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Inflation rates rose sharply in the Philippines during 2018. Understanding the demand and supply sources of inflation pressures is key to monetary policy response. Qualitatively, indicators have pointed to evidence of inflation pressures from both sides in 2018, with the supply factors, by and large, associated with commodity-price shocks and demand factors deduced from gleaning at the wider non-oil trade deficits seen in the Philippines. Quantitatively, we deploy a semi-structural model to decompose the contributions of various shocks to inflation. Our main findings are (1) supply factors (mainly global commodity prices) played a prominent role in explaining the rise in inflation in 2018; (2) demand factors also contributed to inflation in a non-negligible way, justifying the need for tighter monetary policy in 2018; (3) the size of the estimated output gap (an important indicator of demand pressures) could be larger, when considering the widening trade deficits in 2018; and (4) a delayed monetary policy tightening can be costly in terms of higher inflation rates, requiring larger and more aggressive interest rate hikes to bring inflation under control, based on a counterfactual exercise.

Inflation --- Macroeconomics --- Money and Monetary Policy --- Production and Operations Management --- Price Level --- Deflation --- Monetary Policy --- Energy: Demand and Supply --- Prices --- Macroeconomics: Production --- Monetary economics --- Oil prices --- Output gap --- Inflation targeting --- Monetary tightening --- Production --- Monetary policy --- Economic theory --- Philippines

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Real oil prices surged from 2009 through 2014, comparable to the 1970’s oil shock period. Standard explanations based on monopoly markup fall short since inflation remained low after 2009. This paper contributes strong evidence of Granger (1969) predictability of nominal factors to oil prices, using one adjustment to monetary aggregates. This adjustment is the subtraction from the monetary aggregates of the 2008-2009 Federal Reserve borrowing of reserves from other Central Banks (Swaps), made after US reserves turned negative. This adjustment is key in that Granger predictability from standard monetary aggregates is found only with the Swaps subtracted.

Inflation --- Macroeconomics --- Money and Monetary Policy --- Energy: Demand and Supply --- Prices --- Price Level --- Deflation --- Metals and Metal Products --- Cement --- Glass --- Ceramics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary economics --- Oil prices --- Gold prices --- Monetary base --- Consumer price indexes --- Money --- Gold --- Money supply --- Price indexes --- United States

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We examine the existing fiscal policy paradigm in commodity-exporting countries. First, we argue that its centerpiece—the permanent income hypothesis (PIH)—is not consistent with either intergenerational equity or long-term sustainability in the presence of uncertainty. Policies to achieve these goals need to be more prudent and better anchored than the PIH. Second, we point out the presence of a volatility tradeoff between government spending and wealth and re-assess long-held views on the appropriate fiscal anchors, the vice of procyclicality, and the (im)possibility of simultaneously smoothing consumption and ensuring intergenerational equity and sustainability. Finally, we propose what we call a prudent wealth stabilization policy that would be more consistent with long-term fiscal policy goals, yet relatively simple to implement and communicate.

Fiscal policy. --- Tax policy --- Taxation --- Economic policy --- Finance, Public --- Government policy --- Investments: Stocks --- Macroeconomics --- Public Finance --- Fiscal Policy --- Fiscal Policies and Behavior of Economic Agents: General --- Resource Booms --- Macroeconomics: Consumption --- Saving --- Wealth --- Energy: Demand and Supply --- Prices --- National Government Expenditures and Related Policies: General --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Public finance & taxation --- Investment & securities --- Consumption --- Oil prices --- Expenditure --- Stocks --- Fiscal policy --- National accounts --- Financial institutions --- Economics --- Expenditures, Public --- United Arab Emirates

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This Selected Issues paper estimates Ecuador’s potential growth in the range of 1 3/4 to 3 percent. The lower estimate corresponds to an extrapolation of recent trends while the higher estimate could be achievable through the implementation of a reform agenda that addresses fiscal and competitiveness challenges of Ecuador. The paper also develops models to nowcast and forecast GDP to improve the accuracy of growth projections. The oil sector remains an important driver of economic activity; however, it is not as important as it once was. A simple growth accounting exercise is used to decompose Ecuador’s growth between production factors accumulation; capital and labor, and total factor productivity. The study shows that low total factor productivity is the reason behind Ecuador’s recent economic decline and has been a negative contributor to long-term growth. The paper also explores different vector autoregression models to identify the best one to forecast real GDP in Ecuador.

Ecuador --- Economic conditions. --- Banks and Banking --- Financial Risk Management --- Macroeconomics --- Money and Monetary Policy --- Public Finance --- Energy: Demand and Supply --- Prices --- Debt --- Debt Management --- Sovereign Debt --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Fiscal Policy --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary economics --- Banking --- Finance --- Public finance & taxation --- Oil prices --- Currencies --- Debt limits --- Fiscal stance --- Money --- Asset and liability management --- Fiscal policy --- Public debt --- Banks and banking --- Debts, Public

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We build and estimate open economy two-bloc DSGE models to study the transmission and impact of shocks in Russia, Saudi Arabia and the United Kingdom. After accounting for country-specific fiscal and monetary sectors, we estimate their key policy and structural parameters. Our findings suggest that not only has output responded differently to shocks due to differing levels of diversification and structural and policy settings, but also the responses to fiscal consolidation differ: Russia would benefit from a smaller state foot-print, while in Saudi Arabia, unless this is accompanied by structural reforms that remove rigidities, output would fall. We also find that lower oil prices need not be bad news given more oil-intensive production structures. However, lower oil prices have hurt these oil producers as their public finances depend heavily on oil, among other factors. Productivity gains accompanied by ambitious structural reforms, along with fiscal and monetary reforms could support these economies to achieve better outcomes when oil prices fall, including via diversifying exports.

Macroeconomics. --- Economics --- Russia --- Saudi Arabia --- Great Britain --- Economic conditions. --- Investments: Energy --- Macroeconomics --- Taxation --- Bayesian Analysis: General --- Price Level --- Inflation --- Deflation --- Interest Rates: Determination, Term Structure, and Effects --- Fiscal Policy --- Open Economy Macroeconomics --- Energy and the Macroeconomy --- Energy: Demand and Supply --- Prices --- Labor Economics: General --- Energy: General --- Macroeconomics: Consumption --- Saving --- Wealth --- Business Taxes and Subsidies --- Labour --- income economics --- Investment & securities --- Public finance & taxation --- Oil prices --- Labor --- Oil --- Consumption --- Oil, gas and mining taxes --- Commodities --- Taxes --- National accounts --- Labor economics --- Petroleum industry and trade