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This paper proposes a leading indicator, the "Google Mobility Index," for nowcasting monthly industrial production growth rates in selected economies in Latin America and the Caribbean. The index is constructed using the Google COVID-19 Community Mobility Report database via a Kalman filter. The Google database is publicly available starting from February 15, 2020. The paper uses a backcasting methodology to increase the historical number of observations and then augments a lag of one week in the mobility data with other high-frequency data (air quality) over January 1, 2019 to April 30, 2020. Finally, mixed data sampling regression is implemented for nowcasting industrial production growth rates. The Google Mobility Index is a good predictor of industrial production. The results suggest a significant decline in output of between 5 and 7 percent for March and April, respectively, while indicating a trough in output in mid-April.
Air Quality Monitoring --- Coronavirus --- Economic Forecasting --- Economic Growth --- Google Mobility Index --- Industrial Economics --- Industrial Production --- Information Technology --- Production Growth
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This paper identifies and describes key features of Caribbean business cycles during the period 1963-2003. In particular, the chronologies in the Caribbean classical cycle (expansions and contractions in the level of output) and growth cycle (periods of above-trend and below-trend rates of economic growth) are identified. It is found that Caribbean classical cycles are longer-lived than those of developed countries and non-Caribbean developing countries. While there are large asymmetries in the duration and amplitude of phases in the Caribbean classical cycle, on both measures the Caribbean growth cycle is much more symmetric. Further, there is some evidence of synchronization among the classical cycles of Caribbean countries, and stronger evidence of synchronization of Caribbean growth cycles.
Business cycles --- Economic cycles --- Economic fluctuations --- Cycles --- Cariribean Area --- Economic policy. --- Macroeconomics --- Production and Operations Management --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Macroeconomics: Production --- Economic growth --- Output gap --- Production growth --- Production --- Economic theory --- United States
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The concepts of potential output and the output gap are central to the IMF’s analytical work in providing policy recommendations to member governments. This key role has stimulated research at the IMF to develop and refine estimation techniques. This paper summarizes the methodology and results of IMF research on potential output, which has focused mainly on the industrial countries but more recently has addressed issues related to developing countries and countries in transition. It then discusses the approaches that country desk officers use for operational purposes, and presents estimates of potential output for the major industrial countries.
Macroeconomics --- Production and Operations Management --- Macroeconomics: Production --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Labor Economics: General --- Labour --- income economics --- Potential output --- Total factor productivity --- Output gap --- Production growth --- Labor --- Economic theory --- Industrial productivity --- Labor economics --- United States
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This paper documents the extent of financial linkages between Canada and the United States and explores the impact of changes in U.S. financial conditions on financial conditions and real economic activity in Canada. It shows that close to a quarter of financing by Canadian corporations is raised south of the border. Empirical analysis using structural vector autoregressions establishes that a tightening in U.S. financial conditions has significant implications for real activity in Canada. For example, a percentage point increase in the 3- month T-bill rate, other things being equal, leads to a decline of slightly more than one percentage point in Canada's real GDP growth after 3 quarters. That decline can be decomposed into three channels: the direct financial channel, where the slowdown is attributed to a rising cost of funds for Canadian companies raising capital in the United States; the indirect financial channel, where growth is hampered as financial conditions in Canada tighten in response to a tightening in the United States; and the trade channel, which goes through a slowing in the U.S. economy, and correspondently lower demand for Canadian exports. As would be expected from the high degree of reliance on U.S. financing, the direct financial channel proves dominant in the short term.
Canada --- United States --- Foreign economic relations --- Economic conditions --- Econometric models. --- Foreign Exchange --- Inflation --- Macroeconomics --- Price Level --- Deflation --- Macroeconomics: Production --- Energy: Demand and Supply --- Prices --- Currency --- Foreign exchange --- Production growth --- Exchange rates --- Asset prices --- Oil prices --- Production --- Economic theory
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The estimated potential output growth decelerated from 4.9 percent in the third quarter of 2000 to 4.2 percent in the first quarter of 2001. In the Israeli context, the sharp and exogenous nature of shocks at the end of 2000 complicated the task of estimation. The paper presents potential output estimates using the Hodrick-Prescott (HP) filter and the unobserved components approach. The potential output and the nonaccelerating inflation rate of unemployment estimates have been obtained simultaneously. The statistical data are also presented in the paper.
Inflation --- Labor --- Macroeconomics --- Production and Operations Management --- Macroeconomics: Production --- Unemployment: Models, Duration, Incidence, and Job Search --- Price Level --- Deflation --- Labour --- income economics --- Potential output --- Output gap --- Production growth --- Cyclical unemployment --- Production --- Prices --- Economic theory --- Unemployment --- Israel
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We leverage insights from machine learning to optimize the tradeoff between bias and variance when estimating economic models using pooled datasets. Specifically, we develop a simple algorithm that estimates the similarity of economic structures across countries and selects the optimal pool of countries to maximize out-of-sample prediction accuracy of a model. We apply the new alogrithm by nowcasting output growth with a panel of 102 countries and are able to significantly improve forecast accuracy relative to alternative pools. The algortihm improves nowcast performance for advanced economies, as well as emerging market and developing economies, suggesting that machine learning techniques using pooled data could be an important macro tool for many countries.
