Rafael Portillo

• PhD
• Economist at International Monetary Fund

In this paper, we investigate the mechanisms through which import tariffs impact the macroeconomy in two large scale workhorse models used for quantitative policy analysis: a computational general equilibrium (CGE) model (Purdue University GTAP model) and a multi-country dynamic stochastic general equilibrium (DSGE) model (IMF GIMF model). The quan...

The paper evaluates big push borrowing-and-investment programs in a new model-based framework of debt sustainability that is explicitly designed for policy analysis. The new framework is grounded in a fully-articulated, dynamic macroeconomic model. It allows for financing schemes that mix concessional, external commercial, and domestic debt, while...

Many central banks in low-income countries in Sub-Saharan Africa are modernising their monetary policy frameworks. Standard statistical procedures have had limited success in identifying the channels of monetary transmission in such countries. Here we take a case study approach and centre on a significant tightening of monetary policy that took pla...

We reconsider the macroeconomic implications of public investment efficiency, defined as the ratio between the actual increment to public capital and the amount spent. We show that in standard neoclassical and endogenous growth models, increases in public investment spending in inefficient countries do not generally have a lower impact on growth th...

The framework in Chapter 15 is extended to incorporate an explicit role for money aggregates, with an application to Kenya. The chapter provides a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand forecasts to those derived from simple money growth rules), interest-rate based fr...

The chapter compares business cycle fluctuations in sub-Saharan African countries to the rest of the world. Its main results are: (i) African economies stand out by their macroeconomic volatility, which is reflected in the volatility of output and other macro variables; (ii) inflation and output tend to be negatively correlated in SSA countries; (i...

The authors develop a dynamic stochastic general equilibrium (DSGE) model with a banking sector to analyse the impact of the financial crisis in developing countries and the role of the monetary policy response, with an application to Zambia. The crisis is interpreted as a combination of three related shocks: a worsening in the terms of the trade,...

The chapter presents a small open-economy model to study the first-round effects of international food-price shocks in developing countries. First-round shocks are defined as changes in headline inflation that, holding core inflation constant, help implement relative price adjustments. The model features three goods (food, a generic traded good, an...

The chapter introduces subsistence requirements in food consumption into a simple New Keynesian model with flexible food and sticky non-food prices. It shows how the endogenous structural transformation that results from subsistence affects the dynamics of the economy, the design of monetary policy, and the properties of inflation at different leve...

Having broadly stabilized inflation over the past two decades, many policymakers in sub-Saharan Africa are now asking more of their monetary policy frameworks. They are looking to avoid policy misalignments and respond appropriately to both domestic and external shocks, including swings in fiscal policy and spikes in food and export prices. In many...

The authors develop a tractable two-sector New Keynesian model to analyse the short-term effects of aid-financed fiscal expansions. The analysis distinguishes between spending the aid (increasing expenditures and/or cutting revenues) and absorbing the aid-using the aid to finance a higher current account deficit. The standard treatment of the trans...

The authors study a wide range of hybrid inflation-targeting (IT) and managed exchange rate regimes, analysing their implications for inflation, output and the exchange rate in the presence of various domestic and external shocks. To this end, the chapter presents an open economy New Keynesian model featuring sterilized interventions in the foreign...

Many central banks in low-income countries in sub-Saharan Africa are modernizing their monetary policy frameworks. Standard statistical procedures have had limited success in identifying the channels of monetary policy transmission in such countries. This chapter takes a case study approach and examines a significant tightening of monetary policy t...

This chapter shows that limited effects of monetary policy can reflect shortcomings of existing policy frameworks in low-income countries rather than (or in addition to) the structural features often put forward in policy and academic debates. The chapter focuses on two pervasive issues: lack of effective frameworks for implementing policy, so that...

Many low-income countries continue to describe their monetary policy framework in terms of targets on monetary aggregates. This chapter extends the New Keynesian model to provide a role for 'M' in the conduct of monetary policy, and examine the conditions under which some adherence to money targets is optimal. In the spirit of Poole (1970), this ro...

The authors develop a semi-structural, New Keynesian open-economy model with separate food and non-food inflation dynamics to study the sources of inflation in Kenya in recent years. They filter international and Kenyan data through the model to recover a model-based decomposition of most variables into trends (or potential values) and temporary mo...

Most countries in sub-Saharan Africa have made great progress in stabilizing inflation over the past two decades. In about half, a hard peg provides the nominal anchor. In the rest, which are the focus of this book, policymakers have more recently been asking more of monetary policy-to avoid policy misalignments and respond appropriately to shocks...

The author analyses inflation in the Central African Economic and Monetary Community. First, a semi-structural VAR is used to identify the sources of inflation empirically; the chapter finds that fiscal shocks and the commodity price shocks that generally drive them have been important sources of inflation volatility, with monetary policy passively...

We compare business cycle fluctuations in Sub-Saharan African (SSA) countries vis-à-vis the rest of the world. Our main results are as follows: (i) African economies stand out by their macroeconomic volatility, which is is reflected in the volatility of output and other macro variables; (ii) inflation and output tend to be negatively correlated; (i...

We introduce subsistence requirements in food consumption into a simple new-Keynesian model with flexible food and sticky non-food prices. We study how the endogenous structural transformation that results from subsistence affects the dynamics of the economy, the design of monetary policy, and the properties of inflation at different levels of deve...

In April of 2015, the International Monetary Fund gathered leading academic economists and policymakers, to discuss the shape of future macroeconomic policy. This book presents their combined insights. The chapters of the book address the policy debate in a number of areas: (i) whether the global economy has entered a “new normal” of low growth, ne...

