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Qatar
This 2011 Article IV Consultation highlights that Qatar is using its fiscal space, generated from an increase in hydrocarbon production and prices, to implement a large public spending program. Large infrastructure investments are expected to sustain strong growth of 9 percent to 10 percent in the nonhydrocarbon sector in the medium term. The potential inflationary effect of the recent fiscal package is estimated to be about 1 percentage point. This underscores the need for fiscal policy to monitor aggregate demand and for the Qatar Central Bank to manage liquidity.
Jordan
This 2012 Article IV Consultation highlights that the pace of economic activity in Jordan remains subdued. Following a period of robust growth during 2000–09 supported by a favorable external environment, economic activity slowed sharply. Jordan is also facing risks from a further deterioration in its terms of trade and unrest in neighboring countries. Executive Directors have commended the authorities’ track record of prudent and effective macroeconomic management. Directors have also welcomed the fiscal tightening in the 2012 budget and the authorities’ three-year fiscal reform agenda.
Growth Accelerations and Reversals in Emerging Market and Developing Economies: The Role of External Conditions
This paper investigates how country-specific external demand, external financial conditions, and terms of trade affect medium-term growth in Emerging Market and Developing Economies and the occurrence of growth accelerations and reversals. The importance of country-specific external conditions for medium-term growth has increased over time—in particular, the growing contribution of external financial conditions accounts for one-third of the increase in average income per capita growth between 1995–2004 and 2005–14. Stronger external demand and financial conditions significantly increase the probability of growth accelerations, while a strengthening of any of the three conditions significantly decreases the probability of reversals.
Women Are Key for Future Growth
How important are female workers for economic growth? This paper presents empirical evidence that an increase in female labor force participation is positively associated with labor productivity growth. Using panel data for 10 Canadian provinces over 1990–2015, we found that a 1 percentage point increase in the labor force participation among women with high educational attainment would raise Canada’s overall labor productivity growth by 0.2 to 0.3 percentage point a year. This suggests that if the current gap of 7 percentage points between male and female labor force participation with high educational attainment were eliminated, the level of real GDP could be about 4 percent higher today. The government has appropriately stepped up its efforts to improve gender equality, as part of its growth strategy. In particular, the government’s plan to expand access to affordable child care is a positive step. However, we argue that to maximize the policy outcome given a budget constraint, provision of subsidized child care—including publicly funded child care spaces—should be better targeted to working parents.
The Macroeconomics of the Arab States of the Gulf
Provides original insights into the functioning of the GCC macro-economy. It covers structural, long-term, issues such as the determinants of economic growth, the impact of foreign workers on labour markets, wages, and competitiveness, and the economic impact of a rich state that wants to distribute oil money.
United States
This Selected Issues paper on United States 2012 Article IV Consultation discusses rebound of manufacturing production. The U.S. share in global manufacturing production declined through most of the past three decades, but it has stabilized since the Great Recession. It currently represents about 20 percent of global manufacturing value added. Interestingly, after a sharp increase during most of the previous decade, China’s share in global manufacturing has also stabilized since the Great Recession, at a level similar to that of the United States. The notion of a manufacturing renaissance has been fuelled partly by the rebound in production since the end of the Great Recession.
Monetary Policy Transmission in the GCC Countries
The GCC countries maintain a policy of open capital accounts and a pegged (or nearly-pegged) exchange rate, thereby reducing their freedom to run an independent monetary policy. This paper shows, however, that the pass-through of policy rates to retail rates is on the low side, reflecting the shallowness of money markets and the manner in which GCC central banks operate. In addition to policy rates, the GCC monetary authorities use reserve requirements, loan-to-deposit ratios, and other macroprudential tools to affect liquidity and credit. Nonetheless, a panel vector auto regression model suggests that U.S. monetary policy has a strong and statistically significant impact on broad money, non-oil activity, and inflation in the GCC region. Unanticipated shocks to broad money also affect prices but do not stimulate growth. Continued efforts to develop the domestic financial markets will increase interest rate pass-through and strengthen monetary policy transmission.
Inflation Differentials in the GCC
This paper uses a pairwise approach to investigate the main factors that have been driving inflation differentials in the Gulf Cooperation Council (GCC) region for the past two decades. The results suggest that inflation differentials in the GCC are largely influenced by the oil cycle, mainly through the credit and fiscal channels. This implies that closer coordination of fiscal policies will be key for facilitating the closer integration of the GCC economies and ahead of the move to a monetary union. The results also indicate that after controlling for cyclical factors, convergence increased even during the recent oil boom.
Investment in Emerging Markets We Are Not in Kansas Anymore...Or Are We?
We document that (i) although private investment growth in emerging markets has decelerated in recent years, it came down from cyclical highs and remains close to pre-crisis trends; and (ii) investment-to-output ratios generally remain close to or above historical averages. We show that investment is positively related to expect future profitability, cash flows and debt flows, and negatively associated with leverage. Critically, it is also positively related to (country-specific) commodity export prices and capital inflows. Lower commodity export prices and expected profitability, a moderation in capital inflows, and increased leverage account for the bulk of the recent investment deceleration.
Taking Stock
The effect that the recent decline in the price of oil has had on growth is far from clear, with many observers at odds to explain why it does not seem to have provided a significant boost to the world economy. This paper aims to address this puzzle by providing a systematic analysis of the effect of oil price shocks on growth for 72 countries comprising 92.8% of world GDP. We find that, on net, shocks driving the oil price in 2015 shaved off 0.2 percentage points of growth for the median country in our sample, and 0.17 percentage points in GDP-weighted terms. While increases in oil supply and shocks to oil-specific demand actually boosted growth in 2015 (by about 0.2 and 0.4 percentage points, respectively), weak global demand more than offset these gains, reducing growth by 0.8 percentage points. Counterfactual simulations for the 72 countries in our sample underscore the importance of diversification, rather than low levels of openness, in shielding against negative shocks to the world economy.
