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OECD releases full version of global standard for automatic exchange of information

July 24, 2014 Comments off

OECD releases full version of global standard for automatic exchange of information
Source: OECD

Taking an important step towards greater transparency and putting an end to banking secrecy in tax matters, the OECD today released the full version of a new global standard for the exchange of information between jurisdictions.

The Standard for Automatic Exchange of Financial Account Information in Tax Matters calls on governments to obtain detailed account information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis. The Standard, developed at the OECD under a mandate from the G20, endorsed by G20 Finance Ministers in February 2014, and approved by the OECD Council.

The Standard provides for annual automatic exchange between governments of financial account information, including balances, interest, dividends, and sales proceeds from financial assets, reported to governments by financial institutions and covering accounts held by individuals and entities, including trusts and foundations. The new consolidated version includes commentary and guidance for implementation by governments and financial institutions, detailed model agreements, as well as standards for harmonised technical and information technology solutions, notably a standard format and requirements for secure transmission of data.

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International Migration: The Relationship with Economic and Policy Factors in the Home and Destination Country

July 18, 2014 Comments off

International Migration: The Relationship with Economic and Policy Factors in the Home and Destination Country
Source: OECD

Unfavourable demographic trends in many OECD countries threaten the sustainability of potential labour resources, GDP growth and fiscal positions. One factor that is expected to mitigate these trends is continued inflows of migrant workers from low income economies. However, a rapid catch-up in productivity and wages in these traditional source countries vis-à-vis the OECD may weaken economic incentives for migration and imply a transition away from current migration patterns. This paper uses data of the high-skilled and low-skilled migrant stock between 92 origin and 44 destination countries to highlight the relationship between economic factors and migration. The paper also attempts to uncover links with policy and demographic factors prevailing in the origin and destination countries. The analysis suggests that higher skill-specific wages in the destination country are associated with more migration. This relationship appears to be particularly strong for migrants from middle-income countries, supporting theories of an inverted-U relationship between origin country economic development and the propensity to migrate. Policy differences between the destination and origin also appear important, for example in terms of regulations on businesses and labour markets, along with the relative quality of institutions. In some instances, the effects on high-skilled and low-skilled migrants differ markedly. Combining the estimated coefficients from the model with the skill-specific wage profile from the OECD long-term growth projections highlights the potential for weaker future migrant flows to OECD countries than implied by past trends and embedded in official projections.

Turkey: Macroeconomic stability and structural reform key to strong and inclusive growth, OECD says

July 12, 2014 Comments off

Turkey: Macroeconomic stability and structural reform key to strong and inclusive growth, OECD says
Source: OECD

Turkey’s economy will grow stronger in the coming years, but remains overly dependent on domestic consumption funded by foreign finance, according to the latest OECD Economic Survey of Turkey. Turkey should rebalance growth through monetary and financial policies that keep inflation, exchange rates and credit levels on sustainable paths, the OECD said.

The Survey notes that Turkey’s short-term economic outlook has improved: buoyed by the projected global recovery, growth is set to pick up over the coming two years. Turkey’s longer-term prospects, however, hinge on the authorities’ ability to achieve disinflation and preserve the credibility of public finances, while implementing structural reforms that boost productivity and competitiveness across the economy.

A better overall regulatory framework is essential if the business sector is to remain a driver of strong and inclusive growth. Structural change in the business sector would strengthen competitiveness, exports, employment, income and savings, help rebalance domestic and external demand, and move the economy toward an externally sustainable path.

Turkey should strive to make its product and labour market regulations more growth-friendly while continuing to reduce regulatory obligations related to company size.

Vulnerability of Social Institutions

July 11, 2014 Comments off

Vulnerability of Social Institutions
Source: OECD

Future generations will pay a high price if we fail to reform pension, health care and unemployment schemes. Social institutions will be tested in the coming years by ageing and slowing growth that threaten their sustainability and the adequacy of their deliveries, undermining the risk sharing that social institutions provide. In the face of these challenges, social institutions need to be reformed and adjusted regularly to adapt to trend changes and to shocks with-long lasting effects.

