This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper investigates the likely implications of declining oil production on Yemen's equilibrium exchange rate, and discusses policy options to ensure a smooth transition to a nonoil economy. The empirical results suggest that, as oil production and foreign exchange earnings fall, the Yemeni rial will have to adjust downward in real effective terms to keep pace with the equilibrium exchange rate. In light of strong pass-through from exchange rate depreciation to domestic inflation, this could entail a substantial depreciation in nominal terms. Given the nature of the adjustment, a floating exchange rate regime appears to be the best option, if supported by appropriate macroeconomic policies. However, given public fixation on a exchange rate stability, a softly managed float would be a better option for Yemen whereby the central bank may have to lead the market toward the equilibrium exchange rate. JEL Classification Numbers: F31, E52, E58
This paper analyzes the economic situation in Lebanon, which has been aflicted with civil war for the last 15 years. The central government has become completely paralyzed and unable to collect tux revenue but continues to spend in order to maintain essential services, pay wages and salaries and subsidize some basic imported goods. This has led to substantial budget deficits financed by the central bank and commercial banks. The result is a massive increase in the money supply, high infition rates and severe depreciation of the Lebanese currency. Besides, the endemic political and armed conflict has proved to be a fertile ground for speculations and waning confidence which have compounded the twin problems of inflation and exchange rate depreciation.Cette e'tude se propose d'analyser la situation kconomique actuelle au Liban aprds une guerre civile de quinze anne'es (1975)(1976)(1977)(1978)(1979)(1980)(1981)(1982)(1983)(1984)(1985)(1986)(1987)(1988)(1989)(1990)). Durant cette pe'riode, le gouvernement -qui e'tait complktement paralyse' et incapable de collecter les impbts -a cependant continue' a de'penser afin d'assurer les services essentiels, les salaires et les subsides pour 1'importation des produits de base, ce qui a re'sulte' en un e'norme de'ficit budge'taire finance' par la Banque du Liban et les banques commerciales. Cela a eu pour rksultat une augmentation importante de la masse rnone'taire et du taux d'inflation, et la de'pre'ciation de la livre libanaise. De plus, le conflit politique et arm& a encourage' la spkculation et a mine' la confiance duns l'e'conomie du pays, ce qui a encore agrave' le probVme de ['inflation et de la dkprkciation du taux d'kchange de la livre libanaise.
This paper uses a variant of the IMF's Global Economy Model (GEM) to estimate the macroeconomic benefits of Yemen's accession into the Gulf Cooperation Council (GCC). After calibrating the model to Yemen and the GCC block, several simulations are carried out to estimate the potential impact of economic integration on both regions. The paper draws two fundamental conclusions. First, regional integration enhances competition which produces large economic benefits for both Yemen and the GCC. In particular, we show that in some cases economic integration can increase GDP in Yemen by up to 14% and in the GCC by up to 7% over the long run. Second, even if market structures do not improve substantially, GCC enlargement can still generate substantial spillover gains in each block. More specifically, one measure of economic prosperity measured by consumption can increase by up to 7% in Yemen and up to 8% in the GCC.Regional integration, competition, IMF's Global Economy Model (GEM),
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