Despite significant progress in recent decades, labor markets across the world remain divided along gender lines. Female labor force participation has remained lower than male participation, gender wage gaps are high, and women are overrepresented in the informal sector and among the poor. In many countries, legal restrictions persist which constrain women from developing their full economic potential. While equality between men and women is in itself an important development goal, women's economic participation is also a part of the growth and stability equation. In rapidly aging economies, higher female labor force participation can boost growth by mitigating the impact of a shrinking workforce. Better opportunities for women can also contribute to broader economic development in developing economies, for instance through higher levels of school enrollment for girls.
To weather the shock, policymakers should ensure that any near-term measures are time-bound and targeted at the most vulnerable, and maintain the focus on medium-term development objectives
Countries face vastly different exposure to higher oil prices and supply uncertainty, shaped by whether they import or export, and how much policy space they have to respond
Impact on economic activity will vary across countries, but inflation will rise for all
The region must respond to energy shocks through disciplined policies that protect the vulnerable and strengthen resilience
The region can best cope by protecting vulnerable people, letting prices adjust, anchoring inflation expectations, and accelerating structural reforms
Middle East conflict intensifies global uncertainty at a time of strained public finances, underscoring the need for policies that preserve future stability
This paper examines the impact of trade credit and bank loans on firms’ exchange rate passthrough. Using a comprehensive dataset combining customs transaction records and balance sheet data for Chinese exporters during 2000–2011, we document that firms that more intensively extend trade credit to their buyers exhibit more complete exchange rate pass-through. Further empirical investigation sheds light on the underlying mechanism. First, the use of trade credit is positively correlated with exporters’ dependence on bank loans. Second, firm-level bank loan interest rates decline following home currency depreciation. Motivated by these findings, we develop a theoretical model in which exporters constrained by working capital simultaneously extend trade credit to buyers and rely on bank borrowing. The model shows that home currency depreciation improves exporters’ profitability, lowers default risk, and reduces borrowing costs, ultimately enhancing exchange rate pass-through. By endogenizing the interest rate through firm-level default risk, the model reveals a novel channel through which firms’ financial activities shape the dynamics of exchange rate pass-through.
Artificial intelligence is entering a new phase in which systems can act autonomously on behalf of users. These “agentic” AI systems can interpret objectives, break them into tasks, and interact with digital services with limited human input. In payments, this could shift transactions from human-initiated instructions to agent-mediated decisions. While still emerging, rapid experimentation suggests growing relevance. This note examines how agentic AI may affect payment systems, focusing on authorization, liquidity, settlement, compliance, and resilience. It highlights a key tension between probabilistic AI behavior and the deterministic requirements of payment infrastructures. Using a three-layer framework—intent, authorization, and settlement—the analysis identifies where agentic capabilities may add value while preserving control and finality. It reviews use cases and risks, including traceability, opacity, systemic effects, cybersecurity, and legal uncertainty. Overall, the note emphasizes that outcomes will depend on institutional design and governance as much as technology.
Healthcare and long-term care expenditures are projected to rise significantly in Slovenia over the medium and long term, primarily due to rapid population aging. This paper examines the financial challenges confronting the health sector—the increasing demand for healthcare and long-term care, alongside a financing system that has not yet adapted to this evolving context—and outlines reforms to enhance the sector’s long-term sustainability.
Slovenia’s labor productivity growth has slowed since the late 2000s, weakening the country’s prospects of catching up with more advanced EU members. In addition to the gap in business investment, the composition of investment is also important as intangible investments are increasingly driving productivity in knowledge-based economies. This paper examines the investment gap using the extended definition of intangible investments from the Corrado-Hulten-Sichel (2005) framework, and discusses options for closing the gaps relative to the EU average and EU innovation leaders, highlighting the need for expanding access to finance for intangible investments, strengthening the innovation ecosystem, and enhancing overall business environment.
