## reo-oct20-chapter2-technicalannex

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---

### Annex 2.1. Impact of Crises on Tourism Activity in MCD Countries — Severe 6-month Disruption Scenario
- Methodology
  - Data sources: World Tourism Organization and World Travel and Tourism Council.
  - Follows IMF Research Department’s Special Series on COVID-19 Note: A Simple Guide to Estimating the Impact of COVID-19 on Travel and Hospitality Activity.
  - Exposure measured by contribution to value added (percent of GDP) and employment (share of total employment).
  - Calibrates disruption using high-frequency observations: "The average (monthly) decline in tourism receipts from April to June for MCD tourism-dependent countries was around 77 percent."
  - Scenario assumptions:
    - Ꞷ (average percent decline in tourism activity from April to June due to COVID-19) = 75 percent.
    - D (common duration of disruption) = 0.5 = 6/12 months.
  - Country-specific impact formula:
    - Ii = Ti,Pre-COVID-19 x Ꞷ x D
      - Where Ti,Pre-COVID-19 is the country-specific level of pre-COVID-19 travel and tourism exposure (in percent of GDP or as a share of total employment).
- Interpretation
  - Impact Ii is reported as a downward deviation from the baseline GDP in percentage points based on direct and total contribution of travel and tourism activities to GDP.
  - Note: "These estimates do not consider the potential mitigating effect from residents substituting foreign travel for domestic tourism."

- Key country-level 2020 estimated impacts from a 6-month, 75 percent disruption (selected figures)
  - Georgia
    - Direct (GDP): 9.1
    - Total (GDP): 30.5
    - Direct (Employment): 7.7
    - Total (Employment): 26.6
    - 2020 GDP impact range: -3.4, -11.4
    - 2020 Employment impact range: -2.9, -10.0
  - Lebanon
    - Direct (GDP): 7.1
    - Total (GDP): 19.6
    - Direct (Employment): 6.7
    - Total (Employment): 18.8
    - 2020 GDP impact range: -2.6, -7.3
    - 2020 Employment impact range: -2.5, -7.0
  - Jordan
    - Direct (GDP): 5.5
    - Total (GDP): 20.5
    - Direct (Employment): 7.7
    - Total (Employment): 20.5
    - 2020 GDP impact range: -2.1, -7.7
    - 2020 Employment impact range: -2.9, -7.7
  - Qatar
    - Direct (GDP): 3.1
    - Total (GDP): 9.4
    - Direct (Employment): 5.0
    - Total (Employment): 9.0
    - 2020 GDP impact range: -1.2, -3.5
    - 2020 Employment impact range: -1.9, -3.4
  - Bahrain
    - Direct (GDP): 4.2
    - Total (GDP): 9.8
    - Direct (Employment): 3.9
    - Total (Employment): 9.4
    - 2020 GDP impact range: -1.6, -3.7
    - 2020 Employment impact range: -1.5, -3.5
  - Morocco
    - Direct (GDP): 8.1
    - Total (GDP): 18.5
    - Direct (Employment): 7.1
    - Total (Employment): 16.3
    - 2020 GDP impact range: -3.1, -6.9
    - 2020 Employment impact range: -2.7, -6.1
  - Tunisia
    - Direct (GDP): 7.0
    - Total (GDP): 14.4
    - Direct (Employment): 6.5
    - Total (Employment): 13.2
    - 2020 GDP impact range: -2.6, -5.4
    - 2020 Employment impact range: -2.4, -5.0
  - Egypt
    - Direct (GDP): 5.4
    - Total (GDP): 11.0
    - Direct (Employment): 3.9
    - Total (Employment): 8.8
    - 2020 GDP impact range: -2.0, -4.1
    - 2020 Employment impact range: -1.4, -3.3
  - MCD average
    - Direct (GDP): 5.2
    - Total (GDP): 14.4
    - Direct (Employment): 5.1
    - Total (Employment): 13.2
    - 2020 GDP impact range: -2.0, -5.4
    - 2020 Employment impact range: -1.9, -4.9
  - MENAP oil exporters average
    - Direct (GDP): 4.1
    - Total (GDP): 10.0
    - Direct (Employment): 4.6
    - Total (Employment): 9.3
    - 2020 GDP impact range: -1.5, -3.8
    - 2020 Employment impact range: -1.7, -3.5
  - MENAP oil importers average
    - Direct (GDP): 6.6
    - Total (GDP): 16.8
    - Direct (Employment): 6.4
    - Total (Employment): 15.5
    - 2020 GDP impact range: -2.5, -6.3
    - 2020 Employment impact range: -2.4, -5.8
  - CCA oil exporters average
    - Direct (GDP): 4.4
    - Total (GDP): 15.4
    - Direct (Employment): 4.0
    - Total (Employment): 14.1
    - 2020 GDP impact range: -1.7, -5.8
    - 2020 Employment impact range: -1.5, -5.3
  - CCA oil importers average
    - Direct (GDP): 5.0
    - Total (GDP): 16.9
    - Direct (Employment): 4.3
    - Total (Employment): 15.0
    - 2020 GDP impact range: -1.9, -6.4
    - 2020 Employment impact range: -1.6, -5.6

