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.
The costs of fragility are high, but judicious economic policies can help foster trust and support economic stability and growth
Capital markets integration, expanding opportunities for workers, and bigger consumer markets will allow companies to grow faster
Building foreign exchange reserves requires sound policies and takes time, but global efforts to lower the cost of holding them can help
There are few elegant, easy, or politically attractive ways to reduce debt
Diversification has become harder since 2020 as stocks and bonds tend to move in tandem during sharp selloffs, adding to financial stability concerns
But risks are rising, including from the concentration of tech investment and the negative effects of trade disruptions, which may build over time
Despite global headwinds in recent years, Liechtenstein has preserved high incomes, low unemployment, and sizable buffers with virtually no debt. Yet, its highly open economy is exposed to continuing global and geopolitical shifts and some policy areas require attention. Higher tariffs are weighing on industrial activity and the labor market is weakening. Medium-term spending pressures are rising but are not yet fully quantified. Productivity remains above peers, but the gap is narrowing.
This paper evaluates the effectiveness and robustness of a Tax on Inflation Policy (TIP) for improving welfare at the Zero Lower Bound (ZLB) in a New Keynesian model. When the ZLB results from a fall in the neutral interest rate, a negative TIP mitigates deflationary pressures, narrows the output gap, and implements the constrained-efficient allocation. When the ZLB is driven by self-fulfilling expectations, TIP can eliminate the deflationary equilibrium altogether. A rule that responds aggressively to inflation with a negative intercept proves robust across scenarios. Using a medium-scale model calibrated to Japan, we quantify a robust TIP rule that would have lifted the economy out of its liquidity trap.
We study why inflation responds differently to economic activity over time. Using survey data covering the universe of Japanese firms, we show that firms are unable to perfectly distinguish aggregate from sector-specific demand changes, leading to positively correlated expectations about these two components. We develop a model with imperfect information that reproduces this pattern and predicts that higher relative volatility of sector-specific demand reduces the sensitivity of inflation to changes in aggregate demand, thus flattening the Phillips curve. Testing this prediction with Japanese data from 1976 to 2022, we find that increases in the volatility of sectoral demand shocks explain significant changes in the Phillips curve slope over the sample period. Our results provide a novel explanation for the flattening of the Phillips curve: the composition of shocks -- not just their magnitude -- critically affects the sensitivity of inflation to aggregate demand.
The paper explores the role of banking supervisors with respect to banks’ implementation of IFRS 9. It discusses: the benefits associated with IFRS 9 as well as the main challenges from banking soundness and risk management perspectives; the role that banking supervisors should play in achieving a robust implementation of IFRS 9; and steps that can be taken to implement IFRS 9 in a proportionate and sound manner while minimizing procyclicality. It argues that authorities should consider introducing a transition period to provide sufficient preparation time for banks and banking supervisors, with an appropriate sequencing of key tasks to be completed; IFRS 9 should be implemented in a proportionate and sound manner; and regulatory provisioning systems used as prudential backstop should be maintained until supervisors have gained sufficient experience with IFRS 9.
This paper explores the nature and underlying factors contributing to fiscal slippages in selected East African countries from 2000 to 2024. Slippages are proxied by the budget forecast errors as captured in WEO projections by IMF Staff. Our findings indicate that budget forecasts tend to be systematically optimistic with actual budget balances typically falling short of projected balances, primarily due to spending overruns and, to a lesser extent, revenue shortfalls. Unexpected revenue shortfalls largely arise from indirect taxes (VAT and customs), whereas spending slippages are predominantly influenced by public investment, goods and services and social protection expenditures. The optimism bias is more pronounced in situations where the budget is in deficit, during economic booms, among commodity-exporting countries, in the absence of an IMF program or fiscal rules, and when fiscal institutions are weak. These results are robust to excluding potential outliers, expanding the sample to other SSA countries, and controlling for country specific effects as well as potential endogeneity bias.
