William Gbohoui's Books

Sub-Saharan Africa’s Risk Perception Premium: In the Search of Missing Factors

By: William Gbohoui,Rasmané Ouedraogo,Yirbehogre Modeste Some

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Sub-Saharan Africa’s Risk Perception Premium: In the Search of Missing Factors

By: William Gbohoui,Rasmané Ouedraogo,Yirbehogre Modeste Some

Policymakers from the sub-Saharan Africa (SSA) region often flag a mispricing of their sovereign debt presumably originating from a perception risk by international investors that lead to "unjustifiably" high borrowing costs. Against this background, this paper explores the extent to which a potential SSA premium exists in the financial markets following a broader two-fold approach. Firstly, using a sample of 1592 international primary sovereign fixed coupon bonds issued between 2003-2021 from Bond Radar by 89 countries, we find that SSA countries pay significantly higher coupon at issuance compared to their peers from other regions. Secondly, we assess whether there is any bias against SSA countries in the secondary market that would result in higher refinancing cost. Based on an unbalanced panel of quarterly data covering 107 countries over 1990 – 2022, we find that SSA countries pay higher refinancing costs in the secondary market. The paper further explores whether there are other factors overlooked by the literature that matter for the risk pricing by international investors. In that respect, we explore the sensitivity of spreads to some structural dimensions where SSA countries face acute challenges―the transparency of budget process, the importance of the informal sector, the level of financial development, and the quality of public institutions. The results show that the excess premium estimated for SSA countries vanishes when these structural factors are accounted for in the regressions.

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International Monetary Fund

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ISBN 13

9798400242144

The Great Divide: Regional Inequality and Fiscal Policy

By: William Gbohoui,W. Raphael Lam,Victor Duarte Lledo

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The Great Divide: Regional Inequality and Fiscal Policy

By: William Gbohoui,W. Raphael Lam,Victor Duarte Lledo

Growing regional inequality within countries has raised the perception that “some places and people” are left behind. This has prompted a shift toward inward-looking policies and away from pro-growth reforms. This paper presents novel stylized facts on regional inequality for OECD countries. It shows that regional disparity in per-capita GDP is large (even after adjusting for regional price differences), persistent, and widening over time. The paper also finds that rising nationwide income inequality is associated with both rising within-region income inequality and widening average income across regions. The rise in inequality is related to declining incentives for interregional labor mobility, especially for poor households in lagging regions, which are estimated to reduce by as much as one-third in the United States. Against these facts, the paper proposes a framework to identify whether, how and by whom fiscal policies can be used to tackle regional inequality. It outlines conditions under which those policies should be spatially-targeted and illustrates how they can be complementary to conventional means-testing methods in mitigating income inequality.

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International Monetary Fund

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ISBN 10

1498312837

ISBN 13

9781498312837

Structural Unemployment in Luxembourg: Bad Luck or Rational Choice?

By: William Gbohoui

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Structural Unemployment in Luxembourg: Bad Luck or Rational Choice?

By: William Gbohoui

This paper combines both micro and macro approaches to identify the drivers of (un)employment and inactivity in Luxembourg. The young, low-skilled, and non-EU migrants are found to be the most vulnerable groups in the labor market. In addition to skills mismatches, work disincentives embedded in the tax-benefit system constitute a factor explaining structural unemployment. High unemployment of young and low-skilled workers reflects substantial unemployment traps, while disincentives for second earners (respectively the generosity of the pension system) contribute to lower labor market participation of women (respectively seniors). Further reduction of structural unemployment requires better integration of vulnerable groups into the labor market and improved targeting of benefits to make work more rewarding.

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International Monetary Fund

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ISBN 10

151351542X

ISBN 13

9781513515427

Uncertainty and Public Investment Multipliers: The Role of Economic Confidence

By: William Gbohoui

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Uncertainty and Public Investment Multipliers: The Role of Economic Confidence

By: William Gbohoui

This paper investigates how macroeconomic uncertainty affects the fiscal multiplier of public investment. In theory, uncertainty can reduce the multiplier if the private sector becomes more cautious and does not respond to the fiscal stimulus. Conversely, it can increase the fiscal multiplier if public investment shocks improve private agents’ expectations about future economic outlook, and lead to larger private spending. Using the disagreement about GDP forecasts as a proxy for uncertainty, we find that unexpected increases in public investment have larger and longer-lasting effects on output, investment, and employment during periods of high uncertainty, with multipliers above 2, and the larger multipliers are not driven by economic slack. Public investment shocks are also found to boost private sector confidence during heightened uncertainty, driving-up expectations about future economic development which in turn magnify private sector response to the initial stimulus.