- Notes on measurement
  - "Travel and Tourism is measured as the direct and indirect contribution of tourism to GDP (or employment) from the World Travel and Tourism Council."
  - Direct impact: GDP (employment) generated by industries that deal directly with tourists (hotels, travel agents, airlines, other passenger transport services, and activities of restaurant and leisure industries).
  - Indirect impact: impacts generated by intermediate consumption of producers in contact with visitors plus induced impacts.

### Annex 2.1 — Event Study of Past Crises on Inbound Tourism Expenditures
- Approach
  - Event study covering global financial crisis, the Arab Uprisings, and the 2014-15 oil price shock.
  - Inbound tourism expenditures normalized to 100 at the time of each shock.
- Findings
  - Egypt and Tunisia: tourism expenditures "remained significantly below 100 for a protracted period (greater than 5 years) following the global financial crisis and Arab Uprisings."
  - 2014-15 oil shock: tourism expenditures dipped below 100 for Egypt, Jordan and Morocco; "The contraction dissipated two years following the shock."
  - Overall: "The global financial crisis and the Arab Uprisings had on average a deeper and more lasting impact on tourism than the 2014-15 oil shock."
- Additional notes
  - Event analyses for 9/11 and MERS (2012) were conducted but "results were not reported because they did not have significant impact on inbound tourism expenditures."

