## September 2024

## Source details

**Canonical URL:** [September 2024](https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/sep2024.pdf)

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### Published Paper: Political Institutions and Output Collapses
- Paper: "Political Institutions and Output Collapses" by Patrick Imam and Jonathan Temple, European Journal of Political Economy.
- Data and method:
  - Sample: 123 developing countries.
  - Period: 1971–2016.
  - Method: Joint modeling of output growth and political institutions as a finite state Markov chain with a two-dimensional state space.
- Key findings:
  - Growth is more likely to be sustained under democratic regimes than under autocratic ones.
  - Under autocracy:
    - Stagnation is more likely to lead to output collapses.
    - Output collapses are more likely to deepen.
  - Democratic countries appear more resilient in maintaining economic stability.
- Policy implication:
  - The study highlights potential benefits of democratic governance in mitigating severe economic downturns.

### Working Paper: Productive Capacities, Economic Vulnerability, and Growth Volatility in Sub-Saharan Africa
- Paper: "Productive Capacities, Economic Vulnerability and Growth Volatility in Sub-Saharan Africa" by Aminou Yaya, IMF Working Paper, August 2024.
- Data and method:
  - Coverage: 43 Sub-Saharan Africa (SSA) countries.
  - Period: 2000-2018.
  - Method: Generalized Method of Moments (GMM).
- Key findings:
  - Economic vulnerability contributes to growth volatility in SSA.
  - The effect of vulnerability on growth volatility varies with the performance of productive capacities.
  - Countries with high productive capacities have greater opportunities to mitigate the impact of economic vulnerability on growth volatility.
  - Specific dimensions—institutions and information and communication technology (ICT)—appear more influential than others.
- Policy recommendations:
  - Strengthen productive capacities, particularly institutions and ICT, to enhance economic resilience to simultaneous shocks such as Covid-19, climate change, and armed conflicts.

### Working Paper: Mobile Technologies and Productivity among Benin Food Suppliers
- Paper: "Can Mobile Technologies Enhance Productivity? A Structural Model and Evidence from Benin Food Suppliers" by Pierre Nguimkeu and Cedric Okou.
- Context and data:
  - Survey data from two semi-rural markets in Benin.
  - Local context: grains and legumes are staple foods; one-third of the population has internet access.
  - Focus: digital adoption through mobile broadband among small-scale suppliers.
- Key findings:
  - Adoption drivers: younger, wealthier, more educated suppliers, and proximity to other users.
  - Productivity impacts:
    - Adopters conduct 4-5 more transactions per month than non-adopters.
    - Trade frequency and amounts increase by up to 50 percent for adopters.
    - Most adopters are women, but productivity gains for women are lower than for men.
  - Policy simulation results:
    - Improving broadband quality significantly boosts adoption rates and productivity.
    - Reducing broadband cost has a moderate effect.
    - Enhancing credit access increases adoption among credit-constrained suppliers.
- Policy implications:
  - Invest in broadband quality and expand credit access to amplify digital adoption and productivity among small-scale suppliers.

### Working Paper: Knowledge Diffusion Through FDI: Worldwide Firm-Level Evidence
- Paper: "Knowledge Diffusion Through FDI: Worldwide Firm-Level Evidence" by JaeBin Ahn, Chan Kim, Nan Li, and Andrea Manera, IMF Working Paper, July 2024.
- Data and method:
  - Novel firm-level panel dataset combining worldwide utility patent and citation data with project-level greenfield FDI and cross-border M&A data.
  - Coverage: firms across 60 advanced and developing countries over the past two decades.
  - Method: New local projection difference-in-differences methodology.
- Key findings:
  - FDI significantly enhances knowledge flows both from and to investing firms.
  - Citation flows between investing firms and host countries increase by approximately 11-13 percent five years after the initial investment.
  - Effects stronger when host countries have higher innovation capacities or are technologically more similar to investing firms.
  - Knowledge spillovers extend beyond targeted firms and industries, especially in sectors closely connected in the technology space.
- Policy relevance:
  - FDI can be a conduit for knowledge diffusion; fostering host-country innovation capacity and technological similarity amplifies benefits.

### Country Application: DIGNAD Application to Tanzania in the Context of the RSF
- Event: IMF Staff Country Report for Tanzania featuring the Debt, Investment, Growth, and Natural Disaster (DIGNAD) model, FCDO-financed product, published June 25, 2024.
- Scenario analysis and findings:
  - Simulations illustrate Tanzania’s vulnerabilities to climate change and benefits of ex-ante adaptation investments on macroeconomic variables (Annex IV of the report).
  - Investing in adaptation infrastructure can:
    - Improve economic resilience to natural disaster shocks.
    - Limit post-disaster economic losses and recovery costs.
    - Reduce increases in public debt following shocks.
  - Reforms that enhance public investment efficiency and domestic resource mobilization amplify benefits of adaptation investments and strengthen long-term debt sustainability.
- Policy implications:
  - Combine adaptation investments with public investment efficiency and domestic resource mobilization reforms to bolster resilience and debt sustainability.

