Francesco Grigoli

International Monetary Fund · Research Department

We show that macroprudential regulation significantly dampens the impact of global financial shocks on emerging markets. Specifically, a tighter level of regulation reduces the sensitivity of GDP growth to capital flow shocks and movements in the Chicago Board Options Exchange's VIX. A broad set of macroprudential tools contributes to this result,...

The COVID-19 pandemic altered consumption patterns significantly in a short period of time. However, official inflation statistics take time to reflect changes in the weights of the CPI consumption basket. Using credit card data for the UK and Germany, we document how consumption patterns changed and quantify the resulting inflation bias. We find t...

This paper provides the first assessment of the contribution of idiosyncratic shocks to aggregate fluctuations in an emerging market using confidential data on the universe of Chilean firms. We find that idiosyncratic shocks account for more than 40 percent of the volatility of aggregate sales. Although quite large, this contribution is smaller tha...

An important trend in knowledge generation and diffusion is that the co-authorship of research publications has become remarkably more frequent. In this paper we study the role of co-authorship networks for starting and maintaining research collaborations. Relying on the network of the IMF’s Working Papers—which reflects well the endogenous nature...

Overall mobility declined during the COVID-19 pandemic because of government lockdowns and voluntary social distancing. Yet, aggregate data mask important heterogeneous effects across segments of the population. Using unique mobility indicators based on anonymized and aggregate data provided by Vodafone for Italy, Portugal, and Spain, we find that...

Understanding the sources of inflation persistence is crucial for monetary policy. This paper provides an assessment of the influence of inflation expectations' anchoring on the persistence of inflation. We construct an index of inflation expectations' anchoring using survey-based inflation forecasts for 45 economies since 1989. We then study the r...

The large economic costs of full-blown lockdowns in response to COVID-19 outbreaks, coupled with heterogeneous mortality rates across age groups, led to question non-discriminatory containment measures. In this paper we provide an assessment of the targeted approach to containment. We propose a SIR-macro model that allows for heterogeneous agents i...

Using high-frequency proxies for economic activity over a large sample of countries, we show that the economic crisis during the first seven months of the COVID-19 pandemic was only partly due to government lockdowns. Economic activity also contracted severely because of voluntary social distancing in response to higher infections. Furthermore, we...

Population ageing in advanced economies could have significant macroeconomic implications, unless more individuals choose to participate in labour markets. In this context, the steep increase in the share of older workers who remain economically active since the mid-1990s is an overlooked yet encouraging trend. We identify the drivers of the rise i...

High levels of economic policy uncertainty (EPU) in various parts of the world revamped the debate about its impact on economic activity. Employing heterogeneous panel structural vector autoregressions, we test for EPU spillovers on other countries’ economic activity. EPU reduces growth in real output, private consumption, and private investment, w...

The large economic costs of full-blown lockdowns in response to COVID-19 outbreaks, coupled with heterogeneous mortality rates across age groups, led to question non-discriminatory containment measures. In this paper we provide an assessment of the targeted approach to containment. We propose a SIR-macro model that allows for heterogeneous agents i...

Lockdowns and voluntary social distancing led to significant reduction in people’s mobility. Yet, there is scant evidence on the heterogeneous effects across segments of the population. Using unique mobility indicators based on anonymized and aggregate data provided by Vodafone for Italy, Portugal, and Spain, we find that lockdowns had a larger imp...

Anchoring of inflation expectations is of paramount importance for central banks’ ability to deliver stable inflation and minimize price dispersion. Relying on daily interest rates and inflation forecasts from major financial institutions in the United States, we calculate monetary policy surprises of individual analysts as the unexpected changes i...

Using high-frequency proxies for economic activity over a large sample of countries, we show that the economic crisis during the first seven months of the COVID-19 pandemic was only partly due to government lockdowns. Economic activity also contracted because of voluntary social distancing in response to higher infections. We also show that lockdow...

We show that domestic production networks shape worker flows between firms. Data on the universe of firm-to-firm transactions for the Dominican Republic, matched with employer-employee records, reveals that about 20 percent of workers who change firms move to a buyer or supplier of their original firm. This is a considerably larger share than would...

