IMF World Economic Outlook Research Articles

Flexible Labour, Flexible Production and Innovation-by-Agreement: International Comparisons Contesting the Lindbeck-Snower Insider-Outsider Thesis and 'Structural Reforms' in the European Union

IntroductionSince the onset of the financial crisis of 2007-08, 'structural reforms' to achieve more flexible labour markets have been demanded by the 'Troikas' of the IMF, the European Central Bank and the European Commission of weaker and mainly peripheral EU member states. This paper submits that the case for them is unfounded. It does so first by citing rethinking by the IMF in a study that finds no link between employment protection and inefficiency. Also a questioning of structural reforms by Benoit Cae ure, a member of the executive board of the ECB.It then critiques the insider-outsider theory forwarded by former Nobel economics committee member Assar Lindbeck and the British economist Denis Snower on the grounds that their flexible labour market case, though influencing claims for structural reforms, was entirely theoretical, with no supporting evidence. It contrasts this with the flexible production model in Japan, where failures in flexible labour markets in the early 20th century gave rise to lifetime employment for core workers, and illustrates how this enabled the kaizen of continuous improvement and achievement of some of the most competitive companies in the world. It relates this to western theories of psychological contract and social contract and. demonstrates that recommendation of this flexible production model, with the principle of work-life balance, was made to and endorsed by the European Council in the Lisbon Agenda 2000. It also summarises some implications in relation to feasible policies to recover employment in Europe.1.Deflation, Flexible Labour Markets and Structural Reforms,Flexibilisation of labour markets has been integral to the case for 'structural reforms' which have been demanded of several EU member states since the onset of the financial crisis of 2007-08. Such reforms assume that increased economic efficiency, and innovation, depend on a reduction of social protection of labour. If business did not need to engage employees on the basis of long-term contracts, or any contracts, and could fire them easily, then new and innovative firms would be able to attract the new workers they need to expand their business (Janssen, 2015).Yet recent research by the IMF has found there is no evidence that deregulation of labour markets increases economic efficiency. This is highlit in a text box in the IMF's World Economic Outlook of April 2015 recognising that productivity in terms of output per worker can be increased by using more highly skilled labour and information and communications technology, and by investing more in research and development. But, in a survey of OECD countries, does not find any statistically significant negative effects on productivity, and thus economic efficiency that result from defence of employee rights through protective labour market legislation (IMF, 2015a).In addition, in November 2015, an IMF Staff Discussion Note published findings that 'beggar-thy-neighbour' wages policy through 'structural reforms' was not a condition for recovery through increased competitiveness but was deflationary (IMF, 2015b). Unlike the 'crowding out' hypothesis of Milton Friedman, the IMF also has found that there is no evidence that public spending drains rather than sustains the private sector (Abiad, Furceri and Topalova, 2015). In effect, EU 'structural reforms' are not working at a macroeconomic level. Rather they are imposing massive social and political costs in terms of high levels of unemployment which is encouraging political extremism (Holland, 2015b).In parallel, in statements in 2014 and 2015, Benoit Cae ure, French Member of the Executive Committee of the ECB, questioned the case for structural reforms and the obsession with competitiveness at the cost of demand. As he put it'I want to stress that we need to enhance our understanding of the supply side so we can better appreciate its interactions with demand. For instance, we know too little about which policies will extend the benefits of micro-level reforms to the macroeconomy. …

Some Challenges to Economic Growth and Stability in China

China has experienced an incredible rate of growth in recent decades. According to the April 2015 issue of the IMF World Economic Outlook database, China’s GDP based on current prices has grown fro...

Visions about a Renewable Future

Visions about a Renewable Future

How to Explain Errors in Budget Balance Forecasts in Euro Area Countries? Empirical Evidence Based on Real-Time Data

The aim of this study is to explore budget planning in the euro area countries in 2004-2014. Our analyses are based on annual real-time data from the IMF World Economic Outlook publications. As forecasts made by different institutions are strongly correlated, our dataset reasonably reflects information available for policy makers in real-time. We examine whether real-time forecasts of overall budget balance, real GDP growth and output gap have been systematically biased. We also analyse forecast accuracy of potential output growth, which we construct using different vintages of real-time data. Our results indicate systematic biases in forecasts. Further, we study how real-time macroeconomic conditions affect budget planning. For comparison, we also consider how ex post economic conditions and ex post budget balance developments are related. We find robust evidence of mean reversion in budget balances, in both real-time and revised data. Mean reversion is related only to negative budget balances, and it is systematically stronger with respect to revised information. Finally, we analyse errors in budget balance forecasts. We provide robust evidence that revisions to current budget balance have contributed to errors in budget balance forecasts. We also find that forecasted macroeconomic conditions (potential output growth and real GDP growth) and their revisions have affected errors in budget balance forecasts. Overall, our results indicate that real-time uncertainty and revisions materially affect budget planning.

