"Exploring the Aftermath: Macroeconomic Outcomes Following HIPC Debt Relief," with Eyah Denise Edoh, Anja Baum, Yinhao Sun, and Lavinia Zhao. IMF Working Paper.
The Heavily Indebted Poor Countries Initiative (HIPC) Initiative, introduced in the late 1990s, provided many low-income countries with much needed debt relief. This paper, using a propensity score matching technique among other methods, looks at how HIPC countries have fared in three decades since its inception and how the created fiscal space was used, analyzing a wide range of economic, social, and fiscal indicators in one study. Our findings indicate overall positive and sustained effects on macroeconomic outcomes including growth, poverty, foreign direct investment, increased public investment, and tax revenue. However, increases in public expenditure outpace domestic revenue mobilization, while social spending efforts diminish after the completion point. Our analysis further indicates that HIPC did not crowd-in private investment. Post-HIPC developments vary significantly, with countries at risk of or in debt distress showing limited primary balance improvements already during HIPC, while fragile and commodity-exporting countries face greater challenges in attracting private investment and sustaining econoic gains. These results underscore the need to anchor debt restructuring on governance and growth-oriented reforms to promote private investment, diversification, and private sector-led growth, to sustain revenue mobilization efforts, anchor well-prioritized public spending within sustainable medium-term fiscal frameworks, and to institutionalize social spending targets to ensure continuity in the long run.
I propose a structural micro-founded sticky-noisy information model with high- and low-uncertainty regimes. Agents first appraise the state of uncertainty and only spend resources to update their inflation expectations if they perceive uncertainty as sufficiently high. Time-varying uncertainty affects expectation formation through two direct channels: 1) the wake-up call effect, which causes agents to pay more attention, increasing their quantity of information; and 2) the wait-and-see effect, which decreases their quality of information and prompts them to put less weight on new noisier information. Using structural estimation of alternative models with information frictions, I find that accounting for the indirect state-dependence channel, the proposed innovation of the model, better explains the observed information rigidity, since it considers the interaction between the two direct effects. A substantial amount of information rigidity is due to inattention, leaving ample room for policymakers to employ frequent, direct, and simple forward guidance to "pierce the veil" of inattention.
“Inflation Dynamics of Emerging Economies in a Global Context,” with Saad Ahmad. U.S. International Trade Commission Office of Economics Working Paper.
If the inflation globalization hypothesis holds, external factors will eventually replace the domestic determinants of inflation in highly open economies, so that local prices in these countries are increasingly driven by global events. The empirical findings have been mixed, with little consensus on the importance of the global output gap and thus globalization in a country’s inflation process. This paper focuses on the inflation dynamics of emerging economies. First, we examine whether the poolability assumption, common in the literature, holds for modelling emerging economies. Next, we employ a simple out-of-sample forecasting exercise to evaluate the performance of a standard Phillips Curve model against a globalization-augmented Philips Curve. Through this comparison, we determine the usefulness of the global output gap variable in predicting the inflation dynamics of emerging economies.
Low-income countries (LICs) are navigating a highly uncertain global environment shaped by shifting policies in major economies. Changes in trade, migration, spending priorities, and foreign aid are affecting LICs directly and indirectly. While lower food and energy prices and a weaker dollar have provided some relief, cuts in official development assistance are already weighing on many LICs, and tighter immigration policies could weaken remittance inflows going forward. Macroeconomic outcomes also remain highly divergent: growth is projected to rise from 4.8 percent in 2025 to 5.3 percent in 2026, but many LICs still face weak per capita income growth, high debt service burdens, thin reserve buffers, and tighter financing conditions. Building resilience and reinvigorating growth remain urgent. This agenda calls for continued fiscal consolidation in most LICs, with pace and calibration tailored to country circumstances, and supported by stronger domestic revenue mobilization, expenditure prioritization, and improvements in public financial and debt management. Monetary and exchange rate policies must remain focused on durably restoring price stability while safeguarding financial stability. At the same time, structural reforms to strengthen governance, improve institutional quality, and support private sector-led growth and job creation will be critical to rebuilding buffers and raising productivity. The paper also emphasizes that stronger macro-fiscal management and fiscal institutions can help attract more and higher-quality foreign direct investment by reducing policy uncertainty and improving investors’ risk-adjusted returns. By contrast, fiscal incentives should be used selectively and only where fiscal discipline and institutional capacity are already strong. International support, including concessional financing, capacity development, and IMF engagement, will remain critical, with scarce concessional resources best prioritized toward the poorest and fragile LICs.
