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This paper uses methods developed by the Commitment to Equity Institute and data from the Household Budget Survey to assess the effects of government taxation and social spending on poverty and inequality in Moldova. The paper presents the first detailed distributional analysis of the tax and expenditure sides of the fiscal system, examining in particular the contribution of different taxes and transfers to poverty and inequality reduction in Moldova, as well as the cost-effectiveness of different taxes and transfers in achieving these poverty and inequality reduction goals. The analysis finds that the tax-benefit system in Moldova is quite pro-poor and has a significant effect on poverty and inequality, with the poverty reduction effect being stronger for lower poverty thresholds. Pensions provide much of the poverty-reducing effect, which is not surprising, given that in an aging society like Moldova, pensions are the main income source for many households. Direct transfers are also quite effective in reducing poverty and are also efficient, providing a relatively high degree of poverty reduction per dollar allocated to these programs, but their overall effect on poverty is muted by their small budgetary allocations.
Fiscal Incidence --- Fiscal Policy --- Fiscal Trends --- Income Inequality --- Inequality --- Macroeconomics and Economic Growth --- Poverty --- Poverty Reduction --- Public Sector Development --- Social Assistance --- Social Protections and Assistance --- Social Spending --- Taxation --- Taxation and Subsidies
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As more and more Venezuelans leave their country, fleeing the economic and social crisis, the number of Venezuelans in Brazil has risen steadily since 2016, constituting about 18 percent of Brazil's 1.3 million refugee and migrant population as of October 2020. Although the economic gains of immigration are well-documented in the literature, the impacts of forced displacement on the labor market and government budget are mixed and have mainly focused on developed countries. This paper extends the previous literature by exploring the short-run fiscal impact of Venezuelan refugees and migrants on the public expenditure and revenue of Roraima, the state bordering the Republica Bolivariana de Venezuela at the north and the main gateway of the Venezuelan refugees and migrants entering Brazil, and by investigating their impact on its labor market. Using various administrative and survey data and a regression discontinuity framework, the paper finds that the population shock caused by the influx of forcibly displaced Venezuelans in the short-run did not have any statistically significant effect on the fiscal variables of Roraima. On the labor market, the paper finds that the population shock translated into an increase in unemployment among women and a decrease in employment among women and low skilled workers in the short-run. The effects on earnings are heterogenous across industries, but mainly positive for the high skilled and male workers, suggesting a need for cross-cutting policies that target the most vulnerable host population as well as the forcibly displaced.
Access of Poor To Social Services --- Displaced Persons --- Employment and Unemployment --- Fiscal Trends --- Forced Displacement --- Labor Market --- Migrants --- Poverty Reduction --- Public Sector Development --- Refugees --- Rural Development --- Rural Labor Markets --- Services and Transfers To Poor
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This paper outlines the structure and economic foundation of the World Bank's macroeconomic and fiscal model (MFMod). MFMod consists of individual country models for 181 countries. The models are used by country economists within the World Bank's Macroeconomics, Trade and Investment Global Practice to (i) generate country forecasts and (ii) simulate various policies. Each model has a similar structure and functional form, with variation reflecting data availability and economic specialization (notably for oil exporters). Although the functional forms are similar, the parameters are country specific and estimated at the country level. Forecasts across countries are live-linked, with the export market growth of each country calculated as a trade-weighted average of imports of each of its trading partners. Remittance inflows and outflows are balanced across countries through a similar mechanism. Other cross-country linkages come through the real effective exchange rate and export and import prices, which are a function of world commodity prices and local cost considerations.
Commodity Prices --- Econometric Specification --- Economic Forecasting --- Economic Growth --- Economic Modeling --- Economic Policy, Institutions and Governance --- Economic Theory and Research --- Exchange Rates --- Fiscal and Monetary Policy --- Fiscal Policy --- Fiscal Trends --- Macroeconomic Management --- Macroeconomic Model --- Macroeconomics and Economic Growth --- Remittances --- Trade
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Facing a fiscal crisis, the Islamic Republic of Iran decided to increase gasoline prices at the end of 2019. This paper estimates the impact of the price increase on household welfare and government revenue, using the most recent Household Expenditure and Income Survey conducted by the Statistical Center of Iran in March 2018-March 2019. The paper looks at the direct and indirect impacts of the reform and quantifies the compensatory cash transfer program the government instituted. Despite very regressive gasoline subsidies benefitting the rich the most, the increase in gasoline prices is found to affect the poor to a greater extent due to larger negative indirect impacts as well as their relatively low incomes. In total, poverty is estimated to increase by about 2.9 percentage points, with the direct impact accounting for a third of this increase. The proposed government scheme, if targeted perfectly to the poorest 18 million households, would fully compensate the poorest bottom 50 percent of the population and reduce poverty to below pre-reform levels. The annual cost of the program will be around 338 trillion rials, which accounts for 77 percent of the estimated total savings from the subsidies reform (439 trillion rials).
