## September 2018 — Modernizing Monetary Policy Frameworks and Related Research

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### Modernizing Monetary Policy Frameworks
- IMF-DFID collaboration with selected central banks in sub-Saharan Africa and respective IMF country teams to modernize monetary policy practice and analysis.
- Customized training mission on modelling and forecasting to Tanzania in July 2018:
  - Yaroslav Hul assisted the Bank of Tanzania (BoT) forecasting team to further develop its quarterly projection model (which captures the authorities' view of the monetary transmission mechanism and of the shocks hitting the economy).
  - Launched training to modernize BoT’s monetary policy communication function, assessing the present communications strategy and identifying changes necessary to support an orderly transition to an interest rate-based monetary policy framework.

### Financial Inclusion: Rwanda
- IMF staff visited Kigali, Rwanda, in July 2018 as part of the DFID-funded IMF–National Bank of Rwanda research collaboration.
- Andrea Presbitero taught a three-day course on “Methods and Tools for Micro-Applied Economics: Topics in Financial Intermediation” and presented the paper “Financial inclusion under the microscope.”
- Key findings from the study:
  - A government-sponsored program to expand banking outreach through a dense network of credit cooperatives increased access to credit by previously unbanked individuals.
  - Commercial banks reacted to the set-up of the new SACCOs by expanding their lending, targeting individuals who, thanks to the program, were able to build credit history.

### Commodity Prices and Banking Crises
- Empirical model developed by Markus Eberhardt and Andrea Presbitero to predict banking crises in a sample of 60 LICs over the 1981-2015 period.
- Findings:
  - Commodity prices are a key element in designing an early warning system for LICs; accounting for changes in commodity prices significantly increases the predictive power of the model.
  - The commodity price effect is economically substantial and robust to inclusion of a wide array of potential drivers of banking crises.
  - Net capital inflows increase the likelihood of a crisis.
  - In contrast to recent findings for advanced and emerging economies, credit growth and capital flow surges play no significant role in predicting banking crises in LICs.

### Gender Inequality: Papers, Peer-Learning Events, and Presentations
- IMF operationalizing gender issues; released a “how-to” note for staff in June (overview of good practices and resources).
- Contributed to an IMF policy paper on Pursuing Women’s Economic Empowerment ahead of the IMF Managing Director’s participation in the G7 Summit in June.
- Events and training:
  - Three-day peer learning event on gender equality in Dar es Salaam on June 4-6, 2018, coordinated with IMF African Department and UN Women; topics included IMF analytical work on gender inequality and macroeconomic outcomes, gender budgeting, and policy priorities.
  - One-day workshop on gender inequality research with UN Economic Commission for Africa staff in Addis Ababa following the Dar es Salaam workshop.
  - IMF East Africa Regional Technical Assistance Center held a three-day training on “Understanding Gender Responsive Budgeting” in Arusha in August; Lisa Kolovich presented on recent analytical work; 26 participants from ministries of finance, budget offices, and ministries of gender attended.
  - Lisa Kolovich participated in a panel on gender inequality and the future of work in July as part of the “Voyage to Indonesia” seminars leading up to the IMF Annual Meetings in Bali in October.

### Income Inequality How-to Note
- Note provides an overview of good practices and resources for IMF staff addressing inequality-related issues in country work.
- Rationale and focus:
  - Economic inclusion is a high priority; high inequality is negatively associated with macroeconomic stability and sustainable growth.
  - Some macroeconomic policies and reforms may have adverse distributional implications, potentially undermining public support for reforms.
  - The note lays out resources available to country teams, including existing analytical work, data, and tools.

### 2018 Annual Meeting of the Society for Economic Dynamics
- Xin Tang presented “The Macroeconomic and Distributional Implications of Fiscal Consolidations in Low-income countries” in the session on Fiscal Policy with Heterogeneous Agents.
- Paper published as an IMF working paper in June.
- Key insight:
  - Quantitative investigation of how various tax instruments affect macro aggregates and allocation of economic resources in environments resembling low-income countries shows that trade-offs of tax instruments differ from those in developed countries.

### Losing to Blackouts: Evidence from Firm Level Data
- Dan Gurara and Dawit Tessema used manufacturing firm census data from Ethiopia to estimate productivity losses attributable to power disruptions.
- Findings:
  - Power disruptions, on average, result in productivity losses of about 4–10 percent.
  - Nonlinear productivity losses observed across productivity distribution quantiles: firms at higher quantiles faced higher losses compared to firms around the median.
  - Patterns of systematic shutdowns were observed as firms attempt to minimize losses.
- Dawit Tessema presented the paper at AEL2018 organized by the German Economic Association Research Group on Development Economics.

### Climate Change and Macroeconomic Outcomes in LICs
- Alessandro Cantelmo presented a preliminary version of “Climate Change and Macroeconomic Outcomes in Low-Income Countries” at the 24th Computing in Economics and Finance International Conference.
- Using a DSGE model allowing for large non-linearities from disaster and risk shocks related to climate change, the analysis highlights negative implications of natural disasters and climate change on low-income countries’ macroeconomic performance and public debt sustainability.

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_Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/sep2018.pdf_