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The COVID-19 pandemic has led to an unprecedented collapse in global economic activity and trade. The crisis has also highlighted the role played by global value chains (GVC), with countries facing shortages of components vital to everything from health systems to everyday household goods. Despite the vulnerabilities associated with increased interconnectedness, GVCs have also contributed to increasing productivity and long-term growth. We explore empirically the impact of GVC participation on productivity in Estonia using firm-level data from 2000 to 2016. We find that higher GVC participation at the industry level significantly boosts productivity at both the industry and the firm level. Frontier firms, large firms, and exporting firms also benefit more from GVC participation than non-frontier firms, small firms, and non-exporting firms. We also find that GVC participation of downstream industries has a negative correlation with productivity. Frontier firms and large firms benefit more from GVC participation of upstream industries, while non-frontier firms and small firms benefit more from GVC participation of downstream industries. Our results suggest that policies designed to promote participation in GVCs are important to raise aggregate productivity and potential growth in Estonia.

Exports and Imports --- Production and Operations Management --- Globalization --- Empirical Studies of Trade --- Economic Integration --- Firm Performance: Size, Diversification, and Scope --- Measurement of Economic Growth --- Aggregate Productivity --- Cross-Country Output Convergence --- Globalization: General --- Macroeconomics: Production --- Trade: General --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Macroeconomics --- International economics --- Global value chains --- Productivity --- Exports --- Industrial productivity --- Labor productivity --- Production --- International trade --- Estonia, Republic of

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This paper focuses on how the exposure to the corporate sector may impact the health of the Australian banking system. It also compares Australian banks with their international peers. Finally, it investigates banks' exposure to credit risk using the new Basel II Pillar 3 disclosure data. The analysis shows that Australian banks have remained very sound by international standards, despite the global financial turmoil. While the international downturn points to several vulnerabilities, the risks from the corporate and household sectors appear to be manageable.

Banks and Banking --- Corporate Finance --- Industries: Financial Services --- Contingent Pricing --- Futures Pricing --- option pricing --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Firm Performance: Size, Diversification, and Scope --- Financial Institutions and Services: Government Policy and Regulation --- Corporate Finance and Governance: General --- Banking --- Finance --- Financial services law & regulation --- Ownership & organization of enterprises --- Capital adequacy requirements --- Corporate sector --- Residential mortgages --- Financial regulation and supervision --- Financial institutions --- Loans --- Economic sectors --- Banks and banking --- Asset requirements --- Business enterprises --- Australia --- Option pricing

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Some countries support smaller firms through tax incentives in an effort to stimulate job creation and startups, or alleviate specific distortions, such as financial constraints or high regulatory or tax compliance costs. In addition to fiscal costs, tax incentives that discriminate by firm size without specifically targeting R&D investment can create disincentives for firms to invest and grow, negatively affecting firm productivity and growth. This paper analyzes the relationship between size-related corporate income tax incentives and firm productivity and growth, controlling for other policy and firm-level factors, including product market regulation, financial constraints and innovation. Using firm level data from four European economies over 2001–13, we find evidence that size-related tax incentives that do not specifically target R&D investment can weigh on firm productivity and growth. These results suggest that when designing size-based tax incentives, it is important to address their potential disincentive effects, including by making them temporary and targeting young and innovative firms, and R&D investment explicitly.

Taxation --- Corporate Taxation --- Production and Operations Management --- Business Taxes and Subsidies --- Firm Performance: Size, Diversification, and Scope --- Economywide Country Studies: Europe --- 'Panel Data Models --- Spatio-temporal Models' --- Taxation, Subsidies, and Revenue: General --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Macroeconomics: Production --- Public finance & taxation --- Macroeconomics --- Corporate & business tax --- Tax incentives --- Total factor productivity --- Productivity --- Corporate income tax --- Marginal effective tax rate --- Taxes --- Tax policy --- Industrial productivity --- Corporations --- Tax administration and procedure --- United Kingdom --- Panel Data Models --- Spatio-temporal Models

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This paper examines the significance and impact of broad-based and industrial policies on economic diversification in developing economies, supported by a literature review, case studies, and IMF analyses. Economic diversification entails shifting from traditional sectors, like agriculture and mining, to a variety of high-quality services and sectors. This transition is crucial for adapting to global market fluctuations and promoting sustainable growth and improved living standards. A literature review, including many IMF contributions, reveals a strong correlation between economic diversification and improved macroeconomic performance in developing countries, such as faster economic growth and higher incomes per capita. Factors influencing economic diversification include macroeconomic stability, infrastructure quality, workforce skills, credit access, regulatory environment, and income equality. Six case studies highlight the experiences of Costa Rica, Gabon, Georgia, India, Senegal, and Vietnam, demonstrating that successful diversification strategies require a long-term commitment and effective broad-based policies. Industrial policies can support diversification by addressing market failures, but they must be well-designed and effectively implemented. Common lessons include the necessity of maintaining macroeconomic stability, investing in human capital, and fostering competition. Sector-specific mechanisms like Special Economic Zones should be used cautiously, emphasizing underlying bottlenecks and minimizing fiscal costs. Country-specific insights include Costa Rica's strategic policy shift towards export orientation, Gabon's reduced dependence on oil, Georgia's market-friendly policies, India's skilled labor and software clusters, Senegal's infrastructure and business environment improvements, and Vietnam's transition from an agrarian to an industrial economy. The IMF's engagement in diversification emphasizes improving human capital, infrastructure, reducing trade barriers, and promoting international trade integration. Policymakers, researchers, and international organizations increasingly recognize the importance of economic diversification for resilient, sustainable, and inclusive growth, requiring nuanced policy interventions tailored to each country's context and capabilities.

Balance of payments --- Economic Development: General --- Economic growth --- Economics --- Exports and Imports --- Exports --- Finance --- Firm Performance: Size, Diversification, and Scope --- Foreign direct investment --- Industrial Organization: General --- International agencies --- International Agreements and Observance --- International Economics --- International economics --- International institutions --- International Investment --- International organization --- International Organizations --- International trade --- Investments, Foreign --- Long-term Capital Movements --- Macroeconomic Analyses of Economic Development --- Macroeconomics --- Political Economy --- Political economy --- Public Policy --- Service exports --- Trade: General

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This paper examines the extent to which firms in selected MENA countries reported being constrained by the business environment around the time of the Arab Spring and the extent to which these constraints affected their employment performance. The results suggest that small firms in MENA faced more structural constraints than similar firms in other regions. We also find that MENA firms’ weaker job creation can be explained in great part by the macroeconomic environment and structural constraints. Low GDP growth, falling external competitiveness, corruption, lack of access to finance and poor access to electricity are found to explain a significant part of the lack of employment growth in MENA firms compared to their peers.

Job creation --- Creating jobs --- Employment creation --- Full employment policies --- Investments: Energy --- Corporate Finance --- Labor --- Production and Operations Management --- Firm Behavior: Empirical Analysis --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Labor Demand --- Regulation and Business Law: General --- Labor Law --- Firm Performance: Size, Diversification, and Scope --- Financial Institutions and Services: General --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Electric Utilities --- Labour --- income economics --- Macroeconomics --- Investment & securities --- Business environment --- Labor productivity --- Electricity --- Economic sectors --- Production --- Commodities --- Economic theory --- Business enterprises --- Electric utilities --- Lebanon --- Income economics