U.S. recovery could be strengthened by key reforms, OECD says

July 11, 2014 Comments off

U.S. recovery could be strengthened by key reforms, OECD says
Source: OECD

Economic recovery in the United States is stronger than in most OECD countries, but it will remain sluggish unless new reforms are launched to boost growth, according to OECD’s latest Economic Survey of the United States.

The U.S. recovery has spread across a wide array of sectors. Most banks have generally returned to health, housing prices are rising and unemployment has fallen. That said, growth could be bolstered by new reforms of taxes, education, training, immigration and working conditions – all of which could improve the economic prospects of middle-class families.

First OECD PISA financial literacy test finds many young people confused by money matters

July 10, 2014 Comments off

First OECD PISA financial literacy test finds many young people confused by money matters
Source: OECD

Around one in seven students in the 13 OECD countries and economies that took part in the first OECD PISA international assessment of financial literacy are unable to make even simple decisions about everyday spending, and only one in ten can solve complex financial tasks.

Some 29 000 15 year-olds in 18 countries and economies* took part in the test, which assessed the knowledge and skills of teenagers in dealing with financial issues, such as understanding a bank statement, the long-term cost of a loan or knowing how insurance works.

hanghai-China had the highest average score in financial literacy, followed by the Flemish Community of Belgium, Estonia, Australia, New Zealand, the Czech Republic and Poland.

The gender gap in financial literacy was much smaller than in OECD PISA tests in maths or reading, with there being no significant difference between the performance of boys and girls, except in Italy.

But the inequality gap mirrors that in key school subjects: more socio-economically advantaged students scored much higher than less-advantaged students on average across participating OECD countries and economies. Non-immigrant students also performed slightly better than immigrant students from a similar socio-economic status. The gap between the two groups is larger than the OECD average in the Flemish Community of Belgium, Estonia, France, Slovenia and Spain.

The survey also revealed that skills in mathematics and reading are very closely related to financial literacy. However, high proficiency in one of these subjects does not always signal strong performance in financial literacy.

Consequences of Climate Change Damages for Economic Growth: A Dynamic Quantitative Assessment

July 8, 2014 Comments off

Consequences of Climate Change Damages for Economic Growth: A Dynamic Quantitative Assessment
Source: OECD

This report focuses on the effects of climate change impacts on economic growth. Simulations with the OECD’s dynamic global general equilibrium model ENV-Linkages assess the consequences of a selected number of climate change impacts in the various world regions at the macroeconomic and sectoral level. This is complemented with an assessment of very long-run implications, using the AD-RICE model. The analysis finds that the effect of climate change impacts on annual global GDP is projected to increase over time, leading to a global GDP loss of 0.7% to 2.5% by 2060 for the most likely equilibrium climate sensitivity range. Underlying these annual global GDP losses are much larger sectoral and regional variations. Agricultural impacts dominate in most regions, while damages from sea level rise gradually become more important. Negative economic consequences are especially large in South and South-East Asia whereas other regions will be less affected and, in some cases, benefit thanks to adjustments from international trade. Emissions to 2060 will have important consequences in later decades and centuries. Simulations with the AD-RICE model suggest that if emissions continue to grow after 2060, annual damages of climate change could reach 1.5%-4.8% of GDP by the end of the century. Some impacts and risks from climate change have not been quantified in this study, including extreme weather events, water stress and large-scale disruptions. These will potentially have large economic consequences, and on balance the costs of inaction presented here likely underestimate the full costs of climate change impacts. More research is needed to assess them as well as the various uncertainties and risks involved. However, this should not delay policy action, but rather induce policy frameworks that are able to deal with new information and with the fact that by their nature some uncertainties and risks will never be resolved.

OECD Regional Well-Being

June 27, 2014 Comments off

OECD Regional Well-Being
Source: OECD

How does your region perform when it comes to education, environment, safety and other topics important to your well-being? This interactive site allows you to measure well-being in your region and compare it with 300 other OECD regions based on eight topics central to the quality of our lives.

In this initiative, each region is measured in eight topics – income, jobs, health, access to services, environment, education, safety, and civic engagement. A score has been calculated for each topic so that you can compare places and topics within and across countries.

