contributions of demand and supply factors to inflation? To address this question, we follow Shapiro (2022) and construct quarterly demand-driven and supply-driven inflation series for 32 countries utilizing sectoral Personal Consumption Expenditures (PCE) data. We highlight global trends and country-specific differences in inflation decompositions during critical periods such as the great financial crisis of 2008 and the recent inflation surge since 2021. Validating our inflation series, we find that supply-driven inflation is more reactive to oil shocks and supply chain pressures, while demand-driven inflation displays a more pronounced response to monetary policy shocks. Our results also suggest a steeper Phillips curve when inflation is demand-driven, holding significant implications for effective policy design.
Keywords:
Inflation decomposition; demand vs supply; Phillips curve; monetary policy; supply chain pressures; supply decomposition of inflation; demand-driven inflation; supply-driven inflation; decomposition analysis; inflation decomposition methodology; Inflation; Supply shocks; Oil production; Output gap; Oil prices; Global; Asia and Pacific; Europe