Pacific Island Countries (PICs) face acute and rising climate adaptation needs due to high exposure to sea‑level rise, natural disasters, and structural vulnerabilities associated with small size and geographic remoteness. This paper develops a unified framework to produce the first region‑wide, internally consistent estimates of climate adaptation financing needs for PICs. A metadata analysis harmonizes country‑level assessments into comparable annual measures, while a complementary machine‑learning approach generates synthetic estimates for data‑deficient countries using economic, geographic, and climate‑vulnerability indicators, subject to differences in sectoral definitions and coverage embedded in the underlying source studies. The results show that adaptation needs are large, highly uneven across countries, and exceptionally high relative to GDP, particularly for atoll nations where physical risks dominate. The paper also examines climate adaptation finance flows to PICs over the past decade, distinguishing between commitments and estimated disbursements, and finds that current financing levels fall well short of projected needs. Disbursement ratios vary substantially across financing channels, reflecting differences in institutional capacity and project implementation. Taken together, the findings highlight substantial adaptation financing gaps in PICs and underscore the importance of strengthening institutional capacity and improving the effectiveness and accessibility of climate finance mechanisms.
The world faces the spillovers from the war in the Middle East. In addition to the human toll, its economic effects are global and uneven, once again hitting the poorest and most vulnerable countries the hardest. This comes at a time when policy space has been eroded and geopolitical tensions have been increasing. Spillovers to Low-Income Developing Countries (LIDCs) will transmit through supply disruptions, higher commodity prices, second-round effects on inflation and expectations, tighter global financial conditions, exchange rate pressures, and reduced remittances from members of the Gulf Cooperation Council (GCC). The appropriate policy response depends on how the shock propagates through the domestic economy, calling for pragmatism and agility, supported by credible policy frameworks. In LIDCs, near term policies should be anchored in credible frameworks, while concerted efforts are key to enhance resilience and growth potential. Domestic structural reforms, including building strong institutions, also have an important role in the medium-term to attract stronger FDI inflows and create jobs. Robust support from the international community will be essential—especially for the most vulnerable LIDCs and fragile and conflict-affected states (FCS). The IMF stands ready to deploy all its tools to assist the membership—supporting sound policies, helping ensure this new test does not derail key medium-term priorities, and providing balance of payments financing where needed.
This paper uses scenario analysis to illustrate the implications of persistently higher fiscal deficits for monetary policy in the Czech Republic. It distinguishes across different types of fiscal spending and monetary policy responses. The paper argues that coordinated action, explicitly accounting for the monetary policy response to a fiscal easing, can improve policy outcomes. The analysis is complemented by a historical perspective of fiscal and monetary policy interactions in the Czech Republic. Specifically, the paper reviews past policy synchronization, estimates the responsiveness of fiscal policy to debt levels, and constructs a measure of monetary-fiscal policy tensions based on fiscal r*. Intensifying tensions over the coming years point to a potential need for policy adjustments.
This paper applies the IMF’s Integrated Policy Framework (IPF) to the Czech Republic with the aim of contributing to the use of scenario analysis at the Czech National Bank (CNB). The paper identifies some shallowness of FX markets as the main relevant friction under the IPF. Moreover, while inflation expectations are generally well anchored, they can nevertheless deviate from the inflation target for extended periods. Using an extended version of the QIPF model, the paper broadens the scope of analysis beyond traditional external shock scenarios, to also include domestic fiscal policy shocks and central bank balance sheet normalization. The paper finds that (i) in the event of a global risk-off outflow shock, the CNB can improve macro stabilization through a combined use of reserves and interest rate policy, (ii) refocusing fiscal stimulus towards more productive uses greatly reduces the degree of monetary policy tightening needed to stabilize inflation at target, and (iii) balance sheet normalization is optimally implemented in a preannounced and gradual manner, in which potential currency appreciation in principle can be mitigated through a slightly lower policy rate.
