## March 2021

## Source details

**Canonical URL:** [March 2021](https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/mar2021.pdf)

## Other formats

- [Markdown version](/-/media/files/topics/lics/macro-research-for-development/newsletters/mar2021.pdf.md)
- [Structured JSON version](/-/media/files/topics/lics/macro-research-for-development/newsletters/mar2021.pdf.json)

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### Publications and Edited Volumes
- The IMF published a book titled Macroeconomic Policy in Fragile States (co-edited by Ralph Chami, Raphael Espinoza, and Peter Montiel) comprising 20 chapters by experts from the IMF, academia, World Bank and other IFIs, ILO, and thinktanks.
- The book is geared to practitioners, policymakers, and applied economics and political science programs; it is intended to help develop training modules for IMF economists working on fragile states and to inform IMF capacity development in member countries.

### Conferences and High-Level Events
- COVID-19 Pandemic in Developing Countries Conference (December 2020)
  - Motivation: economic outlook worsened significantly in some emerging market and low-income economies where infections were rising rapidly, and these economies, excluding China, are projected to incur a greater loss of output over 2020-21 relative to the pre-pandemic projected path when compared to advanced economies.
  - Focus: policy priorities to save lives and livelihoods and options to keep economies stable until there is a widely available vaccine.
  - Participants: senior IMF staff, ministers, central bankers, and academics from emerging market and low-income countries.
- Central Banks and Inequality – COVID-19 and Beyond (December 2020)
  - Organized with Peterson Institute for International Economics (PIIE) and Council on Economic Policies (CEP).
  - Three high-level virtual roundtables addressed: inequality and financial regulation; financial market infrastructure and inequality; monetary policy and inequality.
  - Consensus: Covid-19 profoundly increased inequality and support measures from central banks (alongside fiscal responses and structural reforms) are needed to help the most economically vulnerable.

### Internal Economics Training on Fragile and Conflict-Affected States (FCS)
- Online modular series delivered September 2020 – January 2021 targeting IMF desk economists and mission chiefs working on FCS; modules combined outside expert overviews and Fund-led field lessons.
- Module schedule and themes:
  - September 22: Overview and General Macroeconomic Policy in FCS — salient characteristics, policy design and implementation challenges, feasible solutions to manage or exit fragility; macroeconomic framework highlighting what’s different about FCS.
  - November 2: Governance, Operating in a Fragile Environment — social, political and economic factors characterizing fragile states; governance vulnerabilities and corruption dynamics.
  - November 9: Fiscal, Building Fiscal Institutions in a Fragile Environment — causal relationships between fiscal capacity and state fragility; concrete steps toward building or restoring fiscal institutions.
  - December 3: Monetary, External, and Financial Sector — monetary and exchange rate policy aspects of descent into and exit from fragility; types of inflows into FCS and overview of financial underdevelopment.
  - January 27: Fund Policy in FCS — findings of the IMF’s Independent Evaluation Office on “The IMF and Fragile States” (2018); Fund engagement during the COVID crisis and program/conditionality design principles distinguishing FCS.
  - Remaining module planned in Mid-March: Operationalizing Fund Policy in FCS.

### Analytical Tools, Models, and Courses
- Online course: Public Debt, Investment, and Growth. The DIG and DIGNAR Models (Giovanni Melina and Felipe Zanna)
  - Explains analysis of the relation between public investment, growth, and public debt dynamics using the Debt, Investment, and Growth (DIG) and Debt, Investment, Growth and Natural Resources (DIGNAR) models.
  - Covers investment-growth nexus, fiscal adjustment, private sector response, and interactions to assess macroeconomic effects of public investment scaling-up plans on growth and debt dynamics.
- DIGNAR-19 toolkit (Zamid Aligishiev, Giovanni Melina, Felipe Zanna)
  - Excel-based interface for quantitative macroeconomic assessments and policy scenario analysis in EMDEs with a focus on growth and debt.
  - Comprises three blocks: simulation, graphing, and realism tools. Translates Excel inputs into instructions for Matlab/Dynare programs and produces Excel outputs with customizable charts.

### Country and Application Studies
- Estimating the Impact of COVID-19 Resurgence in Nigeria (Gabriela Cugat, Giovanni Melina, Felipe Zanna)
  - Model: dynamic general equilibrium DIGNAR-19 combined with epidemiological multigroup susceptible-infectious-removed (SIR) model.
  - Simulation result: COVID-19 resurgence would cause GDP to contract by 1.7 percent in 2021 and the public-debt-to-GDP ratio to continue to increase in the medium term.
- Quarterly Projection Model for the National Bank of Rwanda
  - Documents a structural quarterly projection model (QPM) at the core of the Forecasting and Policy Analysis System (FPAS) at the National Bank of Rwanda (BNR).
  - Model extensions: interest-rate-based policy framework, managed exchange rate, effect of agricultural sector and harvests on prices, role of fiscal policies and aid flows.

### Research Findings and Working Papers
- Macroeconomic Consequences of Remittances in LMICs and FCS (Ralph Chami, Connell Fullenkamp seminar)
  - Stylized facts: prior to COVID-19, remittances became the main flows into LMICs and Fragile States, bypassing portfolio flows and Official Development Assistance.
  - Effects: remittances crucial for welfare and poverty reduction but can produce Dutch Disease-type effects, reduce quality of institutions, delay fiscal adjustment, complicate monetary policy transmission, reduce labor participation, and possibly trap recipient countries in an anemic long-run growth.
- Does an Inclusive Citizenship Law Promote Economic Development? (Patrick Imam, Kangni Kpodar)
  - Using a newly compiled database and empirical methods, the paper finds that jus soli laws—being more inclusive—lead to higher income levels than alternative citizenship rules in developing countries, though to a lesser extent in countries with stronger institutional environment.
- Is Regional Trade Integration a Growth and Convergence Engine in Africa? (Vigninou Gammadigbe)
  - Panel covering 1979- 2018: RTI promotes economic growth in Africa but leads to income divergence, reflecting gains favoring more developed economies.
  - Policy implication: support the AfCFTA with policies to reduce non-tariff barriers and improve infrastructure to maximize growth effects across countries.
- Food Price Shocks and Household Consumption in Developing Countries (Carine Meyimdjui, Jean-Louis Combes)
  - Sample: 70 low and middle-income countries over 1980-2012.
  - Finding: import food price shocks have a sizeable negative effect on household consumption; discretionary government consumption (notably subsidies and transfers) mitigates transmission to household consumption.
  - Effects particularly robust for African countries and countries with less flexible exchange rate regimes.
- Supply-Chain Bottlenecks during a Pandemic (John Spray with Vasco Carvalho and Matt Elliott)
  - Theoretical framework and algorithm identify bottleneck firms that preclude meeting demand targets during a pandemic.
  - Empirical application: tax data from Uganda identifies a small set of firms disproportionately important for meeting output goals when import supply-chain shocks occur.
- Exports Upgrading and Consumption Volatility (Carine Meyimdjui)
  - Sample: 147 developing and developed countries over 1980-2015.
  - Results: export quality upgrading significantly decreases consumption volatility; export concentration significantly increases consumption volatility.
  - Stronger effects in African and non-OECD countries, in higher oil rent countries, and in countries with higher agricultural value added.
  - Channels: export volume volatility and income volatility.

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_Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/mar2021.pdf_