## December 2022 ## Source details **Canonical URL:** [December 2022](https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/dec2022.pdf) ## Other formats - [Markdown version](/-/media/files/topics/lics/macro-research-for-development/newsletters/dec2022.pdf.md) - [Structured JSON version](/-/media/files/topics/lics/macro-research-for-development/newsletters/dec2022.pdf.json) --- ### Food insecurity and IMF emergency financing tools - Food insecurity was a top issue raised by all low-income countries (LICs)’ governors at the 2022 IMF-World Bank Annual Meetings. - The MRLIC team’s work on food security was featured prominently, including in the Managing Director’s curtain raiser speech for the 2022 IMF-World Bank Annual Meetings. - The Managing Director highlighted the importance of the new “food shock window” as part of the Fund’s emergency financing tools to support countries most affected by terms of trade shocks. - An analytical corner presentation featured MRLIC work, jointly with the IMF’s African Department, on climate change and chronic food insecurity; many LIC representatives expressed interest in using the analytical framework on food insecurity. ### Clinics and capacity development - Clinic on Macroeconomics of Gender Equality - Jointly developed by ICD, FAD, LEG, MCM, SPR, and STA to help staff incorporate gender issues into core IMF work in line with the IMF Gender Mainstreaming Strategy. - Examined trends in gender inequality over time and across countries, including the impact of the COVID-19 pandemic. - Aimed to identify macro-critical gender gaps that would undermine prospects for inclusive, sustainable growth and to analyze policy and institutional reform options in fiscal, financial, and legal areas. - Discussed available analytical tools, including the newly released IMF Gender Data Hub. - Introduced by IMF Deputy Managing Director Antoinette Sayeh and moderated by IMF Institute of Capacity Development Deputy Director Michaela Erbenova. - This delivery focused relatively more on low-income developing countries and emerging markets; a subsequent delivery will focus relatively more on advanced economies. - Clinic on Distributional Impact of Policies and Reforms - Held virtually on November 14th; delivered by the IMF-FCDO team and attended by around 30 IMF staff. - Taught the Multi-sector Incomplete Markets Macro Inequality (MIMMI) model and provided hands-on training on the associated MIMMI app. - Released the first version of the app’s brand-new user manual for the course. - Course covered the history and past applications of the MIMMI model, calibration, basic concepts and refresher on incomplete markets models, and a hands-on session for building a box for an Article IV Staff Report with the MIMMI browser-based application. - Participants accessed the app’s interface and its calibration repository (currently consisting of calibrations for Guinea and Namibia) through the Fund’s intranet without installing additional software and computed scenarios in real time during the course. ### Climate Macroeconomic Assessment Program (CMAP) — Madagascar technical assistance - MRLIC contributed to CMAP, a technical assistance program primarily led by the IMF’s Fiscal Affairs Department. - During a CMAP mission held in April, MRLIC used the Debt-Investment-Growth-Natural-Disasters (DIGNAD) model to quantify the impact of climate change on Madagascar through repeated natural disasters and slowly changing temperature patterns that would decrease productivity. - Simulation analysis indicates a sizable implication on debt sustainability from climate change risks in the long run, highlighting the need for Madagascar to proactively design a comprehensive package of policy response measures and to factor these risks into macroeconomic and fiscal projections. - The CMAP report on Madagascar was published in November as the second CMAP pilot country; MRLIC also supported the first CMAP pilot country case, Samoa, whose report was published in March. ### Remittances and transaction costs - Using a new quarterly panel database on remittances from 2011 to 2020, Kangni Kpodar and Patrick Imam investigate the elasticity of remittances to transaction costs in a high-frequency and dynamic setting. - Findings: - Cost reduction has a short-term positive impact on remittances that dissipates beyond one quarter. - Reducing transaction costs to the Sustainable Development Goal target of 3 percent could generate an additional US$32 billion in remittances, higher than the direct cost savings from lower transaction costs. - Higher competition in the remittance market, a deeper financial sector, and adequate correspondent banking relationships are associated with a lower elasticity of remittance flows to transaction costs. - Microdata from the USA-Mexico corridor confirm that migrants facing higher transaction costs tend to remit less; this effect is less pronounced for skilled migrants and those with access to a bank account. ### Bank of Ghana Quarterly Projection Model (QPM) working paper - A Technical Assistance milestone supporting the development of the FPAS at the Bank of Ghana (BoG) was achieved by publishing a working paper co-authored with BoG staff and with support from AFRITAC West 2. - The paper describes the BoG’s Quarterly Projection Model (QPM), its properties and use in policy deliberations. - The QPM is a New Keynesian semi-structural model incorporating main features of the Ghanaian economy, transmission channels and policy framework, including an inflation targeting central bank and aggregate demand effects of fiscal policy. - Shock propagation mechanisms embedded in the calibrated QPM demonstrate theoretical consistency; out-of-sample forecasting accuracy validates empirical robustness. - The historical track record of real-time policy analysis and medium-term forecasting with the QPM establishes its critical role in supporting the BoG’s forward-looking monetary policy framework. ### Book chapters on Promoting Inclusive Growth in the Middle East and North Africa (MENA) - Inclusiveness, Growth and Stability (Chapter 2) - Uses a general equilibrium model with heterogeneity in income, wealth, skill level, and occupations. - Presence of barriers and financial frictions creates misallocation by preventing skilled entrepreneurs from entering business. - Calibrated to an average MENA economy, simulations show that a reform package that simultaneously reduces market distortions and improves access to credit could lead to a more efficient allocation of resources and significantly boost output, wages, and jobs. - Simulations indicate that an increase in public investment that achieves the same increase in output would not generate the same improvement in welfare compared with reforms that remove market distortions and support a more dynamic private sector. - The book was published during the IMF-World Bank 2022 Annual Meetings in October. - Addressing Gender Gaps in MENA Labor Markets (Chapter 5) - Focuses on why female labor force participation is much lower in the MENA region than in the rest of the world. - Main finding: gender disparities in basic and financial legal rights are likely the most powerful barriers to women’s participation in economic life in the MENA region, followed by restrictions in labor market codes and regulation. - Removing barriers that prevent women’s participation in the labor force and entrepreneurship promises substantial impacts on output and welfare despite social norms that may be difficult to change. ### IMF Strategy Toward Mainstreaming Gender — background paper - Produced a background paper providing additional details, illustrations, and arguments to support the Board Paper “IMF Strategy Toward Mainstreaming Gender.” - The work offers an overview of the evolution of gender disparities across different dimensions that limit women’s economic empowerment and, in turn, the full potential of total productivity and economic growth of countries. ### Monetary policy framework for low-income countries - Paper titled “A Monetary Policy Framework for Low Income Countries” presented by Giovanni Sciacovelli during the 2nd Lille-Reading Workshop on International Finance on November 18th. - The paper presents an open economy heterogeneous agent model with features relevant for LICs: - i) poor households with no access to markets (hand-to-mouth), and - ii) a subsistence level of consumption for tradable goods. - With the model calibrated for an average LIC, the team (also composed of Filiz Unsal, Carlos van Hombeeck and Juan Passadore) analyzes effects of external shocks on inequality and poverty. - Key conceptual findings: - A shock to external prices (such as for food) causes a consumption-led recession with poor households suffering more. - Labor income is squeezed for all households while richer households may benefit from higher dividends, generating inequality and welfare differences between and within financially included and excluded households. - The team analyzes how monetary policy might offset some of the impact on households and its distributional consequences. --- _Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/dec2022.pdf_