White Papers
IMF Working Paper-The Rise and Retreat of US Inflation: An Update
May 16, 2025--Summary
Why did US inflation rise over 2021-22 and why has it retreated since then? Ball, Leigh, and Mishra (2022), writing near the inflation peak, explained the rise with a framework in which inflation depends on three factors: long-term expectations; the tightness of the labor market as measured by the vacancy-to-unemployment (V/U) ratio; and large changes in relative prices in particular industries such as energy and autos.
This paper finds that the same framework explains the retreat in inflation since our earlier work.
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Source: IMF.org
IMF Working Paper-Growth, Interrupted: How Crises delay Global Convergence
June 13, 2025--Summary
During a major crisis, the transitional dynamics of conditional convergence are unlikely to apply. In this paper, we introduce a Markov chain approach which integrates the study of crises and convergence. We allow upwards and downwards mobility to change when a country enters a crisis regime. .
We find that conflict and debt crises help to explain the persistence of low relative income, and that the convergence process has changed over time. Faster global convergence in the early 2000s can be attributed partly to fewer and shorter crises, so the multiple shocks after 2020 are likely to have slowed income convergence.
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Source: IMF.org
IMF Working Paper-Lifting Binding Constraints on Growth in Europe: Actionable Priorities to Deepen the Single Market
June 13, 2025--Summary
Focusing on a cross-border perspective, this paper identifies four key binding constraints that hinder firms' ability to innovate and scale up within the EU single market-fragmented regulations, inefficient financial intermediation, limited labor mobility, and fragmented energy market.
To address these constraints and facilitate firms' cross border scale up, investment and innovation, the paper proposes key action areas for deepening the integration of the single market, including lowering regulatory fragmentation, advancing the capital markets union, enhancing labor mobility within the EU, and integrating the EU energy market.
Through illustrative scenarios, the paper highlights that a few actionable steps along these dimensions could lead off the process of deeper integration and deliver a meaningful initial payoff by increasing the EU GDP level relative to baseline by around 3 percent over 10 years-a sizable improvement considering that the EU potential growth is projected to be just above 1 percent annually over this horizon.
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Source: IMF.org
Assessing Thailand's Debt Ceiling-Room for Recalibration?
May 9, 2025--Summary
The pandemic responses and subsequent fiscal stimulus measures have eroded Thailand's fiscal space, pushing its public debt close to the ceiling of 70 percent of GDP. While this situation generally calls for fiscal prudence to reduce debt levels, it also raises questions about the adequacy of the current debt ceiling.
This paper uses various approaches to assess Thailand's public debt threshold, beyond which debt could become unsustainable or negatively impact growth. Stochastic simulations are used to account for potential impact of macroeconomic and fiscal shocks in calibrating an appropriate debt ceiling for Thailand.
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Source: IMF.org
The Energy Origins of the Global Inflation Surge
May 9, 2025--Summary
This paper investigates the relationship between energy prices and inflation dynamics in the context of the global inflation surge during the COVID-19 pandemic. Using a comprehensive sector-level dataset covering over 30 countries and a local projections empirical strategy, we extend previous studies that primarily focused on single-country analyses or aggregate inflation measures.
Our findings indicate that while the energy shocks of 2021-2022 were remarkable, the degree of inflation passthrough of energy shocks appears to be relatively stable over time. Moreover, we show that energy price shocks significantly influence inflation through stable sectoral channels, with structural characteristics such as energy dependence and price flexibility playing critical roles in the passthrough mechanism. These results underscore the necessity of a sectoral perspective in understanding inflationary pressures and highlight the importance of detailed data on price-setting mechanisms and intersectoral connectivity in understanding the energy-inflation passthrough.
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Source: IMF.org
Missing Home-Buyers and Rent Inflation: The Role of Interest Rates and Mortgage Underwriting Standards
May 9, 2025--Summary
Alessia De Stefani has studied how monetary policy interacts with mortgage underwriting standards in shaping tenure decisions and rental market equilibria. Using property-level data from the American Housing Survey, I show that the increase in mortgage rates between 2021 and 2023 pushed many potential first-time home-buyers above FHA mortgage payment-to-income limits, restricting their access to home-ownership.