What Explains the Volume and Composition of Trade? Industrial Evidence from a Panel of Countries

June 24, 2014 Comments off

What Explains the Volume and Composition of Trade? Industrial Evidence from a Panel of Countries
Source: OECD

This paper quantifies the importance of different determinants of trade at the industry level using a sample of 54 OECD and non-OECD economies. The empirical methodology extends the approach of previous empirical studies to explicitly quantify the impact that trading partners’ factor endowments and policies have on bilateral trade, and to analyse the effect of tariffs on the volume and composition of trade. We find that distance, common language, common border and regional trade agreements are important determinants of overall trade, and that factor endowments, policies and institutions, of both the exporter and its trading partners, are main determinants of what and where a country exports. By contrast, we find that trade policies based on tariffs on imported goods not only generate negative spillovers to trading partners by reducing their exports, but they are also likely to reduce exports of countries that impose the tariffs, in particular in industries that rely more on intermediate goods.

Do Resources Flow to Patenting Firms? Cross-Country Evidence from Firm Level Data

June 19, 2014 Comments off

Do Resources Flow to Patenting Firms? Cross-Country Evidence from Firm Level Data
Source: OECD

This paper exploits longitudinal data on firm performance and patenting activity for 23 OECD countries over the period 2003-2010 to explore the extent to which changes in the patent stock are associated with flows of capital and labour to patenting firms. While the finding that patenting is associated with real changes in economic activity at the firm level is in line with recent literature, new empirical evidence presented suggests that the impact of patenting on firm size is likely to be causal. Moreover, these data reveal important differences across OECD countries in the extent to which innovative firms can attract the complementary tangible resources that are required to implement and commercialise new ideas. In turn, the contribution of framework policies to explaining the observed cross-country differences in the magnitude of these flows is explored. While further research is required to establish causality, the results are consistent with the idea that well-functioning product, labour and capital markets; efficient judicial systems and bankruptcy laws that do not overly penalise failure can raise the returns to innovative activity. The paper also investigates the heterogeneous impacts of policies and finds that young firms – which are more likely to experiment with disruptive technologies and rely on external financing to implement and commercialise their ideas – disproportionately benefit from reforms to labour markets and more developed markets for credit and seed and early stage finance.

Economic Policies and Microeconomic Stability: A Literature Review and Some Empirics

June 3, 2014 Comments off

Economic Policies and Microeconomic Stability: A Literature Review and Some Empirics
<Source: Organisation for Economic Co-operation and Development

The decline in macroeconomic volatility from the 1980s to the onset of the Great Recession did not, in general, translate into more microeconomic stability. While microeconomic volatility can reflect growth-generating processes, such as creative destruction and re-allocation of resources, consumption growth volatility weighs on households’ welfare. This study reviews the existing literature on the link between economic policies and economic stability at the firm and household level. Based on firm-level and household-level data for a wide range of OECD countries, it also provides preliminary results on sources and patterns of microeconomic volatility.

OECD Obesity Update 2014

June 2, 2014 Comments off

OECD Obesity Update 2014
Source: Organisation for Economic Co-operation and Development

The majority of the population, and one in five children, are overweight or obese in the OECD area. A nearly tenfold variation in rates of obesity and overweight is observed across OECD countries. The obesity epidemic has spread further in the past five years, but rates have been increasing at a slower pace than before. Obesity and overweight have been virtually stable, or have grown modestly, in Canada, England, Italy, Korea, Spain and the United States, but have increased by a further 2-3% in Australia, France, Mexico and Switzerland. The economic crisis is likely to have contributed to further growth in obesity. Social disparities in obesity persist, and have increased in some countries.

A growing number of countries have adopted policies to prevent obesity from spreading further. Mexico, for instance, has launched one of the most comprehensive government strategies to address the problem in 2013, including awareness-raising, health care, regulatory and fiscal measures. Several countries have developed multi-stakeholder frameworks, involving business and civil society actors in the development of public health policies. Evaluations of the effectiveness of these initiatives are only beginning to emerge.