Leading economists consider the shape of future economic policy: will it resume the pre-crisis consensus, or contend with the post-crisis “new normal”? What will economic policy look like once the global financial crisis is finally over? Will it resume the pre-crisis consensus, or will it be forced to contend with a post-crisis “new normal”? Have w...

We study the role of the exchange rate regime, reserve accumulation, and sterilization policies in the macroeconomics of aid surges. Absent sterilization, a peg allows for almost full aid absorption-an increase in the current account deficit net of aid-delivering the same effects as those of a flexible regime but with a necessary increase in inflat...

We develop a dynamic stochastic general equilibrium model with a banking sector to analyse the impact of the financial crisis in developing countries and the role of the monetary policy response, with an application to Zambia. We view the crisis as a combination of three related shocks: a worsening in the terms of the trade, an increase in the coun...

We develop a tractable small open-economy model to study the first-round effects of international food price shocks in developing countries. We define first-round effects as changes in headline inflation that, holding core inflation constant, help implement relative price adjustments. The model features three goods (food, a generic traded good and...

We reconsider the macroeconomic implications of public investment efficiency, defined as the ratio between the actual increment to public capital and the amount spent. We show that, in a simple and standard model, increases in public investment spending in inefficient countries do not have a lower impact on growth than in efficient countries, a res...

Abstracts We develop a semi‐structural new‐Keynesian open‐economy model – with separate food and non‐food inflation dynamics to study the sources of inflation in Kenya in recent years. To do so, we filter international and Kenyan data (on output, inflation and its components, exchange rates and interest rates) through the model to recover a model‐b...

We study the role of the exchange rate regime, reserve accumulation, and sterilization policies in the macroeconomics of aid surges. Absent sterilization, a peg allows for almost full aid absorption—an increase in the current account deficit net of aid—delivering the same effects as those of a flexible regime but with a necessary increase in inflat...

We develop a simple DSGE model allowing to study policy mixes in terms of FX interventions and interest rates and their implications for inflation, output and the exchange rate. The model features explicit ster- ilized interventions as an additional central bank instrument operating alongside the Taylor rule and aecting the economy through portfoli...

We extend the framework in Andrle and others (2013) to incorporate an explicit role for money targets and target misses in the analysis of monetary policy in low-income countries (LICs), with an application to Kenya. We provide a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand...

We develop a semi-structural new-Keynesian open-economy model, with separate food and nonfood inflation dynamics, for forecasting and monetary policy analysis in low-income countries and apply it to Kenya. We use the model to run several policy-relevant exercises. First, we filter international and Kenyan data (on output, inflation and its componen...

We study a wide range of hybrid inflation-targeting (IT) and managed exchange rate regimes, analyzing their implications for inflation, output and the exchange rate in the presence of various domestic and external shocks. To this end, we develop an open economy new-Keynesian model featuring sterilized interventions in the foreign exchange (FX) mark...

Many central banks in low-income countries in Sub-Saharan Africa are modernising their monetary policy frameworks. Standard statistical procedures have had limited success in identifying the channels of monetary transmission in such countries. Here we take a narrative approach, following Romer and Romer (1989), and center on a significant tightenin...

Natural resource revenues provide a valuable source to finance public investment in developing countries, which frequently face borrowing constraints and tax revenue mobilization problems. This paper develops a dynamic stochastic small open economy model to analyze the macroeconomic effects of investing natural resource revenues, making explicit th...

We develop a model to study the macroeconomic effects of public investment surges in low-income countries, making explicit: (i) the investment-growth linkages; (ii) public external and domestic debt accumulation; (iii) the fiscal policy reactions necessary to ensure debt-sustainability; and (iv) the macroeconomic adjustment required to ensure inter...

We use a multi-sector dynamic stochastic general equilibrium (DSGE) model—calibrated to the Ghanaian economy—to analyse the short-term impact of oil windfalls in low-income countries (LICs) and the role of various fiscal and monetary policy responses. The model includes limited access to international capital markets, limited participation by resid...

We develop a DSGE model with a banking sector to analyze the impact of the financial crisis on Zambia and the role of the monetary policy response. We view the crisis as a combination of three related shocks: a worsening in the terms of the trade, an increase in the country’s risk premium, and a decrease in the risk appetite of local banks. We char...

Many low-income countries continue to describe their monetary policy framework in terms of targets on monetary aggregates. This contrasts with most modern discussions of monetary policy, and with most practice. We extend the new-Keynesian model to provide a role for “M†in the conduct of monetary policy, and examine the conditions under which so...

We develop a model to analyze the macroeconomic effects of a scaling-up of aid and assess the implications of different policy responses. The model features key structural characteristics of low-income countries, including varying degrees of public investment efficiency and a learning-by-doing (LBD) externality that captures Dutch disease effects....

We develop a tractable open-economy new-Keynesian model with two sectors to analyze the short-term effects of aid-financed fiscal expansions. We distinguish between spending the aid, which is under the control of the fiscal authorities, and absorbing the aid-using the aid to finance a higher current account deficit-which is influenced by the centra...

We use a calibrated multi-sector DSGE model to analyze the likely impact of oil windfalls on the Ghanaian economy, under alternative fiscal and monetary policy responses. We distinguish between the short-run impact, associated with demand-related pressures, and the medium run impact on competitiveness and growth. The impact on inflation and the rea...

This dissertation is a collection of essays in international finance and macroeconomics. In the first chapter I present a two-country model with sticky prices that reproduces the volatility and comovement of international relative prices for the U.S. The model nests two alternative assumptions about the currency denomination of trade: firms set pri...