We study the joint dynamics in the volume and prices of capital fows to emerging market economies (EMEs). A dynamic factor model augmented with sign and zero restrictions allows us to identify demand/supply shocks of idiosyncratic/common nature. While common credit supply shocks are the main driver of prices, idiosyncratic credit demand and supply shocks account for most of the variation in quantities. A structural multicountry SOE/RBC model is calibrated to EMEs data to further shed light on the main transmission channels. Augmented with correlated productivity and interest rate shocks, the model matches the comovement between prices and quantities as well as business cycle moments. Common credit demand drivers, captured as correlated TFP shocks, account for around half of the observed comovement in quantities but they are not a signicant driver of price comovement. Fundamentals matter signicantly more for capital flows than for country spreads, which are driven by a sizeable global financial cycle.
The Central Bank of Solomon Islands (CBSI) has received sustained IMF technical assistance since 2021 to strengthen its enterprise-wide risk management framework. The objective of the 2025 onsite mission was to conduct an independent assessment of CBSI’s progress in implementing recommendations from the previous reports. In addition, the mission team provided technical guidance on selected areas, including implementation of the Three Lines Model, business continuity management, and good practices for interaction with internal audit. These activities were intended to support CBSI maturing its enterprise risk management to better safeguard the organization and to contribute to strategic decision-making. While CBSI has made modest but meaningful advances—such as establishing the Risk Management Committee, approving and launching the Enterprise Risk Management Policy, and developing a draft Business Continuity Management Plan—gaps remain. A follow-up technical assistance mission, including an Executive and Board workshop, is recommended within 18–24 months.
The Technical Assistance (TA) assisted Somalia in reviewing its prudential regulation on classification and provisioning of credit operations aiming at aligning it with international standards and benchmarks and delivered a dedicated training on credit risk. This mission is part of a broad initiative to help the Central Bank of Somalia (CBS) improve the quality of data submitted by commercial banks, according to an action plan approved in July 2024. The effort covers reviewing prudential regulations, training supervisors, and updating data requirement templates. The prudential supervision framework under review includes capital requirements, liquidity requirements, related party transactions and assets classification and provisions. While capital and liquidity were addressed in earlier TAs, the current focus is on asset classification, provisioning, and broader credit risk issues.
The costs of fragility are high, but judicious economic policies can help foster trust and support economic stability and growth
Capital markets integration, expanding opportunities for workers, and bigger consumer markets will allow companies to grow faster
Building foreign exchange reserves requires sound policies and takes time, but global efforts to lower the cost of holding them can help
There are few elegant, easy, or politically attractive ways to reduce debt
Diversification has become harder since 2020 as stocks and bonds tend to move in tandem during sharp selloffs, adding to financial stability concerns
But risks are rising, including from the concentration of tech investment and the negative effects of trade disruptions, which may build over time
Despite global headwinds in recent years, Liechtenstein has preserved high incomes, low unemployment, and sizable buffers with virtually no debt. Yet, its highly open economy is exposed to continuing global and geopolitical shifts and some policy areas require attention. Higher tariffs are weighing on industrial activity and the labor market is weakening. Medium-term spending pressures are rising but are not yet fully quantified. Productivity remains above peers, but the gap is narrowing.
This paper evaluates the effectiveness and robustness of a Tax on Inflation Policy (TIP) for improving welfare at the Zero Lower Bound (ZLB) in a New Keynesian model. When the ZLB results from a fall in the neutral interest rate, a negative TIP mitigates deflationary pressures, narrows the output gap, and implements the constrained-efficient allocation. When the ZLB is driven by self-fulfilling expectations, TIP can eliminate the deflationary equilibrium altogether. A rule that responds aggressively to inflation with a negative intercept proves robust across scenarios. Using a medium-scale model calibrated to Japan, we quantify a robust TIP rule that would have lifted the economy out of its liquidity trap.
We study why inflation responds differently to economic activity over time. Using survey data covering the universe of Japanese firms, we show that firms are unable to perfectly distinguish aggregate from sector-specific demand changes, leading to positively correlated expectations about these two components. We develop a model with imperfect information that reproduces this pattern and predicts that higher relative volatility of sector-specific demand reduces the sensitivity of inflation to changes in aggregate demand, thus flattening the Phillips curve. Testing this prediction with Japanese data from 1976 to 2022, we find that increases in the volatility of sectoral demand shocks explain significant changes in the Phillips curve slope over the sample period. Our results provide a novel explanation for the flattening of the Phillips curve: the composition of shocks -- not just their magnitude -- critically affects the sensitivity of inflation to aggregate demand.