### Annex Table 2.4.1 — Estimations of Remittances, Poverty and Inequality (Regression Results and Instrumentation)
- Model types and sample sizes
  - Models presented include: OLS-FE, First stage, IV-GMM, OLS, OLS, First stage, IV, IV.
  - Observations by column: 265; 212; 212; 412; 412; 412; 412; 412
  - Countries by column: 17; 14; 14; 80; 80; 80; 80; 80
- Selected coefficient estimates (standard errors in parentheses where provided)
  - GDP per capita in the sending country:
    - Column (1): 2.530*** (0.5360)
    - Column (2): 0.442*** (0.0675)
    - Column (3): 3.016*** (0.6257)
  - GDP per capita in the receiving country:
    - Column (1): 0.837 (0.5733)
    - Column (2): 1.838 (1.3035)
    - Column (3): -1.465*** (0.0626)
    - Column (4): 0.081*** (0.0139)
    - Column (5): -1.400*** (0.0864)
    - Column (6): -0.115*** (0.0181)
  - Per capita remittances:
    - Column (1): -0.054 (0.0339)
    - Column (2): -0.0013 (0.0064)
    - Column (3): -0.141*
    - Column (4): -0.029** (0.0064?)
    - Column (5): -0.0761 (0.0123)  (placement in source ambiguous)
  - Gini coefficient:
    - Column (7): 3.783*** (0.2601)
    - Column (8): 3.779*** (0.2621)
  - Inflation and Broad money:
    - Inflation: (0.0002) (0.0001) reported twice
    - Broad money: (0.0002) (0.0004) reported twice
  - Financial development (M2/GDP):
    - 0.444 (0.3041)
    - -0.005 (0.0294)
    - 0.340*** (0.1164)
  - FDI per capita:
    - 0.001* (0.00001)
    - -0.00004* (0.00001)
  - Nominal effective exchange rate:
    - -0.17 (0.1405)
    - 0.062*** (0.0195)
    - -0.046 (0.0885)
  - Intercepts:
    - 12.855*** (0.796)
    - -0.202 (0.156)
    - 23.076*** (2.122)
    - 11.415*** (1.387)
    - 0.560* (0.284)
- Instrumentation details
  - Instruments for GDP per capita of receiving countries:
    - 2-year lag of private investment ratio: 0.052** (0.0206)
    - Terms of trade index: 0.054 (0.0397)
  - Instruments for remittances per capita (sending countries):
    - GNI per capita: 1.412*** (0.2057)
    - Unemployment rate: 0.0416 (0.0279)
    - Labor force participation rate: -0.0102 (0.0102)
    - Real interest rate: -0.063** (0.02661)
    - Real exchange rate (LCU/$): -0.247*** (0.0471)
  - Notes on weighting and instruments:
    - GDP per capita in sending countries is the weighted sum of the levels of GDP per capita of each of the sending countries with weights being the bilateral migrants’ stock shares drawn from Parsons et al. (2007).
    - All of sending countries instrument variables for remittances per capita in the column 6 first stage equation are weighted by the bilateral remittances flows estimates from Azizi (2019).
- Diagnostics and fixed effects
  - F-statistics/Wald test reported: 380.5; 15.09; 28.76; 374.8; 15.06
  - R2 by column: 0.596; 0.924; 0.851; 0.737; 0.157; 0.262; 0.733; 0.051
  - Shea R2: 0.051
  - Fisher statistic of the instrumentation equation: 5.179
  - Hansen p-value: 0.288
  - Country fixed effects: Yes
  - Years fixed effects: Yes
- Estimation notes
  - Robust standard errors in parentheses.
  - All variables are expressed in log terms except unemployment rate, labor force participation, real interest rate and yearly dummies which are included in some specifications.
  - Significance codes: * p < 0.1, ** p < 0.05, *** p < 0.01.

