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Republic of Palau: Technical Assistance Report-Managing Government Employment and Compensation-Update
August 16, 2024
Upon the authorities’ request, the IMF’s Fiscal Affairs Department provided technical assistance to Palau on implementing the recommendations of the technical report produced by the November 2023 mission on government compensation and employment. The creation of the Employment and Compensation Committee (ECC) demonstrated the authorities’ commitment to reform and the mission supports the authorities’ proposal to reorganize the ECC into a Steering Committee and a Working Group. Before awarding pay increases to address issues of recruitment and retention, the government needs to assess its fiscal space and determine its expenditure priorities. The importance of systematically and prominently advertising vacancies online cannot be overstated. Human resource laws and regulations are generally fit for purpose, but current practices governing new position creation and recruitment merit review by the ECC with support from FAD.
Republic of Uzbekistan: Technical Assistance Report-Report on National Accounts Mission (July 24–August 4, 2023)
August 16, 2024
A technical assistance mission assisted the Statistics Agency under the President of the Republic of Uzbekistan (SA) in conducting a major revision of national accounts time series. Based on the results of the 2023 survey on non-observed economy (NOE) in hotels, restaurants, and other services, the 2024 major revision increases the nominal GDP for 2017–2023 in the range of 10–12 percent. The mission reviewed the results of the 2024 major revision and provided recommendations for improvement before their publication. These improvements to data and methods will improve the understanding of the Uzbekistan economy, both for domestic policymaking and international surveillance.
Republic of Uzbekistan: Technical Assistance Report-Report on National Accounts Mission (April 8-12, 2024)
August 16, 2024
A technical assistance mission assisted the Statistics Agency under the President of the Republic of Uzbekistan (SA) in conducting a major revision of national accounts time series. Based on the results of the 2023 survey on non-observed economy (NOE) in hotels, restaurants, and other services, the 2024 major revision increases the nominal GDP for 2017–2023 in the range of 10–12 percent. The mission reviewed the results of the 2024 major revision and provided recommendations for improvement before their publication. These improvements to data and methods will improve the understanding of the Uzbekistan economy, both for domestic policymaking and international surveillance.
Industrial Policies for Innovation: A Cost-Benefit Framework
August 16, 2024
When and how should governments use industrial policy to direct innovation to specific sectors? This paper develops a framework to analyze the costs and benefits of industrial policies for innovation. The framework is based on a model of endogenous innovation with a sectoral network of knowledge spillovers (Liu and Ma 2023), extended to capture implementation frictions and alternative policy goals. Simulations show that implementing sector-specific fiscal support is only preferable to sector-neutral support under restrictive conditions—when externalities are well measured (e.g., greenhouse gas emissions), domestic knowledge spillovers of targeted sectors are high (typically in larger economies), and administrative capacity is strong (including to avoid misallocation to politically connected sectors). If any of these conditions are not fully met, welfare impacts of industrial policy quickly become negative. The optimal allocation of support entails greater subsidies to greener sectors, but other factors such as cross-sector knowledge spillovers matter. For a sample of technologically advanced economies, existing industrial policies seem to be directing innovation to broadly the right sectors, but to an excessive degree in most economies, including China and the United States.
Shedding Light on the Local Impact of Temperature
August 16, 2024
We use a new dataset to estimate the impact of temperature on economic activity at a more geographically and temporally disaggregated level than the existing literature. Analyzing 30-kilometer grid cells at a monthly frequency, temperature has a negative, highly statistically significant, and quantitatively large effect on output: a 1 °C increase in monthly temperature is associated with a 0.77 percent reduction in nighttime lights, a proxy for local economic activity. The effects of even a temporary increase in temperature persist for almost one year after the shock. Increases in temperature have an especially large, negative impact on growth in poorer countries, indicating that they are more vulnerable to the impact of climate change.
Programmability in Payment and Settlement
August 16, 2024
Programmability in payment and settlement has yet to realize its potential to support policy goals such as efficiency, safety, and innovation. This paper proposes a comprehensive framework for understanding and evaluating programmability. It explores two key dimensions: external programmatic access, which is the ability for external participants to access the system data and functions with code, and internal programmatic capabilities, the extent to which internal execution of programs is supported and guaranteed. By developing strategies based on these dimensions, financial institutions, regulators, and related actors can better improve resilience, reduce costs and interoperability, all while managing associated risks. The resulting hybrid systems are coordinated efforts balancing the advantages of permissionless blockchains, such as composability, with regulatory requirements and a wider range of technologies. The paper describes these programmatic models to inform and guide the development of digital finance, bridging policy discussions with technical considerations.
How Widespread is FDI Fragmentation?
August 16, 2024
This paper examines the extent to which FDI has fragmented across countries, the ways it has done so, using a modified gravity approach. The paper finds that FDI fragmentation is, for now, not a widespread phenomenon. Instead, fragmentation is circumscribed in two ways. First, the paper finds that geo-economic fragmentation has occurred only for certain industries that likely have strategic value, including computer manufacturing, information and communications, transport, as well as professional, scientific and technical services. Secondly, fragmentation appears to be more pronounced for outward FDI from the US, notably in a shift of US FDI from China to advanced Europe and the rest of Asia. This shift appears to be driven by both the intensive and extensive margin. Fragmentation is also more pronounced for immediate rather than ultimate FDI, with evidence of ultimate parent companies aligning the geopolitical mix of their intermediaries more closely to that of their final FDI host destinations. Overall, the results suggest that fragmentation, where found, may be a response to targeted policies that have placed curbs on certain types of FDI on national security grounds, rather than an indiscriminate breakup of investment links between non-ally countries.
Raghuram Rajan on Blazing a New Path to India’s Development
August 15, 2024
Carbon Emissions from AI and Crypto Are Surging and Tax Policy Can Help
August 15, 2024
Crypto mining and data centers now account for 2 percent of global electricity use and nearly 1 percent of global emissions, and their footprint is growing.
Republic of Armenia: Technical Assistance Report-Tax Compliance and Crypto Assets
August 14, 2024
Armenia has committed to the adoption of the OECD’s Crypto-Asset Reporting Framework. To give effect it will need to enact legislation. An eight-step roadmap for implementation was developed. It sets out each activity, assigns responsibilities and sets timelines.