African countries need to tap global markets more effectively to strengthen their economies

May 27, 2014 Comments off

African countries need to tap global markets more effectively to strengthen their economies
Source: African Development Bank/OECD

By participating more effectively in the global production of goods and services, Africa can transform its economy and achieve a development breakthrough, according to the latest African Economic Outlook, released at the African Development Bank Group’s Annual Meetings.

Produced annually by the African Development Bank (AfDB), the OECD Development Centre and the United Nations Development Programme (UNDP), this year’s report shows that Africa has weathered internal and external shocks and is poised to achieve healthy economic growth rates.

The continent’s growth is projected to accelerate to 4.8 percent in 2014 and 5 to 6 percent in 2015, levels which have not been seen since the global economic crisis of 2009. Africa’s economic growth is more broad-based, argues the report, driven by domestic demand, infrastructure and increased continental trade in manufactured goods.

The Cost of Air Pollution: Health Impacts of Road Transport

May 22, 2014 Comments off

The Cost of Air Pollution: Health Impacts of Road Transport
Source: Organisation for Economic Co-operation and Development

Outdoor air pollution kills more than 3 million people across the world every year, and causes health problems from asthma to heart disease for many more. This is costing societies very large amounts in terms of the value of lives lost and ill health. Based on extensive new epidemiological evidence since the 2010 Global Burden of Disease study, and OECD estimates of the Value of Statistical Life, this report provides evidence on the health impacts from air pollution and the related economic costs.

Economic Survey of Germany 2014 (overview)

May 15, 2014 Comments off

Economic Survey of Germany 2014
Source: Organisation for Economic Co-operation and Development

The German economy has proven remarkably resilient in the face of recent crises. Unemployment has reached post-unification lows, reflecting ambitious reforms in the past decade and Germany’s status as a “safe haven”. The current account surplus remains large, although domestic demand has started contributing substantially to growth. However, Germany will face a number of challenges. Potential growth is estimated to fall on account of demographic changes over the next 20 years. The share of low-paying jobs has risen considerably. Public investment is low and government spending on key services to support inclusive growth, notably childcare, needs to rise further. On unchanged policies, targets for CO2 emission reductions will be missed. To address these issues, determined action is needed, building on the momentum of past reforms. Such action would also have positive international spillover effects on activity.

The German banks have weathered the euro area crisis well but potential risks arise from the low interest-rate environment and large derivative exposures. These potential risks are aggravated by high leverage of the country’s largest banks and persistent perceptions of government guarantees to banks. Lending growth has fallen in real terms in recent years, reflecting weak demand. In some respects, the government has moved ahead of many other OECD countries with reforms to reduce risks in the financial sector. Nonetheless, further steps to make the banks more robust would improve incentives for banks to take advantage of low interest rates to finance strong, sustainable economic growth. Such steps should include reducing high leverage, ambitious implementation of EU requirements for the reform of resolution legislation and addressing governance problems in the public banking sector.

The contribution of the services sector to value-added growth in Germany has been relatively small over the past 10 years. While export oriented manufacturing is exposed to international competition and responds with productivity-increasing innovation and human capital accumulation, service sector productivity is lagging. Competition often appears to be hindered by protection of incumbents. Reforming and deregulating the domestically oriented sectors, including network industries, crafts and professional services would release hidden growth potential and prove beneficial to the economy as a whole. It could also help strengthen domestic demand and make economic growth more balanced.

Full report available for purchase.

Global economy strengthening but significant risks remain, says OECD in latest Economic Outlook

May 8, 2014 Comments off

Global economy strengthening but significant risks remain, says OECD in latest Economic Outlook
Source: Organisation for Economic Co-operation and Development

The global economy will strengthen over the coming two years, but urgent action is still required to further reduce unemployment and address other legacies from the crisis, according to the OECD’s latest Economic Outlook.

GDP growth across the 34-member OECD is projected to accelerate to a 2.2% rate in 2014 and 2.8% in 2015, according to the Outlook. The world economy will grow at a 3.4% rate in 2014 and 3.9% in 2015.

Among the major advanced economies, recovery is best established in the United States, which is projected to grow by 2.6% in 2014 and 3.5% in 2015. The euro area will see a return of positive growth after three years of contraction: 1.2% in 2014 and 1.7% in 2015. In Japan, growth will be dented by the launch of much-needed fiscal consolidation measures, and is expected to hover at 1.2% in 2014 and 2015.