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International Monetary Fund

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ISBN 10

1616356200

ISBN 13

9781616356200

Do Temporary Business Tax Cuts Matter? A General Equilibrium Analysis

By: William Gbohoui

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Do Temporary Business Tax Cuts Matter? A General Equilibrium Analysis

By: William Gbohoui

This paper develops a dynamic general equilibrium model to assess the effects of temporary business tax cuts. First, the analysis extends the Ricardian equivalence result to an environment with production and establishes that a temporary tax cut financed by a future tax-increase has no real effect if the tax is lump-sum and capital markets are perfect. Second, it shows that in the presence of financing frictions which raise the cost of investment, the policy temporarily relaxes the financing constraint thereby reducing the marginal cost of investment. This direct effect implies positive marginal propensities to invest out of tax cuts. Third, when the tax is distortionary, the expectation of high future tax rates reduces the expected marginal return on investment mitigating the direct stimulative effects.

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International Monetary Fund

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ISBN 10

1498301037

ISBN 13

9781498301039

A New Fiscal Framework for Resource-Rich Countries

By: Mr. Luc Eyraud,William Gbohoui,Mr. Paolo Mauro

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A New Fiscal Framework for Resource-Rich Countries

By: Mr. Luc Eyraud,William Gbohoui,Mr. Paolo Mauro

This paper revisits the debate on the design of fiscal rules in resource-rich countries. Its main objective is to assess alternative systems of rules against their policy objectives, while taking into account country characteristics. One of the contributions of the paper is to propose fiscal frameworks that are centered around the principle of insurance against shocks and less reliant on estimating precisely resource wealth, which tends to be highly volatile.

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International Monetary Fund

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ISBN 13

9798400259609

Calibrating Fiscal Rules

A Consideration of Natural Disaster Risks

By: Olusegun Ayodele Akanbi,William Gbohoui,Mr. Waikei R Lam

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Calibrating Fiscal Rules

A Consideration of Natural Disaster Risks

By: Olusegun Ayodele Akanbi,William Gbohoui,Mr. Waikei R Lam

This technical note assesses how large shocks from natural disasters are key source of vulnerabilities for public finances. It extends the IMF Fiscal Affairs Department calibration toolkit by developing a methodology to calibrate fiscal rules in the event of natural disaster shocks and the possibility of implementing climate adaptation and mitigation measures. The features incorporated in this technical note would allow the calibration of a prudent medium-term fiscal anchor as well as annual budgetary limits that ensure the sustainability of public finances. The note is accompanied by a set of toolkits that provides instructions on calibrating a medium-term debt anchor and corresponding operational rules in the presence of natural disaster risks, accounting for climate investment and other mitigation mechanisms.

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ISBN 13

9798400237508

Financial Frictions and Stimulative Effects of Temporary Corporate Tax Cuts

By: William Gbohoui,Rui Castro

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Financial Frictions and Stimulative Effects of Temporary Corporate Tax Cuts

By: William Gbohoui,Rui Castro

This paper uses an industry equilibrium model where some firms are financially constrained to quantify the effects of a transitory corporate tax cut funded by a future tax increase on the U.S. economy. It finds that by increasing current cash-flows tax cuts alleviate financing frictions, hereby stimulating current investment. Per dollar of tax stimulus, aggregate investment increases by 26 cents on impact, and aggregate output by 3.5 cents. The average effect masks heterogeneity: multipliers are close to 1 for constrained firms, especially new entrants, and negative for larger and unconstrained firms. The output effects extend well past the period the policy is reversed, leading to a cumulative multiplier of 7.2 cents. Multipliers are significantly larger when controlling for the investment crowding-out effect among unconstrained firms.

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