Worsening housing affordability in the Czech Republic reflects a structural imbalance between supply and demand, where income-driven demand has persistently outpaced construction capacity constrained by slow permitting processes and municipal fragmentation. Using a structural vector autoregression (SVAR) framework, this paper quantifies the contributions of demand, supply, and monetary shocks to movements in Czech house prices. The findings show that while monetary policy can moderate cyclical pressures, achieving sustainable affordability requires structural reforms that address rigidities in the construction sector, scale affordable housing development, and modernize property taxation.
To weather the shock, policymakers should ensure that any near-term measures are time-bound and targeted at the most vulnerable, and maintain the focus on medium-term development objectives
Countries face vastly different exposure to higher oil prices and supply uncertainty, shaped by whether they import or export, and how much policy space they have to respond
Impact on economic activity will vary across countries, but inflation will rise for all
The region must respond to energy shocks through disciplined policies that protect the vulnerable and strengthen resilience
The region can best cope by protecting vulnerable people, letting prices adjust, anchoring inflation expectations, and accelerating structural reforms
Middle East conflict intensifies global uncertainty at a time of strained public finances, underscoring the need for policies that preserve future stability
This paper examines the impact of trade credit and bank loans on firms’ exchange rate passthrough. Using a comprehensive dataset combining customs transaction records and balance sheet data for Chinese exporters during 2000–2011, we document that firms that more intensively extend trade credit to their buyers exhibit more complete exchange rate pass-through. Further empirical investigation sheds light on the underlying mechanism. First, the use of trade credit is positively correlated with exporters’ dependence on bank loans. Second, firm-level bank loan interest rates decline following home currency depreciation. Motivated by these findings, we develop a theoretical model in which exporters constrained by working capital simultaneously extend trade credit to buyers and rely on bank borrowing. The model shows that home currency depreciation improves exporters’ profitability, lowers default risk, and reduces borrowing costs, ultimately enhancing exchange rate pass-through. By endogenizing the interest rate through firm-level default risk, the model reveals a novel channel through which firms’ financial activities shape the dynamics of exchange rate pass-through.
Artificial intelligence is entering a new phase in which systems can act autonomously on behalf of users. These “agentic” AI systems can interpret objectives, break them into tasks, and interact with digital services with limited human input. In payments, this could shift transactions from human-initiated instructions to agent-mediated decisions. While still emerging, rapid experimentation suggests growing relevance. This note examines how agentic AI may affect payment systems, focusing on authorization, liquidity, settlement, compliance, and resilience. It highlights a key tension between probabilistic AI behavior and the deterministic requirements of payment infrastructures. Using a three-layer framework—intent, authorization, and settlement—the analysis identifies where agentic capabilities may add value while preserving control and finality. It reviews use cases and risks, including traceability, opacity, systemic effects, cybersecurity, and legal uncertainty. Overall, the note emphasizes that outcomes will depend on institutional design and governance as much as technology.
Healthcare and long-term care expenditures are projected to rise significantly in Slovenia over the medium and long term, primarily due to rapid population aging. This paper examines the financial challenges confronting the health sector—the increasing demand for healthcare and long-term care, alongside a financing system that has not yet adapted to this evolving context—and outlines reforms to enhance the sector’s long-term sustainability.
Slovenia’s labor productivity growth has slowed since the late 2000s, weakening the country’s prospects of catching up with more advanced EU members. In addition to the gap in business investment, the composition of investment is also important as intangible investments are increasingly driving productivity in knowledge-based economies. This paper examines the investment gap using the extended definition of intangible investments from the Corrado-Hulten-Sichel (2005) framework, and discusses options for closing the gaps relative to the EU average and EU innovation leaders, highlighting the need for expanding access to finance for intangible investments, strengthening the innovation ecosystem, and enhancing overall business environment.
