The Unassuming Economist

The latest IMF country report finds that “Gender inequality in Nigeria is high and widespread across areas of economic opportunities (enforcement of legal rights; access to education, health, financial services) and outcomes (labor force participation, entrepreneurship, political representation, income). These inequalities have led to substantial macroeconomic losses in terms of growth, income equality, and economic diversification. Nigeria’s real GDP per capita growth could, on average, be higher by 1¼ percentage points annually if gender inequality was reduced to that of peers in the region. Addressing challenges in health and education, such as by providing necessary infrastructure (sanitation facilities and electricity), equalizing legal rights, and combatting violence against women and girls, will be essential for Nigeria to reap the demographic dividend from its young and rapidly growing population.”

The latest IMF country report on Nigeria finds that “Income inequality and poverty rates are high in Nigeria, with the latter having declined more slowly compared to other countries. At the same time, moving closer to achieving the sustainable development goals and addressing Nigeria’s large development needs will require additional financing. This chapter finds that reforms to generate fiscal space—increases in value-added tax collection, excises, and electricity tariffs—are progressive, i.e. they reduce income inequality. However, they increase poverty gaps and rates to varying extents. Scaling up social safety net transfers and expanding their scope to cover a wider share of the poor can, to some extent, compensate for these adverse impacts at relatively low cost, and bring down poverty rates more generally. In the short term, other measures to shield vulnerable households’ income, including through lifeline electricity tariffs, and higher spending on health and education are needed.”

My new paper with Sangyup Choi and Davide Furceri has been featured the Central Banking:

“A working paper published by the International Monetary Fund has concluded anchoring inflation expectations – rather than the level of inflation – is what has a statistical effect on growth.

In their paper, Sangyup Choi, Davide Furceri, and Prakash Loungani explore whether low inflation and the anchoring of inflation expectations are positive for economic growth, as central bankers often assert.

While they find inflation anchoring fosters growth in industries that are more credit-constrained, the authors also attempt to “disentangle” the effect of inflation anchoring from the effect of the level of inflation.

Using data on sectoral growth for 36 advanced and emerging market economies from 1990–2014, the authors “explicitly” control for interactions between “the level of inflation and industry-specific measures of credit constraints”.

“While these two channels tend to be correlated, since low inflation is often achieved by better inflation anchoring … the results of the analysis suggest that it is inflation anchoring and not the level of inflation per se that has a statistical effect on growth,” they say.”

From a new IMF Working Paper:

“We compare business cycle fluctuations in Sub-Saharan African (SSA) countries vis-à-vis the rest of the world. Our main results are as follows: (i) African economies stand out by their macroeconomic volatility, which is is reflected in the volatility of output and other macro variables; (ii) inflation and output tend to be negatively correlated; (iii) unlike advanced economies and emerging markets (EMs), trade balances and current accounts are acyclical in SSA; (iv) the volatility of consumption and investment relative to GDP is larger than in other countries; (v) the cyclicality of consumption and investment is smaller than in advanced economies and EMs; (vi) there is little comovement between consumption and investment; (vii) consumption and investment are strongly positively correlated with imports.”

Continue reading here.

From a new IMF working paper:

“Over the past two decades, Mexico has hedged oil price risk through the purchase of put options. We examine the resulting welfare gains using a standard sovereign default model calibrated to Mexican data. We show that hedging increases welfare by reducing income volatility and reducing risk spreads on sovereign debt. We find welfare gains equivalent to a permanent increase in consumption of 0.44 percent with 90 percent of these gains stemming from lower risk spreads.”