Mr.Haonan Qu

Ms.Aleksandra Zdzienicka

Davide Furceri

Mr.Shekhar Aiyar

Yi Ji

Mr.Romain A Duval

Daniel Garcia-Macia

Mr.John C Bluedorn

Davide Malacrino

Jesse Siminitz

Cross-country differences in economic resilience—in an economy’s ability to withstand and adjust to shocks—remain significant in the euro area. In part, the differences reflect the lack of a national nominal exchange rate as a mechanism to adjust to shocks. The IMF staff has argued that union-wide architectural changes such as the banking union, the capital markets union, and a central fiscal capacity can help foster greater international risk sharing. Yet even these changes cannot insure against all shocks. National policies thus have a vital role to play. This IMF staff discussion note analyzes how national structural policies can help euro area countries better deal with economic shocks. Using a mix of empirical and modeling approaches, the note finds that growth-enhancing reforms to labor and product market regulations, tailored to country-specific circumstances, would help individual euro area economies weather adverse shocks. Higher-quality insolvency regimes are associated with more efficient factor reallocation following a shock. The note also finds that structural and cyclical policies interact. Greater rigidities make economies more fragile, putting a higher burden on fiscal policy. This is especially true for members of a monetary union. Countries should build fiscal space in good times and tackle rigidities, reducing their need for countercyclical policies in bad times while making countercyclical policies more effective when deployed.

The Role of National Structural Reforms in Building Resilience

Strengthening the Euro Area

Mr.Christian H Ebeke

Ms.Anna Ilyina

Allan Dizioli

Mr.Ruben V Atoyan

Lone Engbo Christiansen

Mr.Nadeem Ilahi

Mr.Gil Mehrez

Ms.Faezeh Raei

Ms.Alaina P Rhee

Ms.Daria V Zakharova

This paper analyses the impact of large and persistent emigration from Eastern European countries over the past 25 years on these countries’ growth and income convergence to advanced Europe. While emigration has likely benefited migrants themselves, the receiving countries and the EU as a whole, its impact on sending countries’ economies has been largely negative. The analysis suggests that labor outflows, particularly of skilled workers, lowered productivity growth, pushed up wages, and slowed growth and income convergence. At the same time, while remittance inflows supported financial deepening, consumption and investment in some countries, they also reduced incentives to work and led to exchange rate appreciations, eroding competiveness. The departure of the young also added to the fiscal pressures of already aging populations in Eastern Europe. The paper concludes with policy recommendations for sending countries to mitigate the negative impact of emigration on their economies, and the EU-wide initiatives that could support these efforts.

Emigration and Its Economic Impact on Eastern Europe

Mr.Pragyan Deb

Padamja Khandelwal

Mr.Ahmed I Al-Darwish

Naif Alghaith

Mr.Alberto Behar

Mr.Tim Callen

Mr.Amgad Hegazy

Ms.Malika Pant

Saudi Arabia: Tackling Emerging Economic Challenges to Sustain Strong Growth

Tackling Emerging Economic Challenges to Sustain Strong Growth

Saudi Arabia

Ms.Maria A Albino-War

Francesco Grigoli

Mr.Javier Kapsoli

Mr.Martin Sommer

Mr.Juan Flores

Mr.Bahrom Shukurov

Ms.Svetlana Cerovic

Mr.Yahia Said

Mr.SeokHyun Yoon

Over the past decade, rising oil prices have translated into high levels of public investment in most MENA and CCA oil exporters. This has prompted questions about the efficiency of public investment in generating growth and closing infrastructure gaps, as well as concerns about fiscal vulnerabilities. When public investment is inefficient, higher levels of spending may simply lead to larger budget deficits, without sufficiency increasing the quantity or quality of public infrastructure in support of economic growth. This paper examines the efficiency of public investment in the MENA and CCA oil exporters using several techniques, including a novel application of the efficiency frontier analysis, estimates of unit investment costs, and assessments of public investment processes. The analysis confirms that these oil exporters have substantial room to improve public investment efficiency. Reforms in the public financial and investment management systems are needed to achieve this objective.

Making the Most of Public Investment in MENA and CCA Oil-Exporting Countries

Mr.Haonan Qu

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