### Workshops and Training on DIGNAD and Climate Modelling
- Workshop: Modelling Climate Risks and Policies
  - Date and location: July 22 to 26, 2024, Johannesburg, South Africa.
  - Organizers: IMF Institute for Capacity Development (ICD), Research Department (RES), Fiscal Affairs Department (FAD); requested and hosted by the South African Reserve Bank.
  - Focus: hands-on training with Excel-based tools and models, including the DIGNAD model.
  - Attendance: Nearly 40 participants, including 24 from AFRITAC South – AFS countries (Comoros, Lesotho, Madagascar, Mozambique, Zambia, Zimbabwe).
  - Participant feedback: strong appreciation for lectures and hands-on practice; high interest in applying DIGNAD in climate policy work.
- Workshop: Macro-Climate Modelling with DIGNAD (virtual)
  - Date: July 29 to 31, 2024.
  - Host: University Network at SOAS.
  - Content:
    - Introductory review of dynamic (stochastic) general equilibrium models by Prof. Johannes Pfeifer.
    - Practical DIGNAD toolkit sessions (MATLAB/Octave) by Dr. Azar Sultanov and Dr. Vimal Thakoor covering components, country use cases, calibration, incorporation of natural disasters, and evaluation of adaptation investments.
  - Attendance: 35 participants from academia and policymakers from Zambia, Ethiopia, Tanzania, Nigeria, Uganda, Rwanda, Ghana, South Africa, Kenya, and Jamaica.

### Course: Compilation of Macro-Relevant Environment and Climate Change Statistics
- Date: August 19 to 30, 2024.
- Organizers: IMF Statistics Department (STA) and Institute for Capacity Development (ICD).
- Focus: methods, frameworks, and tools for compiling macro-relevant climate indicators and application in policy formulation.
- DIGNAD component: session on assessing macro-fiscal effects of natural disasters and adaptation infrastructure.
- Attendance: 35 participants from 30 countries, including several low-income countries.
- Key messages:
  - Importance of institutional frameworks for the climate data ecosystem.
  - Need for inter-agency collaboration at national and international levels to ensure accurate climate-relevant macroeconomic data.

### FCDO-Supported Research and Events
- Peer-to-peer workshop for CCAMM
  - Event: 9th peer-to-peer workshop for central bank practitioners from the Caucasus, Central Asia, Moldova, and Mongolia (CCAMM).
  - Date and location: June 18-19, 2024, Vienna.
  - Organizers: IMF, Swiss National Bank (SNB), Joint Vienna Institute (JVI), CCAMTAC.
  - Attendance: 27 senior central bank officials from all ten countries of the region, including low-income countries Kyrgyz Republic and Moldova.
  - Content:
    - FCDO-supported research presentations on geopolitical and economic fragmentation (GEF) and macroeconomic implications.
    - Country experiences and policy responses to ensure domestic resilience amid geopolitical uncertainty and shifting global linkages.
- Conference: Rethinking Globalization and Fragmentation
  - Date and location: July 2, 2024, Manila, Philippines; organized by the Asian Development Bank.
  - Focus:
    - Assessing trends in global and regional integration.
    - Addressing narratives of geoeconomic fragmentation and implications for Asia and the Pacific.
    - Highlighting policies to strengthen global and regional integration for a polarized global economy.
  - IMF contribution: FCDO-supported research from the Development Macro Division on changing global linkages and implications for Asia and the Pacific, including LICs.

### External Presentations
- Regime-Switching Factor Models and Nowcasting with Big Data
  - Presentation: Omer F. Akbal at the 2024 Annual Conference of the International Association for Applied Econometrics (IAAE), June 25th, 2024, Thessaloniki, Greece.
  - Contribution:
    - Estimation methodology for simultaneous estimation of recession probabilities and real production estimates.
    - Nowcasting performance improves notably when key economic indicators are released.
    - Initial application uses U.S. data; toolkit adaptable to low-income and developing economies with future applications forthcoming.
- Capital Inflows and Technology Diffusion
  - Presentation: Gabriela Cugat at the Barcelona School of Economics Summer Forum on International Finance and Macroeconomics, June 17th, 2024.
  - Paper: "Do Capital Inflows Spur Technology Diffusion? Evidence from a New Technology Adoption Index" co-authored with Andrea Manera.
  - Key instrument: Embodied Technology Imports Indicator (ETI), available for 181 countries over 1970-2020, measuring technological intensity of imports using PATSTAT and COMTRADE.
  - Findings using local projection difference-in-difference:
    - Changes in statutory capital flow regulations lead to a 7-9 percentage point increase in technological intensity over 5 to 10 years.
    - Accompanied by a 28-33 percentage point rise in the volume of gross capital inflows, primarily driven by FDI.
    - Associated with a 9-12 percentage points increase in real GDP per capita (PPP).
  - Policy implication:
    - Capital flow regulations, particularly regarding FDI, are crucial for promoting technology adoption in developing countries.

### Internal Presentation: Foreign Aid and Natural Disasters
- Presentation: "Foreign Aid and (Big) Shocks: Evidence from Natural Disasters" by Rabah Arezki and Patrick Imam at an IMF Institute for Capacity Development (ICD) departmental seminar, May 28th, 2024.
- Findings:
  - Aid commitments increase following natural disasters, with humanitarian aid preceding structural aid.
  - The effect is quantitatively small.
  - The poorest countries, or those experiencing the most severe natural disasters, do not necessarily receive the most aid.
  - No evidence that foreign aid commitments are disbursed more rapidly after natural disasters.
  - Political alignment with major donors matters for aid allocation in recipient countries with low state capacity.
- Implication:
  - Aid allocation patterns after natural disasters are influenced by factors beyond damage severity, including political alignment and recipient capacity.

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_Source: https://www.imf.org/-/media/files/topics/lics/macro-research-for-development/newsletters/sep2024.pdf_