The BRIICS (Brazil, China, India, Indonesia, Russia and South Africa) are projected to see GDP growth of 5.3% this year on average and 5.7% in 2015. China will again have the fastest growth among these countries, with rates just below 7.5% in 2014 and 2015.

Tax burdens on labour income continue to rise across the OECD

April 30, 2014 Comments off

Tax burdens on labour income continue to rise across the OECD
Source: Organisation for Economic Co-operation and Development

Personal income tax has risen in 25 out of 34 OECD countries over the past three years, as countries reduce the value of tax-free allowances and tax credits and subject higher proportions of earnings to tax, according to new data in the annual Taxing Wages publication

The increases in tax burdens on labour income in 2013 were largest in Portugal (due to higher statutory rates), the Slovak Republic (due to higher employer social security contributions) and the United States (due to expiry of previous reductions in employee social security contributions).

International VAT/GST Guidelines

April 25, 2014 Comments off

International VAT/GST Guidelines
Source: Organisation for Economic Co-operation and Development

The Guidelines seek to address the problems that arise from national VAT systems being applied in an uncoordinated way. They set standards that should ensure neutrality in cross-border trade and a more coherent taxation of business-to-business (B2B) trade in services.

Contents:
Chapter 1. Core features of VAT
Chapter 2. Neutrality of VAT in the context of cross-border trade
Chapter 3. Place of taxation for B2B cross-border supplies of services and intangibles

The Prudential Regulation of Financial Institutions: Why Regulatory Responses to the Crisis Might Not Prove Sufficient

April 2, 2014 Comments off

The Prudential Regulation of Financial Institutions: Why Regulatory Responses to the Crisis Might Not Prove Sufficient
Source: Organisation for Economic Co-operation and Development

It is now six years since a devastating financial and economic crisis rocked the global economy. Supported strongly by the G20 process, international regulators led by the Financial Stability Board have been working hard ever since to develop new regulatory standards designed to prevent a recurrence of these events. These international standards are intended to provide guidance for the drawing up of national legislation and regulation, and have already had a pervasive influence around the world. This paper surveys recent international developments concerning the prudential regulation of financial institutions: banks, the shadow banking system and insurance companies. It concludes that, while substantial progress has been made, the global economy nevertheless remains vulnerable to possible future financial instability. This possibility reflects three sets of concerns. First, measures taken to manage the crisis to date have actually made the prevention of future crises more difficult. Second, the continuing active debate over virtually every aspect of the new regulatory guidelines indicates that the analytical foundations of what is being proposed remain highly contestable. Third, implementation of the new proposals could suffer from different practices across regions. Looking forward, the financial sector will undoubtedly continue to innovate in response to competitive pressures and in an attempt to circumvent whatever regulations do come into effect. If we view the financial sector as a complex adaptive system, continuous innovation would only be expected. This perspective also provides a number of insights as to how regulators should respond in turn. Not least, it suggests that attempts to reduce complexity would not be misguided and that complex behavior need not necessarily be accompanied by still more complex regulation. Removing impediments to more effective self-discipline and market discipline in the financial sector would also seem recommended.

Sovereign borrowing set to fall in 2014, says OECD

April 1, 2014 Comments off

Sovereign borrowing set to fall in 2014, says OECD
Source: Organisation for Economic Co-operation and Development
From press release:

Borrowing operations by OECD governments are set to decrease, as their borrowing needs continue to decline, according to a new OECD report. Net borrowing needs are projected to fall from USD 2.0 trillion in 2013 to USD 1.5 trillion in 2014, the lowest level since 2007.

The Sovereign Borrowing Outlook 2014 estimates that gross borrowing requirements will total USD 10.6 trillion in 2014, down from USD 10.8 trillion in 2013.

The redemption profile of medium- and long-term central government debt in the OECD area remains challenging, according to the Outlook, with large projected payment flows for the G7 and euro area governments for 2013 and 2014. For the OECD area as a whole, governments will need to refinance close to 29 % of its outstanding long-term debt in the next 3 years.

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