Cash Transfers --- Energy Demand --- Energy Policies and Economics --- Fiscal Impact --- Fiscal Trends --- Gasoline Price --- Income Elasticity --- Inequality --- Oil and Gas --- Oil Prices --- Poverty --- Services and Transfers to Poor --- Subsidies --- Taxation and Subsidies
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This paper presents a comprehensive analysis of the impact of COVID-19 on debt, puts recent debt developments and prospects in historical context, and analyzes new policy challenges associated with debt resolution. The paper reports three main results. First, even before the pandemic, a rapid buildup of debt in emerging market and developing economies-dubbed the "fourth wave" of debt-had been underway. Because of the sharp increase in debt during the pandemic-induced global recession of 2020, the fourth wave of debt has turned into a tsunami and become even more dangerous. Second, five years after past global recessions, global government debt continued to increase. In light of this historical record, and given large financing gaps and significant investment needs in many countries, debt levels will likely continue to rise in the near future. Third, debt resolution has become more complicated because of a highly fragmented creditor base, a lack of transparency in debt reporting, and a legacy stock of government debt without collective action clauses. National policy makers and the global community need to act rapidly and forcefully ensure that the fourth wave does not end with a string of debt crises in emerging market and developing economies as earlier debt waves did.
Business Cycle --- Business Cycles and Stabilization Policies --- Coronavirus --- COVID-19 --- Debt Markets --- Disease Control and Prevention --- External Debt --- Finance and Financial Sector Development --- Fiscal Trends --- Global Recession --- Health, Nutrition and Population --- International Economics and Trade --- Macroeconomic Management --- Pandemic Impact --- Private Debt --- Public Debt
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This paper explores the sovereign-bank nexus in emerging markets and developing economies: the interconnectedness between the health of the sovereign and the banking system. Data from 140 emerging markets and developing economies suggest that this nexus is rising. First, banks have increased their exposure to their sovereigns in the past decade. Second, government debt has grown, and fiscal positions have deteriorated, raising the specter of sovereign stress. Third, banking system assets and bank credit to the private sector have steadily increased, which may restrict the sovereign's capacity to contain a banking crisis. Fourth, empirical evidence from 36 emerging markets and developing economies documents the existence of the nexus and suggests that it has increased recently. However, deeper country analysis is required for a better understanding of the sovereign-bank nexus, given country idiosyncrasies, including the structure of sovereign debt and the composition of the investor base, and data lags and opacities. To minimize the adverse effects of the sovereign-bank nexus, efforts should be focused on maintaining fiscal and bank buffers, strengthening surveillance and supervision of the banking system, improving transparency and data quality of bank-sovereign linkages, better addressing the regulatory treatment of the sovereign exposures and government support of the banking sector, and carefully evaluating the policy trade-offs in the sovereign-bank nexus.
Bank Exposure --- Banking System --- Bankruptcy and Resolution of Financial Distress --- Debt Markets --- Default Risk --- Emerging Market Economies --- Finance and Financial Sector Development --- Financial Regulation and Supervision --- Fiscal and Monetary Policy --- Fiscal Trends --- Macroeconomics and Economic Growth --- Public Debt --- Public Sector Development --- Sovereign Debt
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Government debt has risen substantially in emerging market and developing economies (EMDEs) since the global financial crisis. The current environment of low global interest rates and weak growth may appear to mitigate concerns about elevated debt levels. Considering currently subdued investment, additional government borrowing might also appear to be an attractive option for financing growth-enhancing initiatives such as investment in human and physical capital. However, history suggests caution. Despite low interest rates, debt was on a rising trajectory in half of EMDEs in 2018. In addition, the cost of rolling over debt can increase sharply during periods of financial stress and result in financial crises; elevated debt levels can limit the ability of governments to provide fiscal stimulus during downturns; and high debt can weigh on investment and long-term growth. Hence, EMDEs need to strike a careful balance between taking advantage of low interest rates and avoiding the potentially adverse consequences of excessive debt accumulation.
Capital Markets and Capital Flows --- Debt Sustainability --- Economic Adjustment and Lending --- Economic Policy, Institutions and Governance --- Emerging Economies --- External Debt --- Finance and Financial Sector Development --- Fiscal and Monetary Policy --- Fiscal Balance --- Fiscal Policy --- Fiscal Position --- Fiscal Trends --- Government Debt --- International Economics and Trade --- Macroeconomics and Economic Growth --- Private Debt
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In the post-global financial crisis period, the financing of countercyclical policies led not only to a reduction in the fiscal surpluses across Sub-Saharan African countries, but also an increase in their levels of indebtedness. Although public debt for the region in 2018 was still below that of the pre-debt forgiveness period, the risk profile of public debt has sharply increased. The share of concessional public debt has been declining while that owed to private creditors and non-Paris Club bilateral creditors has been rising. The resulting reconfiguration of public debt has led to increased debt service in the region. Hence, the higher risk profile of debt and rising payments might lower the threshold for debt distress in the region. Addressing public debt vulnerabilities requires the buildup of external and fiscal buffers by conducting prudent fiscal policies and implementing growth-enhancing reforms, and the strengthening of debt management practices. However, the policy toolkit can be enlarged by gradually moving from debt management to balance-sheet management of the public sector, and policies to boost the efficiency of public investment.
Bond Issue --- Business Cycles and Stabilization Policies --- Capital Flows --- Countercyclical Policy --- Debt Composition --- Debt Markets --- Debt Service Burden --- Debt Sustainability --- Economic Adjustment and Lending --- Finance and Financial Sector Development --- Fiscal and Monetary Policy --- Fiscal Trends --- International Economics and Trade --- Macroeconomics and Economic Growth
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