The paper uses a supply-side framework based on a production function approach to assess the role of structural reforms in boosting long-term GDP growth in Argentina. The impact of product, labor, trade, and tax reforms on each supply-side channel—capital accumulation, labor utilization, and total factor productivity, proxied with an efficiency estimate—is assessed separately and then combined to derive the total impact on growth. The largest effect of structural reforms, involving regulatory changes that promote competition and facilitate flexible forms of employment, comes through the productivity/efficiency channel. Pro-competition regulation also improves labor utilization, while lower entry barriers and trade tariffs are important for capital accumulation. Structural reforms could have substantial effects on Argentina’s long-term GDP growth; for example, an ambitious reform effort to improve business regulatory environment would add 1–1½ percent to average annual growth of GDP.
Jonas Dovern, Mr. Ulrich Fritsche, Mr. Prakash Loungani, and Ms. Natalia T. Tamirisa
We study forecasts for real GDP growth using a large panel of individual forecasts from 36 advanced and emerging economies during 1989–2010. We show that the degree of information rigidity in average forecasts is substantially higher than that in individual forecasts. Individual level forecasts are updated quite frequently, a behavior more in line “noisy” information models (Woodford, 2002; Sims, 2003) than with the assumptions of the sticky information model (Mankiw and Reis, 2002). While there are cross-country variations in information rigidity, there is no systematic difference between advanced and emerging economies.
Laurence M. Ball, João Tovar Jalles, and Mr. Prakash Loungani
This paper provides an assessment of the consistency of unemployment and output forecasts. We show that, consistent with Okun’s Law, forecasts of real GDP growth and the change in unemployment are negatively correlated. The Okun coefficient—the responsiveness of unemployment to growth—from forecasts is fairly similar to that in the data for various countries. Furthermore, revisions to unemployment forecasts are negatively correlated with revisions to real GDP forecasts. These results are based on forecasts taken from Consensus Economics for nine advanced countries since 1989.
This paper surveys dynamic stochastic general equilibrium models with financial frictions in use by central banks and discusses priorities for future development of such models for the purpose of monetary and financial stability analysis. It highlights the need to develop macrofinancial models which allow analysis of the macroeconomic effects of macroprudential policy tools and to evaluate elements of the Basel III reforms as a priority. The paper also reviews the main approaches to introducing financial frictions into general equilibrium models.
This paper evaluates the performance of Consensus Forecasts of GDP growth for industrialized and developing countries from 1989 to 1998. The questions addressed are (1) How do forecast errors differ across industrialized and developing countries? (2) How well do forecasters predict recessions? (3) Are forecasts efficient and unbiased? (4) How does private sector performance compare with that of international organizations? (5) Is forecaster discord a reliable predictor of forecast accuracy? Two key results emerge. First, the record of failure to predict recessions is virtually unblemished. Second, there is high degree of similarity between private forecasts and those of international organizations.