### Annex 2.5 — Scarring Duration Estimations: Methodology and Regression Results
- Data and sample
  - 30 Middle East and Central Asia countries over 2000–2019, plus a dataset including 125 other emerging markets and developing countries.
  - Data sources: World Economic Outlook database, World Development Indicators, World Tourism Organization, national authorities; IMF staff calculations.
- Purpose and empirical approach
  - Analyze effect of the global financial crisis on subsequent GDP levels using panel regressions:
    - Δy_{i,t+5} = α + β X_{i,t−1} + δ Z_{i,t−1} + ε_{i,t}
    - Dur_i = α + β X_{i,t−1} + δ Z_{i,t−1} + ε_{i,t}
  - t is defined to be 2009.
  - Δy_{i,t+5} = difference between GDP level of country i 5 years after (2014), and the level in 2014 implied by trend estimated using GDP growth during five years before 2009.
  - Dur_i = number of years it takes for GDP level of country i to reach/surpass level implied by its pre-crisis trend.
  - X_{i,t−1} (initial conditions at end-2008) includes: current account balance (% of GDP); fiscal balance (% of GDP); trade openness (X+M as % of GDP); debt to GDP ratio; commodities exports as % of total exports; unemployment rate; remittances to GDP; percent of population below $1.90 a day (2011 PPP); and tourism arrivals.
  - Z_{i,t−1} includes controls: dummy for fragile/conflict-affected states; type of monetary regime; average long-run growth rate; and GDP per capita.
  - Coefficients estimated using the global financial crisis (Annex Table 2.5.1) are used to generate fitted values for the current crisis with t set at 2020; data as of end-2019 used for X_{i,end2019} and Z_{i,end2019}.
- Selected regression coefficients from Annex Table 2.5.1 (Level 5 years and Duration; standard errors in parentheses)
  - Current Account Balance:
    - (1) Level 5 years: 0.843* (0.453)
    - (2) Duration: -0.0609* (0.0344)
    - (3) Level 5 years: 0.828* (0.443)
    - (4) Duration: -0.0511 (0.0315)
    - (5) Level 5 years: 1.238*** (0.459)
    - (6) Duration: -0.00161 (0.0588)
    - (7) Level 5 years: -0.220 (0.934)
    - (8) Duration: 0.133 (0.145)
  - Fiscal Balance:
    - (1) Level 5 years: 0.768 (0.467)
    - (2) Duration: -0.201** (0.0876)
    - (3) Level 5 years: 0.759 (0.465)
    - (4) Duration: -0.201** (0.0862)
    - (5) Level 5 years: 1.517* (0.869)
    - (6) Duration: -0.235** (0.113)
    - (7) Level 5 years: 1.100* (0.647)
    - (8) Duration: -0.490*** (0.129)
  - Openness (X+M/GDP):
    - (1) Level 5 years: -0.0140 (0.0433)
    - (2) Duration: 0.0251** (0.0118)
    - (3) Level 5 years: -0.00571 (0.0459)
    - (4) Duration: 0.0267** (0.0120)
    - (5) Level 5 years: 0.00514 (0.0623)
    - (6) Duration: 0.0181 (0.0132)
    - (7) Level 5 years: -0.0763 (0.0712)
    - (8) Duration: 0.0289* (0.0160)
  - Debt to GDP:
    - (1) Level 5 years: 0.127 (0.185)
    - (2) Duration: -0.0236 (0.0272)
    - (3) Level 5 years: 0.115 (0.187)
    - (4) Duration: -0.0216 (0.0293)
    - (5) Level 5 years: 0.757 (0.567)
    - (6) Duration: -0.00277 (0.0713)
    - (7) Level 5 years: 0.131 (0.947)
    - (8) Duration: 0.0199 (0.0940)
  - Commodities Dependence:
    - (1) Level 5 years: -0.000907* (0.000529)
    - (2) Duration: 0.000144 (9.48e–05)
    - (3) Level 5 years: -0.000863 (0.000571)
    - (4) Duration: 0.000127 (9.59e–05)
    - (5) Level 5 years: -0.000948* (0.000520)
    - (6) Duration: 0.000211** (0.000100)
    - (7) Level 5 years: 0.00105 (0.00251)
    - (8) Duration: -0.000379 (0.000253)
  - Unemployment Rate:
    - (1) Level 5 years: -0.572 (0.393)
    - (2) Duration: 0.293** (0.122)
    - (3) Level 5 years: -0.515 (0.399)
    - (4) Duration: 0.293** (0.120)
    - (5) Level 5 years: -0.813* (0.413)
    - (6) Duration: 0.371*** (0.131)
    - (7) Level 5 years: -0.755 (0.995)
    - (8) Duration: 0.130 (0.182)
  - Remittances to GDP (columns 5/6)
    - Level 5 years: -3.109 (2.100)
    - Duration: 0.370 (0.378)
  - Poverty (columns 5/6)
    - Level 5 years: -1.310 (1.838)
    - Duration: 0.217 (0.356)
  - Tourism Arrivals (columns 5/6)
    - Level 5 years: 0.165 (4.585)
    - Duration: 1.073 (0.705)
- Model diagnostics and sample sizes
  - Observations by column: 126; 127; 126; 127; 103; 103; 75; 76
  - R–squared by column: 0.341; 0.316; 0.366; 0.334; 0.418; 0.391; 0.286; 0.382
- Notes
  - Robust standard errors are in parentheses.
  - Significance codes: * p < 0.1; ** p < 0.05; *** p < 0.01.

*Sources: World Tourism Organization; World Travel and Tourism Council; World Development Indicators; national authorities; World Economic Outlook database; and IMF staff calculations.*