The paper explores the role of banking supervisors with respect to banks’ implementation of IFRS 9. It discusses: the benefits associated with IFRS 9 as well as the main challenges from banking soundness and risk management perspectives; the role that banking supervisors should play in achieving a robust implementation of IFRS 9; and steps that can be taken to implement IFRS 9 in a proportionate and sound manner while minimizing procyclicality. It argues that authorities should consider introducing a transition period to provide sufficient preparation time for banks and banking supervisors, with an appropriate sequencing of key tasks to be completed; IFRS 9 should be implemented in a proportionate and sound manner; and regulatory provisioning systems used as prudential backstop should be maintained until supervisors have gained sufficient experience with IFRS 9.
This paper explores the nature and underlying factors contributing to fiscal slippages in selected East African countries from 2000 to 2024. Slippages are proxied by the budget forecast errors as captured in WEO projections by IMF Staff. Our findings indicate that budget forecasts tend to be systematically optimistic with actual budget balances typically falling short of projected balances, primarily due to spending overruns and, to a lesser extent, revenue shortfalls. Unexpected revenue shortfalls largely arise from indirect taxes (VAT and customs), whereas spending slippages are predominantly influenced by public investment, goods and services and social protection expenditures. The optimism bias is more pronounced in situations where the budget is in deficit, during economic booms, among commodity-exporting countries, in the absence of an IMF program or fiscal rules, and when fiscal institutions are weak. These results are robust to excluding potential outliers, expanding the sample to other SSA countries, and controlling for country specific effects as well as potential endogeneity bias.
We study the joint dynamics in the volume and prices of capital fows to emerging market economies (EMEs). A dynamic factor model augmented with sign and zero restrictions allows us to identify demand/supply shocks of idiosyncratic/common nature. While common credit supply shocks are the main driver of prices, idiosyncratic credit demand and supply shocks account for most of the variation in quantities. A structural multicountry SOE/RBC model is calibrated to EMEs data to further shed light on the main transmission channels. Augmented with correlated productivity and interest rate shocks, the model matches the comovement between prices and quantities as well as business cycle moments. Common credit demand drivers, captured as correlated TFP shocks, account for around half of the observed comovement in quantities but they are not a signicant driver of price comovement. Fundamentals matter signicantly more for capital flows than for country spreads, which are driven by a sizeable global financial cycle.
The Central Bank of Solomon Islands (CBSI) has received sustained IMF technical assistance since 2021 to strengthen its enterprise-wide risk management framework. The objective of the 2025 onsite mission was to conduct an independent assessment of CBSI’s progress in implementing recommendations from the previous reports. In addition, the mission team provided technical guidance on selected areas, including implementation of the Three Lines Model, business continuity management, and good practices for interaction with internal audit. These activities were intended to support CBSI maturing its enterprise risk management to better safeguard the organization and to contribute to strategic decision-making. While CBSI has made modest but meaningful advances—such as establishing the Risk Management Committee, approving and launching the Enterprise Risk Management Policy, and developing a draft Business Continuity Management Plan—gaps remain. A follow-up technical assistance mission, including an Executive and Board workshop, is recommended within 18–24 months.
The Technical Assistance (TA) assisted Somalia in reviewing its prudential regulation on classification and provisioning of credit operations aiming at aligning it with international standards and benchmarks and delivered a dedicated training on credit risk. This mission is part of a broad initiative to help the Central Bank of Somalia (CBS) improve the quality of data submitted by commercial banks, according to an action plan approved in July 2024. The effort covers reviewing prudential regulations, training supervisors, and updating data requirement templates. The prudential supervision framework under review includes capital requirements, liquidity requirements, related party transactions and assets classification and provisions. While capital and liquidity were addressed in earlier TAs, the current focus is on asset classification, provisioning, and broader credit risk issues.