Advanced economies are in the midst of a major demographic transition, with the number of elderly rising precipitously. Yet, advanced economies experienced different trajectories in labor force participation rates and workforce attachment of men and women. Using a cohort model for 17 advanced economies during 1985–2016, we document a significant ro...

We study the determinants of new and repeated research collaborations, drawing on the co-authorship network of the International Monetary Fund (IMF)’s Working Papers series. Being an outlet where authors express their views on topics of interest, and given that IMF staff is not subject to the “publish-or-perish” conditions of the academia, the IMF...

We show that macroprudential regulation can considerably dampen the impact of global financial shocks on emerging markets. More specifically, a tighter level of regulation reduces the sensitivity of GDP growth to VIX movements and capital flow shocks. A broad set of macroprudential tools contribute to this result, including measures targeting bank...

In this paper we propose a novel approach to obtain the predictive density of global GDP growth. It hinges upon a bottom-up probabilistic model that estimates and combines single countries’ predictive GDP growth densities, taking into account cross-country interdependencies. Speci?cally, we model non-parametrically the contemporaneous interdependen...

Technological advances raise productivity and growth, but are also likely to reshape labor markets. We examine the impact of automation on aggregate labor force participation rates and individuals’ attachment to the workforce in advanced economies. Cross-country analysis, which leverages the variation in the routinizability of occupations and occup...

Have improvements in monetary policy frameworks increased emerging market resilience to external shocks? This paper exploits the May 2013 taper tantrum episode in the United States to study the reaction of 18 large emerging markets to an external shock, conditioning on their degree of inflation expectations’ anchoring. We find that while the taperi...

The linearity of the relationship between income inequality and economic development has been long questioned. While theory provides arguments for which the shape of the relationship may be positive for low levels of inequality and negative for high ones, most of the empirical literature assumes a linear specification finding conflicting results. E...

This article tests for cross-country convergence in income inequality and estimates its impact on growth with a heterogeneous Panel Structural Vector AutoRegression model, which addresses some empirical challenges plaguing the literature. We find that income inequality is converging across countries, and that its impact on growth is heterogeneous....

Conventional macroeconomic theory is based on the idea that demand shocks can only have temporary effects on unemployment, however several European economies display highly persistent unemployment dynamics. The theory of hysteresis points out that, under certain conditions, demand disturbances can have permanent effects. We find strong evidence of...

Economic theory offers several explanations as to why shifting expectations about future economic activity affect current demand. Abstracting from whether changes in expectations originate from swings in beliefs or fundamentals, we test empirically whether optimism and pessimism about the economy trigger short-term fluctuations in private consumpti...

The sharp, long-lasting decline in oil prices in 2014–16 tested the resilience of oil exporters. We examine the degree to which economic fundamentals entering the oil price decline explain the impact on economic growth across oil exporting economies, and derive policy implications as to what factors help to mitigate the negative effects. We find th...

Economic contractions are generally associated with increases in NPL ratios. However, despite the common assumption used in the empirical literature of homogenous impact across banks, the strength of this relationship is often bank-specific, and imposing homogeneity may lead to over- or underestimating the resilience of the financial system to macr...

Sound regional policies are essential for balanced and sustained economic growth. The interaction of federal and regional policies with cross-regional structural differences affects human and physical capital formation, the business climate, private investment, market depth, and competition. This paper summarizes the main elements of Russia’s fisca...

This paper presents new evidence on the behavior of saving in the world, by extending previous empirical research in several dimensions. After extensively surveying the relevant theoretical and empirical literature, the paper reports estimates of saving determinants relying on the newly constructed and largest available database covering 165 countr...

Despite the acceleration in population aging in almost all advanced economies over the past decade, aggregate labor force participation rates show divergent trajectories. Headline numbers also hide strikingly different shifts in the labor force attachment of different groups of workers: participation has increased among prime-age women and, more re...

A well-functioning monetary transmission mechanism is critical for monetary policy. As the Dominican Republic recently adopted an inflation targeting regime, it is even more relevant to guarantee that changes in the monetary policy rates are quickly and fully reflected in retail rates, to eventually influence aggregate demand and inflation. This pa...