### Section 1

### Annex 2.1. Impact of Crises on Tourism Activity in MCD Countries

### Impact of a Severe 6-month Disruption to Tourism Activity
- Methodology
  - Uses data from the World Tourism Organization and World Travel and Tourism Council and follows the IMF Research Department’s Special Series on COVID-19 Note: A Simple Guide to Estimating the Impact of COVID-19 on Travel and Hospitality Activity.
  - Starts with country-specific travel and tourism exposure measured by contribution to value added (percent of GDP) and employment (share of total employment).
  - Calibrates the size of the potential disruption based on observed high-frequency data: "The average (monthly) decline in tourism receipts from April to June for MCD tourism-dependent countries was around 77 percent."
  - Scenario assumptions used in calculations:
    - Ꞷ (average percent decline in tourism activity from April to June due to COVID-19) is assumed at 75 percent.
    - D (common duration of disruption) is assumed at 0.5 = 6/12 months.
  - Country-specific impact formula:
    - Ii = Ti,Pre-COVID-19 x Ꞷ x D
      - Where Ti,Pre-COVID-19 is the country-specific level of pre-COVID-19 travel and tourism exposure (in percent of GDP or as a share of total employment).
- Interpretation
  - The impact Ii is reported as a downward deviation from the baseline GDP in percentage points based on direct and total contribution of travel and tourism activities to GDP.
  - Note: "These estimates do not consider the potential mitigating effect from residents substituting foreign travel for domestic tourism."

### Key country-level 2020 estimated impacts from a 6-month, 75 percent disruption (Annex Table 2.1.1 summary)
- Table columns: 2019 Travel and Tourism Contribution to GDP (Direct, Total); Employment (Direct, Total); 2020 Forecasted Impact of a 6-months 75 percent Disruption on GDP and Employment (ranges between direct and total contribution).
- Selected country figures (preserve values exactly):
  - Georgia
    - Direct (GDP): 9.1
    - Total (GDP): 30.5
    - Direct (Employment): 7.7
    - Total (Employment): 26.6
    - 2020 GDP impact range: -3.4, -11.4
    - 2020 Employment impact range: -2.9, -10.0
  - Lebanon
    - Direct (GDP): 7.1
    - Total (GDP): 19.6
    - Direct (Employment): 6.7
    - Total (Employment): 18.8
    - 2020 GDP impact range: -2.6, -7.3
    - 2020 Employment impact range: -2.5, -7.0
  - Jordan
    - Direct (GDP): 5.5
    - Total (GDP): 20.5
    - Direct (Employment): 7.7
    - Total (Employment): 20.5
    - 2020 GDP impact range: -2.1, -7.7
    - 2020 Employment impact range: -2.9, -7.7
  - Qatar
    - Direct (GDP): 3.1
