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The ease with which workers can move between sectors has a strong impact on the effects on labor markets of shocks such as changes in world prices or migration flows. This paper introduces an approach to labor mobility with frictions under which worker capabilities (their efficiencies in different sectors) depend on their sector affiliation. If workers in sector a move to sector a', their efficiency shortfall due to a capability misfit compared to what is needed in a' (and possessed by workers already in a') is measured by a proximity parameter, 0 ? proxa,a' ? 1. If proxa, a' < 1, the efficient quantity reaching a' is below the physical quantity. In this setting, profit-maximizing producers are willing to pay the same wage per efficiency unit irrespective of worker origin and thus pay less efficient workers a lower wage per physical unit. This approach to labor mobility is tested in a static CGE model that is applied to an illustrative sub-Saharan African dataset with sector proximities defined using the approach of the product-space literature. Simulations of positive export price shocks show that, the higher the proximities, the stronger the labor reallocation and the welfare gains.

Computable General Equilibrium Models --- Development Planning And Policy --- Factor Mobility --- Labor Mobility --- Wage Differentials

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Since the October 2017 report to the IMFC, the IEO has completed an evaluation of the IMF’s work in fragile states and an update of its 2007 evaluation of IMF exchange rate policy advice. The office continued work on two evaluations, on IMF financial surveillance and on IMF advice on unconventional monetary policies, as well as an update of the 2008 evaluation of structural conditionality. It also launched an update of IEO’s 2008 Evaluation of IMF Governance. The IEO welcomes recent steps taken by the IMF to follow through on Board-endorsed recommendations of its 2016–17 evaluations.

Evaluation (Linguistics) --- Currency --- Development Planning and Policy: Trade Policy --- Exchange rate policy --- Factor Movement --- Foreign Exchange Policy --- Foreign Exchange --- Foreign exchange --- Greece

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After 25 years, the Colombian authorities decided to abandon the crawling peg exchange rate policy and implement a regime of nominal exchange rate bands. Initial conditions in Colombia contrast sharply with those of other cases in which bands were part of an ongoing effort to reduce high inflation. This paper argues that the change in regime was motivated by a change in policy objectives. Starting from a policy whose rationale implied targeting stable inflation, a simple analytical model of optimal policy is presented; initial results with the new regime suggest that inflation is now considered costlier and that policy implementation has been consistent with this new view.

Foreign Exchange --- Inflation --- Open Economy Macroeconomics --- Price Level --- Deflation --- Development Planning and Policy: Trade Policy --- Factor Movement --- Foreign Exchange Policy --- Currency --- Foreign exchange --- Macroeconomics --- Real exchange rates --- Exchange rates --- Crawling peg --- Exchange rate policy --- Prices --- Colombia

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This paper discusses key issues relating to the design and implementation of monetary policy in an emerging European economic and monetary union. Specific institutional proposals for transition to EMU are neither endorsed nor dismissed. In examining the goals of monetary policy, the paper explores the interrelationships among price stability, current account equilibrium, and exchange rate stability. Turning to the implementation of monetary policy, the issues addressed are: coordination versus autonomy, rules versus discretion, and the role of sterilized official intervention. Finally, the last part of the paper emphasizes the importance of fiscal discipline, and evaluates several alternative mechanisms for encouraging it.

Currency --- Development Planning and Policy: Trade Policy --- Exchange rate arrangements --- Exchange rate policy --- Exchange rate stability --- Exchange rates --- Factor Movement --- Fiscal Policy --- Fiscal policy --- Foreign Exchange Policy --- Foreign Exchange --- Foreign exchange --- Macroeconomics --- Public Finance --- France

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In the past two decades, insights from behavioral sciences, particularly behavioral economics, have been widely applied in the design of social programs such as pensions, social security, and taxation. This paper provides a survey of the existing literature in economics on the application of behavioral insights to infrastructure sectors, focusing on water and energy. Various applications of behavioral insights in the literature are examined from the perspectives of the three main actors in the infrastructure sectors: policy makers, service providers, and consumers. Evidence is presented from the literature on how behavioral regularities, such as imperfect optimization, limited self-control, and nonstandard preferences, affect the strategies, decisions, and actions of policy makers, service providers, and consumers, often leading to suboptimal outcomes for service investment, delivery, access, and use. The paper also highlights how behavioral interventions such as anchoring, framing, nonpecuniary incentives, and altering the choice architecture can lead to improvements in performance, adoption, consumption, and other outcomes of interest in the infrastructure sectors.

Behavioral Economics --- Development Planning and Policy --- Energy --- Energy and Economic Development --- Infrastructure --- Infrastructure Economics --- Infrastructure Economics and Finance --- Publicly-Provided Goods --- Water --- Water Economics --- Water Resources --- Water Supply and Sanitation Economics