Allan Dizioli's Books

A Macro-Model Approach to Monetary Policy Analysis and Forecasting for Vietnam

By: Allan Dizioli,Jochen M. Schmittmann

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A Macro-Model Approach to Monetary Policy Analysis and Forecasting for Vietnam

By: Allan Dizioli,Jochen M. Schmittmann

The paper develops a small New-Keynesian FPAS model for Vietnam. The model closely matches actual data from 2000-2014. We derive an optimal monetary policy rule that minimizes variability of output, inflation, and the exchange rate. Compared to the baseline model, the optimal rule places a larger weight on output stabilization as the intermediate target to achieve inflation stability, while allowing greater exchange rate flexibility. We analyze the dynamics of key macro variables under various shocks including external and domestic demand shocks and a lift-off of U.S. interest rates. We find that the optimal monetary policy rule delivers greater macroeconomic stability for Vietnam under the shock scenarios.

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International Monetary Fund

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ISBN 10

1513595660

ISBN 13

9781513595665

Emigration and Its Economic Impact on Eastern Europe

By: Mr.Ruben Atoyan,Lone Engbo Christiansen,Allan Dizioli,Mr.Christian Ebeke,Mr.Nadeem Ilahi,Ms.Anna Ilyina,Mr.Gil Mehrez,Mr.Haonan Qu,Ms.Faezeh Raei,Ms.Alaina Rhee,Ms.Daria Zakharova

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Emigration and Its Economic Impact on Eastern Europe

By: Mr.Ruben Atoyan,Lone Engbo Christiansen,Allan Dizioli,Mr.Christian Ebeke,Mr.Nadeem Ilahi,Ms.Anna Ilyina,Mr.Gil Mehrez,Mr.Haonan Qu,Ms.Faezeh Raei,Ms.Alaina Rhee,Ms.Daria Zakharova

This paper analyses the impact of large and persistent emigration from Eastern European countries over the past 25 years on these countries’ growth and income convergence to advanced Europe. While emigration has likely benefited migrants themselves, the receiving countries and the EU as a whole, its impact on sending countries’ economies has been largely negative. The analysis suggests that labor outflows, particularly of skilled workers, lowered productivity growth, pushed up wages, and slowed growth and income convergence. At the same time, while remittance inflows supported financial deepening, consumption and investment in some countries, they also reduced incentives to work and led to exchange rate appreciations, eroding competiveness. The departure of the young also added to the fiscal pressures of already aging populations in Eastern Europe. The paper concludes with policy recommendations for sending countries to mitigate the negative impact of emigration on their economies, and the EU-wide initiatives that could support these efforts.

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International Monetary Fund

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ISBN 10

1498367453

ISBN 13

9781498367455

The Refugee Surge in Europe

Economic Challenges

By: Mr.Shekhar Aiyar,Ms.Bergljot B Barkbu,Nicoletta Batini,Mr.Helge Berger,Ms.Enrica Detragiache,Allan Dizioli,Mr.Christian H Ebeke,Ms.Huidan Huidan Lin,Ms.Linda Kaltani,Mr.Sebastian Sosa,Mr.Antonio Spilimbergo,Petia Topalova

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The Refugee Surge in Europe

Economic Challenges

Against the background of political turmoil in the Middle-East, Europe faces an unprecedented surge in asylum applications. In analyzing the economic impact of this inflow, this paper draws from the experience of previous economic migrants and refugees, mindful of the fact that the characteristics of economic migrants can be different from refugees. In the short-run, additional public expenditure will provide a small positive impact on GDP, concentrated in the main destination countries of Germany, Sweden and Austria. Over the longer-term, depending on the speed and success of the integration of refugees in the labor market, the increase in the labor force can have a more lasting impact on growth and the public finances. Here good policies will make an important difference. These include lowering barriers to labor markets for refugees, for example through wage subsidies to employers, and, in particular, reducing legal barriers to labor market participation during asylum process, removing obstacles to entrepreneurship/self-employment, providing job training and job search assistance, as well as language skills. While native workers often have legitimate concerns about the impact of immigrants on wages and employment, past experience indicates that any adverse effects are limited and temporary.

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International Monetary Fund

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ISBN 10

1513552597

ISBN 13

9781513552590

How Costly Will Reining in Inflation Be? It Depends on How Rational We Are

By: Mr. Jorge A Alvarez,Allan Dizioli

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How Costly Will Reining in Inflation Be? It Depends on How Rational We Are

By: Mr. Jorge A Alvarez,Allan Dizioli

We document that past highly inflationary episodes are often characterized by a steeper inflationslack relationship. We show that model-generated data from a standard small Dynamic Stochastic General Equilibrium (DSGE) model can replicate this empirical finding when estimated with different expectation formation processes. When inflation becomes de-anchored and expectations drift, we can observe high inflation even with a mildly positive output gap in response to cost-push shocks. The results imply that we should not use an unconditioned (not controlling for expectations change) Phillips curve estimated in normal times to predict the cost of reining in inflation. Our optimal policy exercises prescribe early monetary policy tightening and then easing in the context of positive output gaps and inflation far above the central bank target.