Our findings indicate that while the energy shocks of 2021-2022 were remarkable, the degree of inflation passthrough of energy shocks appears to be relatively stable over time. Moreover, we show that energy price shocks significantly influence inflation through stable sectoral channels, with structural characteristics such as energy dependence and price flexibility playing critical roles in the passthrough mechanism. These results underscore the necessity of a sectoral perspective in understanding inflationary pressures and highlight the importance of detailed data on price-setting mechanisms and intersectoral connectivity in understanding the energy-inflation passthrough.
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Source: IMF.org
Hong Kong SAR's Economy in the Face of Climate Change: Risks and Prospects
May 6, 2025--Hong Kong SAR is facing ongoing challenges from climate change, with projections indicating that these issues will remain prevalent or even intensify in the future. In response, Hong Kong SAR has embraced a comprehensive three-pronged climate strategy-the Climate Action Plan 2050--that focuses on mitigation, adaptation, and building resilience, and sets ambitious goals of reducing carbon emissions by 50 percent before 2035 and achieving carbon neutrality before 2050.
Simultaneously, there is a concerted effort to bolster infrastructure and community resilience against natural disasters. Although significant strides have been made towards decarbonizing the economy and building resilience in the last few years, sustained action is pivotal to reach carbon neutrality, including by reducing emissions in hard-to-abate sectors and improving energy efficiency across industries. It would also be crucial to continue strengthening resilience against extreme weather events, further integrate climate into systemic risk analysis, and foster a green finance ecosystem.
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Source: IMF.org
Impact Dynamics of Natural Disasters and the Case of Pacific Island Countries
May 2, 2025--
Summary
This paper investigates the short-and medium-term economic impacts of natural disasters, focusing on Pacific Island Countries (PICs) and using global high-frequency nightlight data in addition to macroeconomic data. In this paper, we identify significant short--term effects on growth following natural disasters, which are exacerbated by high public debt and heightened climate vulnerability.
Although the negative impacts generally diminish within a year for most countries, PICs face disproportionately larger and rising short-term disruptions (-1.4 percent of annual potential growth) and persistent medium-term consequences. Further analysis of PIC's' fiscal, external, and real sectors following severe disasters using annual economic data reveals that weaker fiscal positions, partly driven by reduced output, may lead to an upward trend in public debt, and increased imports may deteriorate current account balances over the medium term. These findings underscore the need for robust counter-cyclical policies and proactive investments in climate resilience to mitigate the adverse effects of climate shocks and promote long-term economic stability
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Source: IMF.org
Langham Hall -Trends in venture capital fund terms report
April 22, 2025--Langham Hall is delighted to present a research report on venture capital ('VC') fund terms, including trends in both management fees and carried interest. The report has been produced in conjunction with leading VC law firm Osborne Clarke, and contains data from over 60 European VC funds.
Key trends in venture capital fund terms
As one of the only independent providers of fund administration and AIFMD services across three continents, our experience with venture capital clients makes us a valuable partner at set up stage and beyond. More recently, our use of Wolfram’s computable data technology has allowed us to give these GPs innovative management analytics alongside their regular reporting, including LP-by-LP performance data, as well as fund and asset level IRRs, all from one hierarchically stored central data source.
The report looks at:
Management fees: including both during and after the investment period
Carried interest: typical hurdle rates, as well as multiple vs IRR based calculations
Super carry: how much and at what multiple this is payable
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Source: Langham Hall
IMF Working Papers-Inflation Targeting and the Legacy of High Inflation
April 11, 2025-Summary
As inflation targeting (IT) turns 35, it has become a key institutional monetary framework by central banks. Yet, this paper shows that stark differences exist among inflation targeting countries in the conduct of monetary policy. Behind such heterogeneity, the legacy of a high inflation history appears as a preponderant factor.
We propose a model that diverges from existing IT workhorse models by adding path-dependence (to a forward-looking model) and potentially imperfect central bank credibility. We show that achieving low inflation (hitting the target) requires more aggressive monetary policy, and is costlier from an output point of view, when individuals' past inflationary experiences shape their inflation expectation formation. In turn, we provide empirical evidence of the need for these two theoretical additions.
Countries that experienced a high level of inflation before adopting the IT regime tend to respond more aggressively to deviations of inflation expectations from the central bank's target. We also point to the existence of a credibility puzzle, whereby the strength of a central bank's monetary policy response to deviations from the inflation target remains broadly unchanged even as central banks gain credibility over time. Put differently, a country’s inflationary past casts a long and persistent shadow on central banks.
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Source: IMF.org
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