Private saving and economic growth are intimately linked, and low saving rates in Latin America and the Caribbean (LAC) have often been held responsible for disappointing growth in the region. Thus, identifying factors that spur saving is critical. This paper surveys previous empirical studies on LAC, highlighting contradictions, omissions and in s...

Public health spending is low in emerging and developing economies relative to advanced economies and health outputs and outcomes need to be substantially improved. Simply increasing public expenditure in the health sector, however, may not significantly affect health outcomes if the efficiency of this spending is low. This paper quantifies the ine...

Poor performance of the electricity sector remains a drag to economic efficiency and a bottleneck to economic activity in many low-income countries. This paper proposes a number of models that account for different equilibria (some better, some worse) of the electricity sector. They show how policy choices (affecting insolvency prospects or related...

In this paper we present novel findings on private saving behavior. Relying on the largest available world database, we find that higher terms of trade (TOT) raise saving, and this effect is much larger for temporary TOT shocks. When credit constraints are less binding, the marginal effect of higher TOT on private saving is lessened. Accelerations...

The combination of stagnant growth and high levels of income inequality renewed the debate about whether a more even distribution of income can spur economic activity. This paper tests for cross-country convergence in income inequality and estimates its impact on economic growth with a heterogeneous panel structural vector autoregression model, whi...

Output gap estimates are subject to a wide range of uncertainty owing principally to the difficulty in distinguishing between cycle and trend in real time. We show that country desks tend to overestimate economic slack, especially during recessions, and that uncertainty in initial output gap estimates persists several years. Only a small share of o...

The measurement of the efficiency of public education expenditure using parametric and non-parametric methods has proven challenging. This paper seeks to overcome the difficulties of earlier studies by using a hybrid approach to measure the efficiency of secondary education spending in emerging and developing economies. The approach accounts for th...

This paper investigates the effect of institutional quality on the levels, volatility and quality of public investment. Our findings suggest an inverse relationship between public investment levels and institutional quality, supporting the idea that governments use public investment as a vehicle for rent seeking. We also find that lower quality of...

In the last two decades more than 120 countries have adopted a multiyear budget process (Medium-Term Framework, or MTF) that enables the central government to set multiyear fiscal targets. This paper analyzes a newly-collected dataset of worldwide MTF adoptions during 1990-2008. It exploits within-country variation in adoption in a dynamic panel fr...

Over the past decade, rising oil prices have translated into high levels of public investment in most MENA and CCA oil exporters. This has prompted questions about the efficiency of public investment in generating growth and closing infrastructure gaps, as well as concerns about fiscal vulnerabilities. When public investment is inefficient, higher...

State-owned banks may help to soften the financing constraints of public sector entities and consequently become a factor that hampers fiscal discipline. Using a panel dataset, we find that a larger presence of state-owned banks in the banking system is associated with more credit to the public sector, larger fiscal deficits, higher public debt rat...

Public health spending is low in emerging and developing economies relative to advanced economies and health outputs and outcomes need to be substantially improved. Simply increasing public expenditure in the health sector, however, may not significantly affect health outcomes if the efficiency of this spending is low. This paper quantifies the ine...

It is generally acknowledged that the government’s output is difficult to define and its value is hard to measure. The practical solution, adopted by national accounts systems, is to equate output to input costs. However, several studies estimate significant inefficiencies in government activities (i.e., same output could be achieved with less in...

Good practice suggests that budget allocations should reflect spending priorities and that spending should provide cost-effective delivery of public goods and services. This paper analyzes the composition of public expenditure in the Slovak Republic. It also assesses the relative efficiency of spending in education and health. The Slovak Republic s...

In the last two decades more than 120 countries have adopted a version of a Medium-Term Expenditure Framework (MTEF). These are budget institutions whose rationale is to enable the central government to make credible multiyear fiscal commitments. This paper analyzes a newly-collected dataset of worldwide MTEF adoptions during 1990-2008. It exploits...

A well-organized and effective finance ministry and its associated central finance agencies (CFAs) are essential to good fiscal outcomes. Recent studies of CFAs in selected low-income countries demonstrate that their organizational structure varies widely and that decision making on public finance is strongly influenced by political economy factors...