Kodjovi M. Eklou

Ms.Stefania Fabrizio

Mr.Kangni R Kpodar

This paper investigates the impact of domestic fuel price increases on export growth in a sample of 77 developing countries over the period 2000-2014. Using a fixed-effect estimator and the local projection approach, we find that an increase in domestic gasoline or diesel price adversely affects real non-fuel export growth, but only in the short run as the impact phases out within two years after the shock. The results also suggest that the negative effect of fuel price increase on exports is mainly noticeable in countries with a high-energy dependency ratio and countries where access to an alternative source of energy, such as electricity, is constrained, thus preventing producers from altering energy consumption mix in response to fuel price changes.

Export Competitiveness - Fuel Price Nexus in Developing Countries: Real or False Concern?

Mr.Chadi Abdallah

This paper assesses the dynamic pass-through of crude oil price shocks to retail fuel prices using a novel database on monthly retail fuel prices for 162 countries. The impulse response functions suggest that on average, a one cent increase in crude oil prices per liter translates into a 1.2 cent increase in the retail gasoline price at peak level six months after the shock. However, the estimates vary significantly across country groups, ranging from about 0.5 cent in MENA countries to two cents in advanced economies. The results also show that positive oil price shocks have a larger impact than negative price shocks on the retail gasoline price. Finally, the paper underscores the importance of the new dataset in refining estimates of the fiscal cost of incomplete pass-through.

Evidence from a New Global Retail Fuel Price Database

Dynamic Fuel Price Pass-Through

Mr.Maelan Le Goff

Mr.Raju J Singh

This paper contributes to the literature by looking at the possible relevance of the structure of the financial system—whether financial intermediation is performed through banks or markets—for macroeconomic volatility, against the backdrop of increased policy attention on strengthening growth resilience. With low-income countries (LICs) being the most vulnerable to large and frequent terms of trade shocks, the paper focuses on a sample of 38 LICs over the period 1978-2012 and finds that banking sector development acts as a shock-absorber in poor countries, dampening the transmission of terms of trade shocks to growth volatility. Expanding the sample to 121 developing countries confirms this result, although this role of shock-absorber fades away as economies grow richer. Stock market development, by contrast, appears neither to be a shock-absorber nor a shock-amplifier for most economies. These findings are consistent across a range of econometric estimators, including fixed effect, system GMM and local projection estimates.

Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries

Mr.Giovanni Melina

Mr.Chris Papageorgiou

Hites Ahir

Hendre Garbers

Mattia Coppo

Mr.Futoshi Narita

Ms.Filiz D Unsal

Vivian Malta

Xin Tang

Daniel Gurara

Luis-Felipe Zanna

Linda G. Venable

Despite strong economic growth since 2000, many low-income countries (LICs) still face numerous macroeconomic challenges, even prior to the COVID-19 pandemic. Despite the deceleration in real GDP growth during the 2008 global financial crisis, LICs on average saw 4.5 percent of real GDP growth during 2000 to 2014, making progress in economic convergence toward higher-income countries. However, the commodity price collapse in 2014–15 hit many commodity-exporting LICs and highlighted their vulnerabilities due to the limited extent of economic diversification. Furthermore, LICs are currently facing a crisis like no other—COVID-19, which requires careful policymaking to save lives and livelihoods in LICs, informed by policy debate and thoughtful research tailored to the COVID-19 situation. There are also other challenges beyond COVID-19, such as climate change, high levels of public debt burdens, and persistent structural issues.

Advances Made in Five Key Areas Through a DFID-IMF Collaboration

Macroeconomic Research in Low-income Countries

Mr.Kangni R Kpodar

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