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Are IMF growth forecasts systematically optimistic? And if so, what is the role of planned policy adjustments on this outcome? Are program forecasts as biased as surveillance forecasts? We try to answer these questions using a comprehensive database on IMF forecasts of economic growth in surveillance and program cases during 2003–2017. We find that large planned fiscal and external adjustments are associated with optimistic growth projections, with significant non-linearities for both program and surveillance cases. Specifically, we find evidence that larger planned fiscal adjustment is associated with higher growth optimism in IMF non-concessional, non-precautionary financial arrangements. Our results show the tendency for optimism has persisted in the period after the Global Financial Crisis. Moreover, the strong correlation between the magnitude of the optimism and expected fiscal consolidation provides a cautionary signal for the post-COVID IMF projections as countries embark on a path of fiscal adjustment.
Business and Economics --- Current Account Adjustment --- Economic & financial crises & disasters --- Economic Forecasting --- Energy: Demand and Supply --- Financial Crises --- Fiscal consolidation --- Fiscal multipliers --- Fiscal Policy --- Fiscal policy --- Forecasting and Simulation: Models and Applications --- Gdp forecasting --- Global financial crisis of 2008-2009 --- Global Financial Crisis, 2008-2009 --- International Lending and Debt Problems --- Macroeconomic Aspects of International Trade and Finance: Forecasting and Simulation --- Macroeconomics --- National income --- Oil prices --- Prices --- Prices, Business Fluctuations, and Cycles: Forecasting and Simulation --- Short-term Capital Movements
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How do countries enhance their exports of goods in a largely tariff-free environment? Our investigation of export performance of new member states in the European Union single market, which provides a natural control for barrier-free environment, points to the importance of structural reforms, particularly in the areas of higher education, skills upgrade, wage structure’s ability to provide incentives to work and foreign investment environment. In addition, establishing links with supply chains, which in addition to the above-mentioned reforms also depend on better institutions and infrastructure, are important. The analysis in the paper shows that new member states are at varying levels of quality and integration, which highlights the need for country-specific policy priorities. Services trade, which is subject to significant non-tariff barriers in the EU market even after the implementation of the Services Directive, shows considerable room for growth given the comparative advantage of some of the new member states.
Exports --- Structural adjustment (Economic policy) --- International trade --- Exports and Imports --- Labor --- Empirical Studies of Trade --- Economic Integration --- Trade: General --- International Investment --- Long-term Capital Movements --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- International economics --- Finance --- Labour --- income economics --- Service exports --- Export performance --- Foreign direct investment --- Human capital --- Balance of payments --- Investments, Foreign --- Czech Republic --- Income economics
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