    - Total (GDP): 9.4
    - Direct (Employment): 5.0
    - Total (Employment): 9.0
    - 2020 GDP impact range: -1.2, -3.5
    - 2020 Employment impact range: -1.9, -3.4
  - Bahrain
    - Direct (GDP): 4.2
    - Total (GDP): 9.8
    - Direct (Employment): 3.9
    - Total (Employment): 9.4
    - 2020 GDP impact range: -1.6, -3.7
    - 2020 Employment impact range: -1.5, -3.5
  - Morocco
    - Direct (GDP): 8.1
    - Total (GDP): 18.5
    - Direct (Employment): 7.1
    - Total (Employment): 16.3
    - 2020 GDP impact range: -3.1, -6.9
    - 2020 Employment impact range: -2.7, -6.1
  - Tunisia
    - Direct (GDP): 7.0
    - Total (GDP): 14.4
    - Direct (Employment): 6.5
    - Total (Employment): 13.2
    - 2020 GDP impact range: -2.6, -5.4
    - 2020 Employment impact range: -2.4, -5.0
  - Egypt
    - Direct (GDP): 5.4
    - Total (GDP): 11.0
    - Direct (Employment): 3.9
    - Total (Employment): 8.8
    - 2020 GDP impact range: -2.0, -4.1
    - 2020 Employment impact range: -1.4, -3.3
  - MCD average
    - Direct (GDP): 5.2
    - Total (GDP): 14.4
    - Direct (Employment): 5.1
    - Total (Employment): 13.2
    - 2020 GDP impact range: -2.0, -5.4
    - 2020 Employment impact range: -1.9, -4.9
  - MENAP oil exporters average
    - Direct (GDP): 4.1
    - Total (GDP): 10.0
    - Direct (Employment): 4.6
    - Total (Employment): 9.3
    - 2020 GDP impact range: -1.5, -3.8
    - 2020 Employment impact range: -1.7, -3.5
  - MENAP oil importers average
    - Direct (GDP): 6.6
    - Total (GDP): 16.8
    - Direct (Employment): 6.4
    - Total (Employment): 15.5
    - 2020 GDP impact range: -2.5, -6.3
    - 2020 Employment impact range: -2.4, -5.8
  - CCA oil exporters average
    - Direct (GDP): 4.4
    - Total (GDP): 15.4
    - Direct (Employment): 4.0
    - Total (Employment): 14.1
    - 2020 GDP impact range: -1.7, -5.8
    - 2020 Employment impact range: -1.5, -5.3
  - CCA oil importers average
    - Direct (GDP): 5.0
    - Total (GDP): 16.9
    - Direct (Employment): 4.3
    - Total (Employment): 15.0
    - 2020 GDP impact range: -1.9, -6.4
    - 2020 Employment impact range: -1.6, -5.6
- Notes on measurement
  - "Travel and Tourism is measured as the direct and indirect contribution of tourism to GDP (or employment) from the World Travel and Tourism Council."
  - Direct impact: GDP (employment) generated by industries that deal directly with tourists (hotels, travel agents, airlines, other passenger transport services, and activities of restaurant and leisure industries).
  - Indirect impact: impacts generated by intermediate consumption of producers in contact with visitors plus induced impacts.