Pacific Island Countries (PICs) face acute and rising climate adaptation needs due to high exposure to sea‑level rise, natural disasters, and structural vulnerabilities associated with small size and geographic remoteness. This paper develops a unified framework to produce the first region‑wide, internally consistent estimates of climate adaptation financing needs for PICs. A metadata analysis harmonizes country‑level assessments into comparable annual measures, while a complementary machine‑learning approach generates synthetic estimates for data‑deficient countries using economic, geographic, and climate‑vulnerability indicators, subject to differences in sectoral definitions and coverage embedded in the underlying source studies. The results show that adaptation needs are large, highly uneven across countries, and exceptionally high relative to GDP, particularly for atoll nations where physical risks dominate. The paper also examines climate adaptation finance flows to PICs over the past decade, distinguishing between commitments and estimated disbursements, and finds that current financing levels fall well short of projected needs. Disbursement ratios vary substantially across financing channels, reflecting differences in institutional capacity and project implementation. Taken together, the findings highlight substantial adaptation financing gaps in PICs and underscore the importance of strengthening institutional capacity and improving the effectiveness and accessibility of climate finance mechanisms.
The world faces the spillovers from the war in the Middle East. In addition to the human toll, its economic effects are global and uneven, once again hitting the poorest and most vulnerable countries the hardest. This comes at a time when policy space has been eroded and geopolitical tensions have been increasing. Spillovers to Low-Income Developing Countries (LIDCs) will transmit through supply disruptions, higher commodity prices, second-round effects on inflation and expectations, tighter global financial conditions, exchange rate pressures, and reduced remittances from members of the Gulf Cooperation Council (GCC). The appropriate policy response depends on how the shock propagates through the domestic economy, calling for pragmatism and agility, supported by credible policy frameworks. In LIDCs, near term policies should be anchored in credible frameworks, while concerted efforts are key to enhance resilience and growth potential. Domestic structural reforms, including building strong institutions, also have an important role in the medium-term to attract stronger FDI inflows and create jobs. Robust support from the international community will be essential—especially for the most vulnerable LIDCs and fragile and conflict-affected states (FCS). The IMF stands ready to deploy all its tools to assist the membership—supporting sound policies, helping ensure this new test does not derail key medium-term priorities, and providing balance of payments financing where needed.
This paper uses scenario analysis to illustrate the implications of persistently higher fiscal deficits for monetary policy in the Czech Republic. It distinguishes across different types of fiscal spending and monetary policy responses. The paper argues that coordinated action, explicitly accounting for the monetary policy response to a fiscal easing, can improve policy outcomes. The analysis is complemented by a historical perspective of fiscal and monetary policy interactions in the Czech Republic. Specifically, the paper reviews past policy synchronization, estimates the responsiveness of fiscal policy to debt levels, and constructs a measure of monetary-fiscal policy tensions based on fiscal r*. Intensifying tensions over the coming years point to a potential need for policy adjustments.
This paper applies the IMF’s Integrated Policy Framework (IPF) to the Czech Republic with the aim of contributing to the use of scenario analysis at the Czech National Bank (CNB). The paper identifies some shallowness of FX markets as the main relevant friction under the IPF. Moreover, while inflation expectations are generally well anchored, they can nevertheless deviate from the inflation target for extended periods. Using an extended version of the QIPF model, the paper broadens the scope of analysis beyond traditional external shock scenarios, to also include domestic fiscal policy shocks and central bank balance sheet normalization. The paper finds that (i) in the event of a global risk-off outflow shock, the CNB can improve macro stabilization through a combined use of reserves and interest rate policy, (ii) refocusing fiscal stimulus towards more productive uses greatly reduces the degree of monetary policy tightening needed to stabilize inflation at target, and (iii) balance sheet normalization is optimally implemented in a preannounced and gradual manner, in which potential currency appreciation in principle can be mitigated through a slightly lower policy rate.
Worsening housing affordability in the Czech Republic reflects a structural imbalance between supply and demand, where income-driven demand has persistently outpaced construction capacity constrained by slow permitting processes and municipal fragmentation. Using a structural vector autoregression (SVAR) framework, this paper quantifies the contributions of demand, supply, and monetary shocks to movements in Czech house prices. The findings show that while monetary policy can moderate cyclical pressures, achieving sustainable affordability requires structural reforms that address rigidities in the construction sector, scale affordable housing development, and modernize property taxation.
