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Few papers have attempted to assess the role of “capacity,” especially in the area of macroeconomic statistics. Consequently, we make an attempt to advance this literature through the construction of a “statistical capacity building index,” and then test its explanatory power on the cyclicality of government spending. Using panel data from 62 developing countries, we find evidence that improvements in this index are associated with less procyclicality of government spending over the period 1990–2012; with the significance of this relationship dependent upon the quality of administrative and technical capacity of budgetary institutions.
Few papers have attempted to assess the role of “capacity,” especially in the area of macroeconomic statistics. Consequently, we make an attempt to advance this literature through the construction of a “statistical capacity building index,” and then test its explanatory power on the cyclicality of government spending. Using panel data from 62 developing countries, we find evidence that improvements in this index are associated with less procyclicality of government spending over the period 1990–2012; with the significance of this relationship dependent upon the quality of administrative and technical capacity of budgetary institutions.
This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.
Many countries, especially developing ones, follow procyclical fiscal polices, namely spending goes up (taxes go down) in booms and spending goes down (taxes go up) in recessions. We provide an explanation for this suboptimal fiscal policy based upon political distortions and incentives for less-than-benevolent government to appropriate rents. Voters have incentives similar to the "starving the Leviathan" classic argument, and demand more public goods or fewer taxes to prevent governments from appropriating rents when the economy is doing well. We test this argument against more traditional explanations based purely on borrowing constraints, with a reasonable amount of success.
We find that data transparency policy reforms, reflected in subscriptions to the IMF’s Data Standards Initiatives (SDDS and GDDS), reduce the spreads of emerging market sovereign bonds. To overcome endogeneity issues regarding a country’s decision to adopt such reforms, we first show that the reform decision is largely independent of its macroeconomic development. By using an event study, we find that subscriptions to the SDDS or GDDS leads to a 15 percent reduction in the spreads one year following such reforms. This finding is robust to various sensitivity tests, including careful consideration of the interdependence among the structural reforms.
The Research Summaries in this issue of the IMF Research Bulletin cover “Tax Capacity and Growth” (by Vitor Gaspar, Laura Jaramillo, and Philippe Wingender), and “U.S. Shale Revolution and Its Spillover Effects on the Global Economy” (Ravi Balakrishnan, Keiko Honjo, Akito Matsumoto, and Andrea Pescatori). The Q&A coauthored by Amadou Sy and Mariama Sow covers “Seven Questions about the Relationship between Country Finance and Governance.” A listing of recent IMF Working Papers, Staff Discussion Notes, and Recommended Readings from IMF Publications is included in the IMF Research Bulletin. Readers can also find news on free-to-view articles from IMF Economic Review and a call for conference papers in this issue of the Bulletin.
Multidimensional poverty measurement and analysis is evolving rapidly. Notably, it has informed the publication of the Multidimensional Poverty Index (MPI) estimates in the Human Development Reports of the United Nations Development Programme since 2010, and the release of national poverty measures in Mexico, Colombia, Bhutan, the Philippines and Chile. The academic response has been similarly swift, with related articles published in both theoretical and applied journals. The high and insistent demand for in-depth and precise accounts of multidimensional poverty measurement motivates this book, which is aimed at graduate students in quantitative social sciences, researchers of poverty measurement, and technical staff in governments and international agencies who create multidimensional poverty measures. The book is organized into four elements. The first introduces the framework for multidimensional measurement and provides a lucid overview of a range of multidimensional techniques and the problems each can address. The second part gives a synthetic introduction of 'counting' approaches to multidimensional poverty measurement and provides an in-depth account of the counting multidimensional poverty measurement methodology developed by Alkire and Foster, which is a straightforward extension of the well-known Foster-Greer-Thorbecke poverty measures that had a significant and lasting impact on income poverty measurement. The final two parts deal with the pre-estimation issues such as normative choices and distinctive empirical techniques used in measure design, and the post-estimation issues such as robustness tests, statistical inferences, comparisons over time, and assessments of inequality among the poor.
The pamphlet (which updates the 1995 Guidelines for Fiscal Adjustment) presents the IMF’s approach to fiscal adjustment, and focuses on the role that sound government finances play in promoting macroeconomic stability and growth. Structured around five practical questions—when to adjust, how to assess the fiscal position, what makes for successful adjustment, how to carry out adjustment, and which institutions can help—it covers topics such as tax policies, debt sustainability, fiscal responsibility laws, and transparency.
Perceptions of Africa have changed dramatically. Viewed as a continent of wars, famines and entrenched poverty in the late 1990s, there is now a focus on “Africa rising†? and an “African 21st century.†? Two decades of unprecedented economic growth in Africa should have brought substantial improvements in well-being. Whether or not they did, remains unclear given the poor quality of the data, the nature of the growth process (especially the role of natural resources), conflicts that affect part of the region, and high population growth. Poverty in a Rising Africa documents the data challenges and systematically reviews the evidence on poverty from monetary and nonmonetary perspectives, as well as a focus on dimensions of inequality. Chapter 1 maps out the availability and quality of the data needed to track monetary poverty, reflects on the governance and political processes that underpin the current situation with respect to data production, and describes some approaches to addressing the data gaps. Chapter 2 evaluates the robustness of the estimates of poverty in Africa. It concludes that poverty reduction in Africa may be slightly greater than traditional estimates suggest, although even the most optimistic estimates of poverty reduction imply that more people lived in poverty in 2012 than in 1990. A broad-stroke profile of poverty and trends in poverty in the region is presented. Chapter 3 broadens the view of poverty by considering nonmonetary dimensions of well-being, such as education, health, and freedom, using Sen's (1985) capabilities and functioning approach. While progress has been made in a number of these areas, levels remain stubbornly low. Chapter 4 reviews the evidence on inequality in Africa. It looks not only at patterns of monetary inequality in Africa but also other dimensions, including inequality of opportunity, intergenerational mobility in occupation and education, and extreme wealth in Africa.
This report provides actionable advice on how to design and implement fiscal policies for both development and climate action. Building on more than two decades of research in development and environmental economics, it argues that well-designed environmental tax reforms are especially valuable in developing countries, where they can reduce emissions, increase domestic revenues, and generate positive welfare effects such as cleaner water, safer roads, and improvements in human health. Moreover, these reforms need not harm competitiveness. New empirical evidence from Indonesia and Mexico suggests that under certain conditions, raising fuel prices can actually increase firm productivity. Finally, the report discusses the role of fiscal policy in strengthening resilience to climate change. It provides evidence that preventive public investments and measures to build fiscal buffers can help safeguard stability and growth in the face of rising climate risks. In this way, environmental tax reforms and climate risk-management strategies can lay the much-needed fiscal foundation for development and climate action.