## June 2023

## Source details

**Canonical URL:** [June 2023](https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2023.pdf)

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- [Markdown version](/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2023.pdf.md)
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### Article IV Mission Presentation: Development Policies in Chad in the Face of Climate Change
- The Article IV Mission to Chad was led by Edouard Martin.
- A presentation in French entitled “Development Policies for Chad in the Face of Climate Change” was delivered by Alejandro Badel and Ljubica Dordevic.
- Key emphasis:
  - Use potential fiscal space from the reduction of oil subsidies for infrastructure, education, and climate adaptation.
- Follow-up:
  - The team discussed the analysis with the Chadian authorities and received feedback.
  - A Special Issues Paper, along with the staff report, will include the final analysis and policy conclusions.

### Tax Revenues in Low-income Countries (Economic Journal)
- Publication: paper by A. Peralta-Alva, X. Tam, X. Tang and M. Mendes in the Economic Journal.
- Scope and methods:
  - Consolidates theoretical insights on revenue mobilization in low-income countries using the inequality toolkit.
  - Quantitatively investigates the welfare costs of increasing tax revenues in low-income countries.
  - Considers three tax instruments: consumption, labour income, and capital income taxes.
  - Uses a parsimonious version of the inequality toolkit: a general equilibrium model with heterogeneous agents, incomplete financial markets, and rural and urban areas.
  - Model calibrated to the Ethiopian economy; welfare costs decomposed into aggregate and distributional components.
- Findings:
  - Taxes alter the composition of demand; together with limited labour mobility, higher taxes fall disproportionately on the rural population regardless of instrument.
  - Consumption taxes are the instrument with the largest welfare loss.

### Gender Labor Market Tool
- Product: Excel-based toolkit for gender labor market analysis.
- Functionality:
  - Identifies factors contributing to employment gender gaps in levels and rates of change.
  - Uses an accounting decomposition approach to split employment gender gaps into employment rates, labor force participation rates, and population shares.
  - Can be applied at country, regional, income group, and global levels.
- Coverage:
  - Populated with data covering advanced economies, emerging markets, and 59 low income developing countries.
- Intended users:
  - Staff working on gender issues.

### Bank Ownership Around the World (Working Paper by Ugo Panizza)
- Dataset:
  - Covers more than 6,500 banks in 181 countries (including 59 low-income economies) over the period 1995-2020.
- Trends:
  - Until 2010, reduction in state-ownership of banks and increase in foreign ownership; the Global Financial Crisis interrupted or reversed these trends.
- Country-level associations:
  - Presence of foreign owned banks is positively associated with future economic growth.
  - State ownership is negatively but not robustly associated with future financial depth.
- Bank-level regressions:
  - State-owned banks are less profitable and have a higher share of non-performing loans than private (domestic or foreign) counterparts.
  - State and foreign-owned banks in developing economies pay and charge lower interest rates than domestic private counterparts.
- Shock responses:
  - State-owned banks stabilize credit in the presence of domestic shocks.
  - Foreign banks amplify external shocks.
  - Regarding domestic shocks, foreign banks are not significantly different from domestic private counterparts.

### Will Working from Home Stick in Developing Economies? (Working Paper)
- Authors: Conesa Martinez, Futoshi Narita, and Chris Papageorgiou.
- Data:
  - Survey of 500 respondents in 10 countries, including Vietnam.
- Findings:
  - Increases in teleworking days ranged from 0.7 to 17.6 percentage points across surveyed contexts.
  - The income discount associated with telework temporarily disappeared during the pandemic's onset.
  - Workers' preferences for telework appeared linked to education levels; a calibrated model supports this link.
  - Sustainability of telework may depend on obstacles faced by less-educated workers and economy-wide externalities.
- Policy implication:
  - Telework viability is constrained by challenges among less-educated workers and potential economy-wide externalities.

### Mining Revenues and Inclusive Development in Guinea
- Authors: Alejandro Badel and Rachel Lyngaas.
- Method:
  - Heterogeneous-agents, general equilibrium multisector macro-inequality model calibrated to a customized model economy.
- Fiscal potential:
  - Guinea’s mining can provide additional revenues of around 2 percent of GDP under realistic and moderate reforms.
- Simulated policy package and impacts:
  - Jointly increasing investment in infrastructure, education spending, and social transfers would yield:
    - Additional 1.1 percentage points of annual growth over 30 years.
    - Poverty reduction of 17.8 percentage points.
    - Substantial improvements in several inequality indicators.
- Note:
  - Results were echoed in the Staff Report for the 2022 Article IV Mission to Guinea.

### Workshop: Promoting Inclusive Growth in the Middle East and North Africa
- Organizer: IMF and Université Mohammed V in Rabat (Faculty of Legal, Economic and Social Sciences-Agdal).
- Context:
  - Part of a series of IMF events in Morocco preparing for the World Bank Group and IMF Annual Meetings in Marrakech in October 2023.
- Featured content:
  - Presentation of chapters from the IMF book, including Chapter 5 on “Addressing Gender Gaps in MENA Labor Markets” co-authored and presented by IMF-FCDO staff.
- Themes discussed:
  - Impact of lack of inclusiveness, particularly barriers to private entrepreneurship, on economic growth and stability.
  - Causes and macroeconomic effects of large gender gaps in MENA labor markets.
  - Implications of, and possible policy responses to, limited access to financial services for many households and firms in the region.

### Monetary Policy Frameworks Project
- Event: special session of the Royal Economic Society annual conference in Glasgow on "New monetary policy databases" (April 3rd).
- Presentation:
  - D. Filiz Ünsal presented "Monetary Policy Frameworks-An Index and New Evidence".
- Databases covered (freely available for researchers):
  - Database of macroprudential policies covering 134 countries, including 42 LICs (by Erlend Nier, IMF).
  - Independence and Accountability, Policy and Operational Strategy, and Communications (IAPOC) index, which includes LICs (by Filiz Unsal, IMF/OECD).
  - Comprehensive Monetary Policy Frameworks classification (by David Cobham, Heriot-Watt University).
- Commentators:
  - Charles Nolan (Glasgow University) and Tim Willems (Bank of England).

### A Monetary Policy Framework for Low Income Countries
- Event: presentation during the Annual Conference of the Banco Central do Brasil (May 18th).
- Authors: Carlos van Hombeeck, Juan Passadore, and Filiz Unsal.
- Model:
  - Open Economy Heterogenous Agents model with LIC-relevant features:
    - Poor households with no access to markets (hand-to-mouth).
    - A subsistence level of consumption for tradable goods.
  - Calibrated for an average LIC.
- Shock analysis:
  - A shock to external prices causes:
    - A consumption-led recession.
    - An increase in inflation.
    - A drop in real wages.
  - Distributional effects:
    - Consumption inequality increases: poor households can’t insure against the shock, while richer households exploit their wealth.
    - Households at the bottom and at the top of the income distribution are the most negatively affected:
      - Bottom: lower wages and consumption.
      - Top: negative revaluation of their assets.
  - Monetary policy stance:
    - A less aggressive monetary policy stance benefits poorer households because a lower drop in labor demand offsets lower real wages.

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_Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/jun2023.pdf_