### Event Study of the Impact of Past Crises on Inbound Tourism Expenditures
- Approach
  - Event study of inbound tourism expenditures for past crises: global financial crisis, the Arab Uprisings, and the 2014-15 oil price shock.
  - The value of inbound tourism expenditures is normalized to 100 at the time of the shock.
- Findings (qualitative and duration)
  - For Egypt and Tunisia, tourism expenditures "remained significantly below 100 for a protracted period (greater than 5 years) following the global financial crisis and Arab Uprisings."
  - For the 2014-15 oil shock:
    - Tourism expenditures dipped below 100 for Egypt, Jordan and Morocco.
    - "The contraction dissipated two years following the shock."
  - Overall: "The global financial crisis and the Arab Uprisings had on average a deeper and more lasting impact on tourism than the 2014-15 oil shock."
- Additional notes
  - Event analysis were also done for the 9/11 attack and the Middle East Respiratory Syndrome (MERS) outbreak of 2012, but "results were not reported because they did not have significant impact on inbound tourism expenditures."

*Sources: World Tourism Organization and World Travel and Tourism Council; Annex Tables and notes as provided in the source document.*

### Section 2

### reo-oct20-chapter2-technicalannex - Section 2

### Annex Table 2.4.1 — Estimations of Remittances, Poverty and Inequality (Regression Results and Instrumentation)
- Model types presented: OLS-FE, First stage, IV-GMM, OLS, OLS, First stage, IV, IV.
- Key coefficient estimates (standard errors in parentheses):
  - GDP per capita in the sending country:
    - Column (1): 2.530*** (0.5360)
    - Column (2): 0.442*** (0.0675)
    - Column (3): 3.016*** (0.6257)
  - GDP per capita in the receiving country:
    - Column (1): 0.837 (0.5733)
    - Column (2): 1.838 (1.3035)
    - Column (3): -1.465*** (0.0626)
    - Column (4): 0.081*** (0.0139)
    - Column (5): -1.400*** (0.0864)
    - Column (6): -0.115*** (0.0181)
  - Per capita remittances:
    - Column (1): -0.054 (0.0339)
    - Column (2): -0.0013 (0.0064)
    - Column (3): -0.141* (no parentheses shown)
    - Column (4): -0.029** (0.0064? — standard error formatting as in source)
    - Column (5): (0.0123) associated with -0.0761 (placement in source ambiguous)
  - Gini coefficient:
    - Column (7): 3.783*** (0.2601)
    - Column (8): 3.779*** (0.2621)
  - Inflation:
    - (0.0002) (0.0001) reported twice
  - Broad money:
    - (0.0002) (0.0004) reported twice
  - Financial development (M2/GDP):
    - 0.444 (0.3041)
    - -0.005 (0.0294)
    - 0.340*** (0.1164)
  - FDI per capita:
    - 0.001* (0.00001)
    - -0.00004* (0.00001)
  - Nominal effective exchange rate:
    - -0.17 (0.1405)
    - 0.062*** (0.0195)
    - -0.046 (0.0885)
  - Intercepts:
    - 12.855*** (0.796)
    - -0.202 (0.156)
    - 23.076*** (2.122)
    - 11.415*** (1.387)
    - 0.560* (0.284)
- Instrumentation details:
  - Instruments for GDP per capita of receiving countries:
    - 2-year lag of private investment ratio: 0.052** (0.0206)
    - Terms of trade index: 0.054 (0.0397)
  - Instruments for remittances per capita (sending countries):
    - GNI per capita: 1.412*** (0.2057)
    - Unemployment rate: 0.0416 (0.0279)
    - Labor force participation rate: -0.0102 (0.0102)
    - Real interest rate: -0.063** (0.02661)
    - Real exchange rate (LCU/$): -0.247*** (0.0471)
  - Notes on weighting and instruments:
    - GDP per capita in sending countries is the weighted sum of the levels of GDP per capita of each of the sending countries with weights being the bilateral migrants’ stock shares drawn from Parsons et al. (2007).
    - All of sending countries instrument variables for remittances per capita in the column 6 first stage equation are weighted by the bilateral remittances flows estimates from Azizi (2019).
- Sample, diagnostics, and fixed effects:
  - Observations by column: 265; 212; 212; 412; 412; 412; 412; 412
  - Countries: 17; 14; 14; 80; 80; 80; 80; 80 (by column grouping in source)
  - F-statistics/Wald test reported: 380.5; 15.09; 28.76; 374.8; 15.06
  - R2 reported by column: 0.596; 0.924; 0.851; 0.737; 0.157; 0.262; 0.733; 0.051
  - Shea R2: 0.051 (reported)
  - Fisher statistic of the instrumentation equation: 5.179
  - Hansen p-value: 0.288
  - Country fixed effects: Yes
  - Years fixed effects: Yes
- Estimation notes:
  - Robust standard error in parentheses.
  - All the variables are expressed in log terms except unemployment rate, labor force participation, real interest rate and yearly dummies which are included in some specifications.
  - Significance codes: * p < 0.1, ** p < 0.05, *** p < 0.01.