An Impact of Financial Decision Making of Independent Women: Need for Financial Inclusive Growth of Society

Financial inclusiveness of the country is the need of any developing nation for becoming developed country. As India is one of the most promising developing countries as 2nd largest populated country with average 7% GDP. According to IMF World Economic Outlook (April-2015), GDP growth rate of India in 2014 is 7.168% and India is 15th fastest nation of the world. Total Female Population in India, 622, 365, 144 (622 million in 2015) which are the huge population with money as urban 20% female is working. The study was done for rural women to check the potential & scope of improvement to grow financially.

Catching-up and Club Convergence From Cross-National Perspective a Statistical Study for the Period 1980–201

The paper presents the analysis outcomes on the catching-up process. Additionally, it seeks to identify the “convergence clubs” in cross-national section. It implements a traditional analysis of convergence, tracking the catching-up process as well as the per capita income dynamics across time. The author finds no statistically significant relationship between an average annual GDP PPP per capita growth rates (as exponential growth rate) and initial GDP PPP per capita (as natural logarithm) in a selected group of countries. The author also identifies the existence of “rich country cluster” and “poor country cluster” in the analyzed sample. For the statistical analysis the author applies the country sample composed of 101 economies. All data concerning GDP PPP per capita are drawn from the IMF World Economic Outlook Database 2011. The time coverage is 1980-2010.

Data Dissemination Standards and the Statistical Quality of the IMF's World Economic Outlook Forecasts

This paper analyzes the effects of IMF member countries participation in the IMF’s Data Standards Initiatives (DSI) on the statistical quality of WEO forecasts. Results show that WEO forecasts for SDDS subscribers are in general better than for GDDS participants and those member countries than do not participate in the DSIs. Policy implications are that the DSI positively affect the statistical quality of forecasts and by extension improve the necessary conditions for multilateral surveillance and the provision of member countries with high quality policy advice.

A Historical Public Debt Database

This paper describes the compilation of the first truly comprehensive database on gross government debt-to-GDP ratios, covering nearly the entire IMF membership (174 countries) and spanning an exceptionally long time period. The database was constructed by bringing together a number of other datasets and information from original sources. For the most recent years, the data are linked to the IMF World Economic Outlook (WEO) database to facilitate regular updates. The paper discusses the evolution of debt-to-GDP ratios across country groups for several decades, episodes of debt spikes and reversals, and a pattern of negative correlation between debt and growth.

