The Unassuming Economist

From the latest IMF working paper:

“This paper examines the output effects of changes in public expenditure and revenue in sub-Saharan African countries during 1990–2016. Fiscal multipliers in sub-Saharan Africa are somewhat smaller than those in advanced and emerging economies. The effect of changes in fiscal policy on output depends on the composition: cutting public investment has a larger effect on output than cutting public consumption or raising revenue. Episodes of fiscal consolidation have short- and medium-term output effects, but here, too, composition matters: fiscal consolidations based on reducing public investment have the largest effect on output, while fiscal consolidations based on revenue mobilization are less harmful than those based on public investment cuts. These findings suggest that the negative impact on growth can be mitigated through the design of fiscal adjustment and the accompanying policy environment.”

IMF’s latest report says that “Growth in Albania is recovering but has recently been driven by large FDI projects, raising concerns about the sustainability of the recovery and underlying growth potential. This study assesses the prospects and challenges for medium term growth. While Albania’s external conditions are favorable, low savings and demographic trends are expected to weigh on investment and labor utilization. However, EU accession literature suggests that institutional reforms as an EU candidate country can catalyze productivity improvements and potential growth in Albania.”

A new IMF report on Finland’s labor market finds that “the response of employment to output seems to have slowed since 2000. Based on the entire 1973–2016 sample, the estimate of [Okun coefficient] is equal to 0.5. However, there are substantial differences between the subsamples considered. For example, using data until 2000 yields a [Okun coefficient] of 0.75, while more recently a one percent increase in output has been associated only with a 0.3 percent expansion of employment.”

Continue reading here, page 23-30.

A new IMF report says that “Finland’s labor market features a highly educated workforce and has safeguarded equality during a time of adverse shocks. But labor market outcomes have not been as good as in Nordic peers for many years. This paper suggests that there is room for improvement in two main areas. First, wages have become misaligned with productivity at the sectoral level during the past decade. More firm-level flexibility in collective bargaining could help to address this. Second, labor supply is lower among certain population groups compared to other Nordics; to this end, bolstering work incentives further for the low skilled, women of child-bearing age, young and old workers would help. These structural measures would be important also because employment seems to respond less to cyclical growth upswings now than before the turn of the millennium. Finally, additional policies to facilitate the adjustment of the labor market to global trends—technological change and globalization—will likely be needed over the longer term.”

From a new IMF working paper:

“We present estimates of welfare by country for 2007 and 2014 using the methodology of Jones and Klenow (2016) which incorporates consumption, leisure, mortality and inequality, and we extend the methodology to include environmental externalities. During the period of the global financial crisis welfare grew slightly more rapidly than income per capita, mainly due to improvements in life expectancy. This led to welfare convergence in most regions towards advanced country levels. Introducing environmental effects changes the welfare ranking for countries that rely heavily on natural resources, highlighting the importance of the natural resource base in welfare. This methodology could provide a theoretically consistent and tractable way of monitoring progress in several Sustainable Development Goal (SDG) indicators.”