## June 2018 ## Source details **Canonical URL:** [June 2018](https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2018.pdf) ## Other formats - [Markdown version](/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2018.pdf.md) - [Structured JSON version](/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2018.pdf.json) --- ### Modernizing Monetary Policy Frameworks - IMF-DFID collaboration with selected central banks in sub-Saharan Africa and IMF country teams to modernize monetary policy practice and analysis. - Publication: Monetary Policy in Sub-Saharan Africa (published in April 2018) — applies dynamic general equilibrium models adapted for low-income countries to analyze monetary policy in sub-Saharan African countries. - IMF participation in the East African Community’s Technical Working Group on Forecasting and Policy Analysis System (FPAS) meeting in Uganda (May 2018) to support harmonization of FPAS development among EAC Partner States’ central banks. - Customized training missions on modelling and forecasting: - Tanzania (February 2018) - Malawi (March 2018) - Rwanda (April 2018) - Outcomes of training missions: - Further development of quarterly projection models in central banks - Streamlining of decision-making processes - Modernization of communication functions in line with best practices in emerging economies ### Fiscal Policies and Gender Equality - IMF-DFID global study of gender budgeting initiatives culminating in the book Fiscal Policies and Gender Equality, summarizing efforts in more than 80 countries and offering lessons, good practices, and suggestions for improvement. - Outreach activities coordinated with UN Women: - TED-style talk on gender budgeting at the IMF Spring Meetings - Panel discussion on transformative gender budgeting practices for rural women at the UN Commission on the Status of Women ### Globalization and Inequality - New paper examining the effect of globalization on income among and within countries using a panel of 147 countries during 1970-2014. - Main findings: - Effect of globalization on average income growth depends on a country’s prevailing level of globalization. - Globalizing is generally good for growth but with diminishing marginal returns. - Growth gains are substantially positive for countries at early and medium stages of integration, notably middle and low-income countries. - For countries at very high stages of globalization, income gains are small or insignificant. - Globalization is often associated with widening economic inequality. - In the average developing economy, the poor also benefit from globalization; in many advanced economies, globalization often has little effect on the incomes of the poor. - Government policies matter: investments in education that raise skill levels, and taxes and transfers that spread benefits more broadly, can help globalization be a more inclusive process. ### Are Remittances Good for Labor Markets in the LICs, MICs, and Fragile States? - Remittances have strong impacts on both labor supply and labor demand in recipient countries; effects are highly significant and greater in size than those of foreign direct investment or official development aid. - Supply-side effects: - Remittances reduce labor force participation. - Remittances increase informality of the labor market. - Male and female labor supply show significantly different sensitivities to remittances. - Demand-side effects: - Remittances reduce overall unemployment. - Benefits accrue mostly to lower-wage, lower-productivity non-tradables industries at the expense of high-productivity, high-wage tradables sectors. - Distributional and productivity outcomes: - Inequality declines as a result of larger remittances. - Average wage and productivity growth decline, with productivity falling more strongly than wages, leading to an increase in the labor income share. - In fragile states, remittances impose a positive externality, possibly because the tradables sector tends to be underdeveloped. - Policy implication: reforms to foster inclusive growth need to account for the role of remittances. ### Domestic Fuel Price Changes and Export Growth in Developing Countries - Presentation delivered at a CERDI seminar (University of Auvergne, France) in May. - Key findings: - Fuel price hikes have an adverse but short-lived effect on exports. - The adverse effect is observed only in countries with high energy dependency and constrained access to alternative energy sources. - Policy implication: - Countries reducing sizeable fuel subsidies—given subsidies are fiscally costly, inequitable, and bad for the environment—should not be overly concerned about impacts on export competitiveness. - Mitigating measures and structural reforms to reduce energy inefficiencies and enhance access to other energy sources can minimize adverse consequences of higher fuel prices for exports. ### Dominica and Income Inequality - IMF Article IV mission to Dominica included presentation of a resilience building tool customized for small states with natural disasters. - Presentation of key results in the Selected Issues Paper and Staff Report for Dominica and at the Ministry of Finance with attendees from the National Resilience Development Committee and the Chamber of Commerce. - Main results: - Both long-run economic growth and short-run recovery depend crucially on the level of resilience. - Return on investing in resilient capital is higher than the associated cost. - A more resilient economy leads to higher private investment and lower brain drain. ### Economic Fluctuations in Sub-Saharan Africa - Comparative analysis of business cycle fluctuations in Sub-Saharan African (SSA) countries versus the rest of the world. - Main results: - African economies exhibit notable macroeconomic volatility, reflected in volatility of output and other macro variables. - Inflation and output tend to be negatively correlated. - Unlike advanced economies and emerging markets (EMs), trade balances and current accounts are acyclical in SSA. - Volatility of consumption and investment relative to GDP is larger than in other countries. - Cyclicality of consumption and investment is smaller than in advanced economies and EMs. - There is little co-movement between consumption and investment. - Consumption and investment are strongly positively correlated with imports. ### The Economic Impacts of Revenue Mobilization in Resource-Rich Sub-Saharan Africa - Analysis focusing on the CEMAC region with lessons applicable more broadly to sub-Saharan Africa. - Findings: - Revenue mobilization is a particularly powerful means to reduce government indebtedness. - Revenue mobilization may generate undesirable effects on inequality. - Policy recommendation: - Adopt mitigating policies, in particular cash transfer programs targeted to the most vulnerable, especially if specific revenue mobilization instruments are likely to affect poor households’ incomes. ### Improving Governance: General Equilibrium Analysis Using a Macroeconomic Model - Extension of the Debt, Investment, and Growth (DIG) model (Buffie and others, 2012) to capture governance reforms. - Use of the general equilibrium DIG model allows analysis of reforms’ simultaneous impacts on output, private investment, consumption, and fiscal outcomes. - Governance improvements analyzed: - (i) Reduction in bribes and other distortions that discourage firms from investing and creating jobs. - (ii) Increase in public investment spending efficiency. - (iii) Decline in tax evasion. --- _Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2018.pdf_