Toward Effective Multilateralism: Why Bigger May Not Be Better

Click to increase image sizeClick to decrease image size Acknowledgements This article was adapted from a paper commissioned by the Stanley Foundation. Notes 1. See Brookings Institution, “Managing Global Insecurity,” www.brookings.edu/projects/mgi.aspx; Daniel Drezner, “The New New World Order,” Foreign Affairs 86, no. 2 (March/April 2007); G. John Ikenberry and Anne-Marie Slaughter, Forging a World of Liberty Under Law, U.S. National Security in the 21st Century (Princeton, NJ: Princeton University Press, September 27, 2006), http://www.princeton.edu/~ppns; Parag Khanna, Empires and Influence in the New Global Order (New York: Random House, 2008); Ruth Wedgwood, “Give the United Nations a Little Competition,” New York Times, December 5, 2005, http://www.nytimes.com/2005/12/05/opinion/05wedgewood.html?pagewanted=print. For Barack Obama's stated views, see “Renewing American Leadership,” Foreign Affairs 86, no. 4 (July/August 2007). 2. Richard Haass, “The Age of Nonpolarity: What Will Follow U.S. Dominance,” Foreign Affairs 87, no. 3 (May/June 2008): 55–56. 3. Francis Fukuyama, America at the Crossroads: Democracy, Power, and the Neoconservative Legacy (New Haven, Conn.: Yale University Press, 2007), 163. 4. See Laurie Garrett, “The Challenge of Global Health,” Foreign Affairs 86, no. 1 (January/February 2007). 5. Michael Gerson, “The Despots’ Democracy,” Washington Post, May 28, 2008, p. A13, http://www.washingtonpost.com/wp-dyn/content/article/2008/05/27/AR2008052702556.html. For a good account of South Africa's “rogue” diplomacy see Pauline H. Baker and Princeton N. Lyman, “South Africa: From Beacon of Hope to Rogue Democracy,” Stanley Foundation Working Paper, December 2008, http://www.cfr.org/content/thinktank/South_Africa_Paper_Dec_2008.pdf. 6. See Wilson D. Miscamble, From Roosevelt to Truman: Potsdam, Hiroshima, and the Cold War (New York: Cambridge University Press, 2008). 7. See Kent E. Calder and Francis Fukuyama, eds., East Asian Multilateralism: Prospects for Regional Stability (Baltimore, MD: Johns Hopkins University Press, 2008). 8. IMF, “IMF Member Quotas’ and Voting Power, and IMF Board of Governors,” April 9, 2009, http://www.imf.org/external/np/sec/memdir/members.htm. The GDP figures for Belgium and India are for 2008 and were sourced from the IMF's World Economic Outlook Database. See http://www.imf.org/external/pubs/ft/weo/2009/01/weodata/weoselgr.aspx. 9. Chris Giles and Ralph Atkins, “IMF Members Back Plans for Voting Reforms,” Financial Times, September 19, 2006, 8. 10. Martin Wolf, Fixing Global Finance (Baltimore, MD: Johns Hopkins University Press, 2008). 11. Office of the Press Secretary, The White House, “News Conference by President Obama,” London, United Kingdom, April 2, 2009, http://www.whitehouse.gov/the_press_office/news-conference-by-president-obama-4-02-09/. 12. See Richard N. Gardner, Sterling-Dollar Diplomacy: Anglo-American Collaboration in the Reconstruction of Multilateral Trade (Oxford, UK: Clarendon Press, 1956). 13. Yoichi Funabashi, “Forget Bretton Woods II: the Role for U.S.–Japan–China Trilateralism,” The Washington Quarterly 32, no. 2 (April 2009): 7–25, http://www.twq.com/09april/docs/09apr_Funabashi.pdf. 14. See “The G-20 Communique,” Brad Setser: Follow the Money Blog, Council on Foreign Relations, November 17, 2008, http://blogs.cfr.org/setser/2008/11/17/g-20-post-mortem/ (hereinafter Setser blog); “Statement from G-20 Summit,” New York Times, November 15, 2008, www.nytimes.com/2008/11/16/washington/summit-text.html. 15. See John Kirton and Lynn Robertson, “Is Isolation of Unpleasant Governments a Winning Strategy?” (paper presented at Berlin Roundtable Meeting on “The Role of the G-8 in an Endangered Global Economic and Political Climate,” Berlin, Germany, June 1–2, 2007). 16. See Martin Wolf, “What the G-2 Must Discuss Now that the G-20 is Over,” FT.com/Economists Forum blog, April 8, 2009, http://blogs.ft.com/economistsforum/2009/04/what-the-g2-must-discuss-now-the-g20-is-over/. 17. Brad Setser, “The Shape of Things to Come,” Finance and Development 46, no. 1 (March 2009), http://www.imf.org/external/pubs/ft/fandd/2009/03/setser.htm. 18. UN High Level Panel, “A More Secure World: Our Shared Responsibility,” December 2, 2004, http://www.wwan.cn/secureworld/. 19. See Anne-Marie Slaughter, A New World Order (Princeton, NJ: Princeton University Press, 2005). Additional informationNotes on contributorsThomas WrightThomas Wright is the executive director of studies at The Chicago Council on Global Affairs

Modeling Aggregate Use of IMF Resources—Analytical Approaches and Medium-Term Projections

This paper presents two approaches to modeling the use of IMF resources from the General Resources Account in order to gauge whether the recent decline in credit outstanding is a temporary or a permanent phenomenon. The two approaches—the time-series behavior of credit outstanding and a two-stage program selection and access model—yield the same conclusion: the use of IMF resources is likely to decline sharply. Specifically, credit outstanding is projected to decline from an average of SDR 50 billion over 2000–05 to an average of about SDR 8 billion over 2006–10. Stochastic simulations suggest that it is unlikely to be much higher. These results are based on the IMF's World Economic Outlook projections with a correction for historically observed overoptimistic biases. In addition, alternative scenarios assuming weaker economic performance or a less benign global economic environment do not materially alter these results.

Genesis of Macro-Modelling for the IMF's World Economic Outlook

This paper reviews the genesis and early development of macro-modelling for the IMF's World Economic Outlook from the report's inception up to the early 1990s. Models covered include the Multilateral Exchange Rate Model, World Trade Model, Minimod, Multimod Marks 1 and 2, the Disaggregated Developing Country Model and Rational Expectations Developing Country Model.

Further Cross-Country Evidence on the Accuracy of the Private Sector's Output Forecasts

This paper evaluates the performance of Consensus Forecasts of real GDP growth for a large number of industrialized and developing countries for the time period October 1989 to December 1999. The questions addressed are the following: How accurate are private sector forecasts? How does their accuracy compare with that of the IMF's World Economic Outlook? How well do forecasters predict rare events such as recessions or crises? Is discord among forecasters associated with lower forecast accuracy? Copyright 2002, International Monetary Fund