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International Monetary Fund

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ISBN 13

9798400232275

Income Inequality and Education Revisited

Persistence, Endogeneity, and Heterogeneity

By: Mr.David Coady,Allan Dizioli

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Income Inequality and Education Revisited

Persistence, Endogeneity, and Heterogeneity

By: Mr.David Coady,Allan Dizioli

This paper presents new results on the relationship between education expansion and income inequality. While human capital theory suggests that income inequality increases with inequality of education outcomes, the expected relationship between income inequality and the level of education is ambiguous. Consistent with these theoretical priors, when dynamic panel estimation techniques are used to address issues of persistence and endogeneity we find a large, positive, statistically significant and stable relationship between education inequality and income inequality, especially in emerging and developing economies and among older age cohorts. The relationship between income inequality and education levels is positive but small and not always statistically significant, but we find a statistically significant negative relationship with schooling levels of younger cohorts. Statistical tests indicate that our dynamic estimators are consistent and that our identifying instruments are valid. Policy simulations suggest that education expansion will continue to be inequality reducing but that this role will diminish as countries develop.

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International Monetary Fund

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ISBN 10

1484302133

ISBN 13

9781484302132

Australia’s Fiscal Framework: Revisiting Options for a Fiscal Anchor

By: Allan Dizioli,Mr.Philippe D Karam,Mr.Dirk V Muir,Siegfried Steinlein

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Australia’s Fiscal Framework: Revisiting Options for a Fiscal Anchor

By: Allan Dizioli,Mr.Philippe D Karam,Mr.Dirk V Muir,Siegfried Steinlein

This paper revisits options for fiscal anchors in Australia against the backdrop of a medium-term budget balance anchor that has led to larger than expected upward drift in the net debt to GDP ratio since the end of the mining investment boom. The IMF’s G20MOD model is used to compare the budget balance anchor with a long-term debt anchor. Using model simulations evaluated against objective macro stabilization-debt control criteria under three likely scenarios for the Australian economy, the latter is found to perform at least as well as the former. The paper also considers the operationalization of a long-term debt anchor utilizing a combination of fiscal rules which includes expenditure restrictions and a flexible time horizon for convergence, aiming at encouraging countercyclical fiscal policy and minimizing the cost in terms of real GDP foregone in the medium term under fiscal consolidation.

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International Monetary Fund

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ISBN 10

1484336240

ISBN 13

9781484336243

Unconventional Fiscal Policy in Times of High Inflation

By: Mai Dao,Allan Dizioli,Chris Jackson,Pierre-Olivier Gourinchas,Mr. Daniel Leigh

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Unconventional Fiscal Policy in Times of High Inflation

By: Mai Dao,Allan Dizioli,Chris Jackson,Pierre-Olivier Gourinchas,Mr. Daniel Leigh

The surge in energy prices in 2022 has been a defining factor behind the increase in euro area inflation. We assess the impact of “unconventional fiscal policy,” defined as the set of fiscal measures, possibly expansionary, motivated by a desire to mute the effects of the increase in energy prices and to lower inflation. Overall, we find that these unconventional measures reduced euro area inflation by 1 to 2 percentage points in 2022 and may avoid an undershoot later on. When nonlinearities in the Phillips curve are taken into account, the net effect is to reduce inflation by about 0.5 percentage points in 2021-24, and keep it nearer to its target. About one-third to one-half of the reduction in 2022 reflects the direct effects of the measures on headline inflation, with much of the remainder reflecting the lower pass-through to core inflation. The fiscal measures were deficit-financed but had limited effects on raising inflation by stimulating demand and instead modestly helped to stabilize longer-term inflation expectations. Looking ahead, the prospective decline in inflation in the euro area is partly due to fortunate circumstances, with energy prices falling from their 2022 peaks and their pass-through effects fading, and with less economic overheating than in economies such as the United States. Implementing similar measures in the face of a more persistent increase in energy prices, or in a more overheated economy, would have caused a more persistent rise in core inflation.

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International Monetary Fund

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ISBN 13

9798400251399

Spillovers from the Maturing of China’s Economy

By: Allan Dizioli,Mr.Benjamin L Hunt,Wojciech Maliszewski

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Spillovers from the Maturing of China’s Economy

By: Allan Dizioli,Mr.Benjamin L Hunt,Wojciech Maliszewski

China’s transition to a new growth model continues and the impact has been felt across the globe. Several trends contribute to the ‘maturing’ of China’s economy: i) structural slowing on the convergence path; ii) on-shoring deepening; and iii) demand rebalancing from investment towards consumption. In the short term, financial stress may lead to a cyclical slowdown. This paper discusses and quantifies spillovers to the global economy from these different developments. The analysis is undertaken using the APDMOD and G20MOD, both modules of the IMF’s Flexible System of Global Models. For plausible values of these developments, the overall impact on the global economy is not large. However, the impact on China’s closest trading partners and commodity exporters can be notable.

