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China’s exchange rate regime has undergone gradual reform since the move away from a fixed exchange rate in 2005. The renminbi has become more flexible over time but is still carefully managed, and depth and liquidity in the onshore FX market is relatively low compared to other countries with de jure floating currencies. Allowing a greater role for market forces within the existing regime, and greater two-way flexibility of the exchange rate, are important steps to build on the progress already made. This should be complemented by further steps to develop the FX market, improve FX risk management, and modernize the monetary policy framework.

International Monetary Fund --- Internationaal monetair fonds --- International monetary fund --- Evaluation. --- Foreign Exchange --- Money and Monetary Policy --- International Monetary Arrangements and Institutions --- International Financial Markets --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Economic History: Financial Markets and Institutions: General, International, or Comparative --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Currency --- Foreign exchange --- Monetary economics --- Exchange rates --- Exchange rate flexibility --- Exchange rate arrangements --- Currencies --- Money --- China, People's Republic of

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This paper assesses the effects of structural reforms on firm-level productivity for 37 developing countries from 2006 to 2014 period. It takes advantage of the IMF Monitoring of Fund Arrangements dataset for reform indexes and the World Bank Enterprise Surveys for firm-level productivity. The paper highlights the following results. Structural reforms such as financial, fiscal, real sector, and trade reforms, significantly improve firm-level productivity. Interestingly, real sector reforms have the most sizeable effects on firm-level productivity. The relationship between structural reforms and firm-level productivity is nonlinear and shaped by some firms’ characteristics such as the financial access, the distortionary environment, and the size of firms. The pace of structural reforms matters since being a “strong reformer” is associated with a clear productivity dividend for firms. Finally, except for financial and trade reforms, all structural reforms under consideration are bilaterally complementary in improving firm-level productivity. These findings are robust to several sensitivity checks.

Corporate Finance --- Macroeconomics --- Public Finance --- Production and Operations Management --- Firm Behavior: Empirical Analysis --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Fiscal and Monetary Policy in Development --- Development Planning and Policy: Trade Policy --- Factor Movement --- Foreign Exchange Policy --- Institutions and the Macroeconomy --- Macroeconomics: Production --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Fiscal Policy --- Financial Institutions and Services: General --- Structural reforms --- Productivity --- Labor productivity --- Fiscal policy --- Business environment --- Macrostructural analysis --- Production --- Economic sectors --- Industrial productivity --- Business enterprises --- Bangladesh

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Most macroeconomic models assume that aggregate output is generated by a specification for the production function with total physical capital as a key input. Implicitly this assumes that private and public capital stocks are perfect substitutes. In this paper we test this assumption by estimating a nested-CES production function whereas the two types of capital are considered separately along with labor as inputs. The estimation is based on our newly developed dataset on public and private capital stocks for 151 countries over a period of 1960-2014 consistent with Penn World Table version 9. We find evidence against perfect substitutability between public and private capital, especially for emerging and LIDCs, with the point estimate of the elasticity of substitution estimated closely around 3.

Investments: General --- Investments: Stocks --- Labor --- Macroeconomics --- Public Finance --- Macroeconomic Analyses of Economic Development --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Fiscal and Monetary Policy in Development --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- National Government Expenditures and Related Policies: Infrastructures --- Other Public Investment and Capital Stock --- Labor Economics: General --- Investment --- Capital --- Intangible Capital --- Capacity --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Investment & securities --- Labour --- income economics --- Public finance & taxation --- Stocks --- Public investment and public-private partnerships (PPP) --- Private investment --- Human capital --- Financial institutions --- Expenditure --- National accounts --- Public-private sector cooperation --- Labor economics --- Saving and investment --- United States

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International comparisons reveal that—even controlling for a host of explanatory factors—credit depth is exceptionally low in Mexico. Using panel data methods linking credit growth and fundamentals, this paper estimates a long-term gap between actual and expected credit of about 40 percent of GDP. Possible explanations include the history of banking crises, the large informal sector and an inefficient legal system. Using a disequilibrium regression approach, this paper also finds that supply factors are particularly important as determinants of credit in Mexico. Recent financial reforms address many of the supply constraints, but their success will depend on implementation. The main challenge going forward will be to support financial deepening, while limiting risks to financial stability.

Finance --- Financial institutions --- Financial intermediaries --- Lending institutions --- Associations, institutions, etc. --- Banks and Banking --- Finance: General --- Money and Monetary Policy --- Macroeconomics --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- General Financial Markets: General (includes Measurement and Data) --- Business Fluctuations --- Cycles --- Monetary economics --- Banking --- Credit --- Bank credit --- Commercial banks --- Emerging and frontier financial markets --- Money --- Financial markets --- Credit cycles --- Financial sector policy and analysis --- Banks and banking --- Financial services industry --- Business cycles --- Mexico

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Despite significant strides in financial development over the past decades, financial dollarization, as reflected in elevated shares of foreign currency deposits and credit in the banking system, remains common in developing economies. We study the impact of financial dollarization, differentiating across foreign currency deposits and credit on financial depth, access and efficiency for a large sample of emerging market and developing countries over the past two decades. Panel regressions estimated using system GMM show that deposit dollarization has a negative impact on financial deepening on average. This negative impact is dampened in cases with past periods of high inflation. There is also some evidence that dollarization hampers financial efficiency. The results suggest that policy efforts to reduce dollarization can spur faster and safer financial development.

Banks and Banking --- Finance: General --- Inflation --- Money and Monetary Policy --- General Financial Markets: General (includes Measurement and Data) --- Financial Institutions and Services: General --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Financial Markets and the Macroeconomy --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Price Level --- Deflation --- Monetary economics --- Finance --- Banking --- Macroeconomics --- Dollarization --- Financial sector development --- Credit --- Bank deposits --- Monetary policy --- Financial markets --- Money --- Financial services --- Prices --- Financial services industry --- Banks and banking --- Angola