### Annex 2.5 — Scarring Duration Estimations: Methodology and Regression Results
- Data and sample:
  - Data for 30 Middle East and Central Asia countries over 2000–2019, plus a dataset that includes 125 other emerging markets and developing countries.
  - Data sources: World Economic Outlook database, World Development Indicators, World Tourism Organization, national authorities; IMF staff calculations.
- Purpose and approach:
  - To analyze the effect of the global financial crisis on subsequent GDP levels, estimating panel regressions:
    - Δy_{i,t+5} = α + β X_{i,t−1} + δ Z_{i,t−1} + ε_{i,t}
    - Dur_i = α + β X_{i,t−1} + δ Z_{i,t−1} + ε_{i,t}
  - t is defined to be 2009.
  - Δy_{i,t+5} is the difference between the GDP level of country i 5 years after (2014), and the level in 2014 implied by a trend estimated using GDP growth during the five years before 2009.
  - Dur_i is the number of years it takes for the GDP level of country i to reach/surpass the level implied by its pre-crisis trend.
  - X_{i,t−1} includes initial conditions at end-2008: current account balance (% of GDP); fiscal balance (% of GDP); trade openness (X+M as % of GDP); debt to GDP ratio; commodities exports as % of total exports; unemployment rate; remittances to GDP; percent of population below $1.90 a day (2011 PPP); and tourism arrivals.
  - Z_{i,t−1} includes controls: dummy for fragile/conflict-affected states; type of monetary regime; average long-run growth rate; and GDP per capita.
  - Coefficients estimated using the global financial crisis (Annex Table 2.5.1) are used to generate fitted values for the current crisis with t set at 2020; data as of end-2019 used for X_{i,end2019} and Z_{i,end2019}.
- Annex Table 2.5.1 — Selected regression coefficients (Level 5 years and Duration; standard errors in parentheses):
  - Current Account Balance:
    - (1) Level 5 years: 0.843* (0.453)
    - (2) Duration: -0.0609* (0.0344)
    - (3) Level 5 years: 0.828* (0.443)
    - (4) Duration: -0.0511 (0.0315)
    - (5) Level 5 years: 1.238*** (0.459)
    - (6) Duration: -0.00161 (0.0588)
    - (7) Level 5 years: -0.220 (0.934)
    - (8) Duration: 0.133 (0.145)
  - Fiscal Balance:
    - (1) Level 5 years: 0.768 (0.467)
    - (2) Duration: -0.201** (0.0876)
    - (3) Level 5 years: 0.759 (0.465)
    - (4) Duration: -0.201** (0.0862)
    - (5) Level 5 years: 1.517* (0.869)
    - (6) Duration: -0.235** (0.113)
    - (7) Level 5 years: 1.100* (0.647)
    - (8) Duration: -0.490*** (0.129)
  - Openness (X+M/GDP):
    - (1) Level 5 years: -0.0140 (0.0433)
    - (2) Duration: 0.0251** (0.0118)
    - (3) Level 5 years: -0.00571 (0.0459)
    - (4) Duration: 0.0267** (0.0120)
    - (5) Level 5 years: 0.00514 (0.0623)
    - (6) Duration: 0.0181 (0.0132)
    - (7) Level 5 years: -0.0763 (0.0712)
    - (8) Duration: 0.0289* (0.0160)
  - Debt to GDP:
    - (1) Level 5 years: 0.127 (0.185)
    - (2) Duration: -0.0236 (0.0272)
    - (3) Level 5 years: 0.115 (0.187)
    - (4) Duration: -0.0216 (0.0293)
    - (5) Level 5 years: 0.757 (0.567)
    - (6) Duration: -0.00277 (0.0713)
    - (7) Level 5 years: 0.131 (0.947)
    - (8) Duration: 0.0199 (0.0940)
  - Commodities Dependence:
    - (1) Level 5 years: -0.000907* (0.000529)
    - (2) Duration: 0.000144 (9.48e–05)
    - (3) Level 5 years: -0.000863 (0.000571)
    - (4) Duration: 0.000127 (9.59e–05)
    - (5) Level 5 years: -0.000948* (0.000520)
    - (6) Duration: 0.000211** (0.000100)
    - (7) Level 5 years: 0.00105 (0.00251)
    - (8) Duration: -0.000379 (0.000253)
  - Unemployment Rate:
    - (1) Level 5 years: -0.572 (0.393)
    - (2) Duration: 0.293** (0.122)
    - (3) Level 5 years: -0.515 (0.399)
    - (4) Duration: 0.293** (0.120)
    - (5) Level 5 years: -0.813* (0.413)
    - (6) Duration: 0.371*** (0.131)
    - (7) Level 5 years: -0.755 (0.995)
    - (8) Duration: 0.130 (0.182)
  - Remittances to GDP:
    - (5)/(6) coefficients reported: -3.109 (2.100) for Level 5 years; 0.370 (0.378) for Duration
  - Poverty:
    - (5)/(6) coefficients reported: -1.310 (1.838) for Level 5 years; 0.217 (0.356) for Duration
  - Tourism Arrivals:
    - (5)/(6) coefficients reported: 0.165 (4.585) for Level 5 years; 1.073 (0.705) for Duration
- Model diagnostics and samples:
  - Observations by column: 126; 127; 126; 127; 103; 103; 75; 76
  - R–squared by column: 0.341; 0.316; 0.366; 0.334; 0.418; 0.391; 0.286; 0.382
- Notes:
  - Robust standard errors are in parentheses.
  - Significance codes: * p < 0.1; ** p < 0.05; *** p < 0.01.

*Sources: World Development Indicators; national authorities; World Economic Outlook database; World Tourism Organization; and IMF staff calculations.*

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_Source: https://www.imf.org/-/media/files/publications/reo/mcd-cca/2020/october/english/reo-oct20-chapter2-technicalannex.pdf_