Macroeconomics --- Intelligence (AI) & Semantics --- Forecasting and Other Model Applications --- Neural Networks and Related Topics --- Technological Change: Choices and Consequences --- Diffusion Processes --- Macroeconomics: Production --- Machine learning --- Production growth --- Technology --- Production --- Economic theory --- Costa Rica
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We leverage insights from machine learning to optimize the tradeoff between bias and variance when estimating economic models using pooled datasets. Specifically, we develop a simple algorithm that estimates the similarity of economic structures across countries and selects the optimal pool of countries to maximize out-of-sample prediction accuracy of a model. We apply the new alogrithm by nowcasting output growth with a panel of 102 countries and are able to significantly improve forecast accuracy relative to alternative pools. The algortihm improves nowcast performance for advanced economies, as well as emerging market and developing economies, suggesting that machine learning techniques using pooled data could be an important macro tool for many countries.
Costa Rica --- Macroeconomics --- Intelligence (AI) & Semantics --- Forecasting and Other Model Applications --- Neural Networks and Related Topics --- Technological Change: Choices and Consequences --- Diffusion Processes --- Macroeconomics: Production --- Machine learning --- Production growth --- Technology --- Production --- Economic theory
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Traditionally, the impacts of the rights of financial institutions and workers on corporate performance have been analyzed independently. Yet, theory clearly indicates that the combination of relative powers of different stakeholders affects a firm overall performance. Using U.S. state level and state-industry level data, we investigate how output growth is affected by bank branch deregulation and employment protection occurring over 1972-1993. We find that financial liberalization positively impact overall state growth but greater workers' rights affects it ambiguously. At the industry level, however, employment protection promotes those industries that are more knowledge intensive, while the effect of financial liberalization does not differ across industries that vary in external financing dependency. The results hold controlling for changes in shareholders' rights, which itself is not significant. The findings suggest that financial liberalization operates mostly through an efficiency channel, better reallocating resources across sectors, while employment protection creates higher incentives and encourages more sector-specific, human capital investments. Overall, the results show that the strength of stakeholders' protection affects performance through efficiency channels and provide support for a stakeholders' view of corporate governance.
Banks and banking --- Working class --- Corporate governance --- Industrial productivity --- State supervision --- Banks and Banking --- Labor --- Macroeconomics --- Labor Contracts --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Wages, Compensation, and Labor Costs: Public Policy --- Labor Economics: General --- Macroeconomics: Production --- Labour --- income economics --- Banking --- Employment protection --- Minimum wages --- Production growth --- Manpower policy --- Minimum wage --- Labor economics --- Production --- Economic theory --- United States
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Conventional wisdom states that currency depreciation in oil-producing countries are contractionary because demand effects, limited by the prevalence of oil exports priced in dollars, are more than offset by adverse supply effects. Iran, however, has experienced a rapid increase in non-oil exports in the last decade. Against this background, the paper tests whether the conventional wisdom still applies to Iran and concludes that the emergence of the non-oil export sector has made currency depreciation expansionary. The expansionary effect is particularly evident with respect to anticipated persistent depreciation in the long-run. Notwithstanding the varying effects of exchange rate fluctuations on the demand and supply sides of the economy, managing a flexible exchange rate gradually over time towards achieving stability in the real effective exchange rate may strike the necessary balance.
Foreign Exchange --- Investments: General --- Macroeconomics --- Money and Monetary Policy --- Macroeconomics: Production --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Investment --- Capital --- Intangible Capital --- Capacity --- Currency --- Foreign exchange --- Monetary economics --- Exchange rates --- Production growth --- Currencies --- Depreciation --- Real effective exchange rates --- Production --- Economic theory --- Money --- Saving and investment --- Iran, Islamic Republic of --- Currency question --- Foreign exchange rates --- Petroleum industry and trade --- Econometric models.
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A robust empirical determinant of long-term economic growth in many developing countries has been the expansion and diversification of the export sector. The latter, in turn, has been influenced by capital accumulation and economic growth. The growth model developed here explores this interdependence in the context of the “new growth theory”. The analytical results are consistent with empirical regularities observed in the exports-economic growth linkages. The paper also derives a formula for the optimal rate of return to capital in the presence of learning effects and improvement of human resources brought about by export expansion and its interaction with saving and investment.
Exports and Imports --- Macroeconomics --- Production and Operations Management --- Trade: General --- Labor Economics: General --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Macroeconomics: Production --- International economics --- Labour --- income economics --- Exports --- Labor --- Capital productivity --- Production growth --- Export performance --- Labor economics --- Production --- Economic theory
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