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International Monetary Fund

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ISBN 10

1475554435

ISBN 13

9781475554434

Mining the Gap: Extracting Firms’ Inflation Expectations From Earnings Calls

By: Silvia Albrizio,Allan Dizioli,Pedro Vitale Simon

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Mining the Gap: Extracting Firms’ Inflation Expectations From Earnings Calls

By: Silvia Albrizio,Allan Dizioli,Pedro Vitale Simon

Using a novel approach involving natural language processing (NLP) algorithms, we construct a new cross-country index of firms' inflation expectations from earnings call transcripts. Our index has a high correlation with existing survey-based measures of firms' inflation expectations, it is robust to external validation tests and is built using a new method that outperforms other NLP algorithms. In an application of our index to United States, we uncover some facts related to firm's inflation expectations. We show that higher expected inflation translates into future inflation. Going into the firms level dimension of our index, we show departures from a rational framework in firms' inflation expectations and that firms' attention to the central enhances monetary policy effectiveness.

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International Monetary Fund

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ISBN 13

9798400253522

A Pandemic Forecasting Framework: An Application of Risk Analysis

By: Allan Dizioli,Daniel Rivera Greenwood,Aneta Radzikowski

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A Pandemic Forecasting Framework: An Application of Risk Analysis

By: Allan Dizioli,Daniel Rivera Greenwood,Aneta Radzikowski

This paper introduces a simple, frequently and easily updated, close to the data epidemiological model that has been used for near-term forecast and policy analysis. We provide several practical examples of how the model has been used. We explain the epidemic development in the UK, the USA and Brazil through the model lens. Moreover, we show how our model would have predicted that a super infectious variant, such as the delta, would spread and argue that current vaccination levels in many countries are not enough to curb other waves of infections in the future. Finally, we briefly discuss the importance of how to model re-infections in epidemiological models.

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International Monetary Fund

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ISBN 10

1513594842

ISBN 13

9781513594842

Spillovers from China’s Growth Slowdown and Rebalancing to the ASEAN-5 Economies

By: Allan Dizioli,Mr.Jaime Guajardo,Mr.Vladimir Klyuev,Rui Mano,Mr.Mehdi Raissi

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Spillovers from China’s Growth Slowdown and Rebalancing to the ASEAN-5 Economies

By: Allan Dizioli,Mr.Jaime Guajardo,Mr.Vladimir Klyuev,Rui Mano,Mr.Mehdi Raissi

After many years of rapid expansion, China’s growth is slowing to more sustainable levels and is rebalancing, with consumption becoming the main growth driver. This transition is likely to have negative effects on its trading partners in the near term. This paper studies the potential spillovers to the ASEAN-5 economies through trade, commodity prices, and financial markets. It finds that countries with closer trade linkages with China (Malaysia, Singapore, and Thailand) and net commodity exporters (Indonesia and Malaysia) would suffer the largest impact, with growth falling between 0.2 and 0.5 percentage points in response to a decline in China’s growth by 1 percentage point depending on the model used and the nature of the shock. The impact could be larger if China’s slowdown and rebalancing coincides with bouts of global financial volatility. There are also opportunities from China’s rebalancing, both in merchandise and services trade, and there is preliminary evidence that some ASEAN-5 economies are already benefiting from these trends.

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International Monetary Fund

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ISBN 10

1475528949

ISBN 13

9781475528947

How Do Adaptive Learning Expectations Rationalize Stronger Monetary Policy Response in Brazil?

By: Allan Dizioli,Hou Wang

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How Do Adaptive Learning Expectations Rationalize Stronger Monetary Policy Response in Brazil?

By: Allan Dizioli,Hou Wang

This paper estimates a standard Dynamic Stochastic General Equilibrium (DSGE) model that includes a wage and price Phillip's curves with different expectation formation processes for Brazil and the USA. Other than the standard rational expectation process, we also use a limited rationality process, the adaptive learning model. In this context, we show that the separate inclusion of a labor market in the model helps to anchor inflation even in a situation of adaptive expectations, a positive output gap and inflation above target. The estimation results show that the adaptive learning model does a better job in fitting the data in both Brazil and the USA. In addition, the estimation shows that expectations are more backward-looking and started to drift away sooner in 2021 in Brazil than in the USA. We then conduct optimal policy exercises that prescribe early monetary policy tightening in the context of positive output gaps and inflation far above the central bank target.

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