In 2025, fragile and conflict-affected (FCS) included 38 economies that are home to 1 billion people. The recent shocks have intensified fragility-related pressures even in more stable economies. This paper provides a comprehensive discussion of macroeconomic challenges and policies under fragility, expanding on the existing literature and drawing on the implementation of the IMF’s 2022 FCS Strategy. It finds that fragility is associated with slower long-term economic growth amid impaired government functions, including weak public service provision, low tax revenues, and underdeveloped financial sector. In the short term, fragility heightens economies’ vulnerability, with external shocks (such as terms of trade changes) having a stronger and longer-lasting impact. These effects are particularly pronounced in cases when institutional fragility is compounded by conflict or structural characteristics such as fuel export dependence or small country size. The paper argues that strengthening core government functions—macroeconomic stabilization, public service delivery, and market-based resource allocation—is essential to improving macroeconomic performance and addressing fragility, provided institutional and socio-political constraints are accounted for. International financial institutions can support countries’ efforts to mitigate and overcome fragility through tailored policy advice, capacity development, financing, and stronger partnerships with humanitarian, development, and peace organizations.
Using a database of emerging market fundamentals and bond index spreads across 56 frontier and emerging market countries rated below investment grade during the period 2002-22, we assess whether IMF arrangements can restore access to international capital markets (ICM) for countries in distress through liquidity and conditionality channels. We find that global financial conditions and debt/GDP are the most important determinants of access to ICM within the horizon of a typical IMF arrangement. Using an event study methodology, we show that spreads increase prior to the start of an IMF arrangement and then decrease gradually. By exploiting different characteristics of IMF arrangements, we find evidence that the reforms implemented under the IMF arrangement, as measured by rounds of successful IMF reviews, matter more in the medium term than the IMF’s role as a liquidity provider. These results are consistent with our analysis of 55 credit rating upgrades to ICM access levels, which suggests that debt reduction plays the largest role and that IMF arrangements lend credibility to reforms.
This chapter analyzes the impact of the COVID-19 pandemic on gender disparities in the southern African region. It explores the extent and channels through which the COVID-19 pandemic has affected gender inequality. The analysis provides significant evidence for a “she-cession”: the pandemic economically affected women disproportionately relative to men. In South Africa, employment, hours worked, and incomes for women were more negatively affected than for men. In Namibia and Eswatini, women were less likely to be employed during the pandemic and were more likely to have lost employment due to the pandemic. In Lesotho, women were less likely to be formally employed than men during the pandemic. This chapter provides evidence supporting women’s heavier unpaid work burden and occupational gender segregation as transmission channels and that business employment acted as a countercyclical shock absorber for women in South Africa and Lesotho.
We show that gender inequality decreases the variety of goods countries produce and export, in particular in low-income and developing countries. We argue that this happens through at least two channels: first, gender gaps in opportunity, such as lower educational enrollment rates for girls than for boys, harm diversification by constraining the potential pool of human capital available in an economy. Second, gender gaps in the labor market impede the development of new ideas by decreasing the efficiency of the labor force. Our empirical estimates support these hypotheses, providing evidence that gender-friendly policies could help countries diversify their economies.
Gender inequality decreases the variety of goods countries produce and export, particularly for low-income and developing economies. This happens through at least two channels. First, gender gaps in opportunity, such as lower educational enrollment rates for girls than for boys, harm diversification by constraining the potential pool of human capital available in an economy. Second, gender gaps in the labor market impede the development of new ideas by decreasing the efficiency of the labor force. Our empirical estimates provide evidence that gender-friendly policies could help countries diversify their economies.