International Monetary Fund

Displaying 1-40 of 747 results

  • White Papers // Dec 2011

    Employment Protection and Business Cycles in Emerging Economies

    The authors build a small open economy, real business cycle model with labor market frictions to evaluate the role of employment protection in shaping business cycles in emerging economies. The model features matching frictions and an endogenous selection effect by which inefficient jobs are destroyed in recessions. In a quantitative...

    Provided By International Monetary Fund

  • White Papers // Jun 2011

    The Cost Of Volatile Investment In An Emerging Economy

    The author measures the welfare gains from eliminating fluctuations in investment in an emerging economy such as Argentina. The estimated welfare effects are an order of magnitude higher than those for the US and arise with moderate degrees of diminishing returns to investment. This paper calculates the welfare costs associated...

    Provided By International Monetary Fund

  • White Papers // Jun 2011

    The Role Of Monetary Policy In Turkey During The Global Financial Crisis

    Turkey is an interesting case study because it was one of the hardest hit emerging economies by the global financial crisis, with a year-over-year contraction of 15 percent during the first quarter of 2009. At the same time, anticipating the fallout from the crisis, the Central Bank of the Republic...

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  • White Papers // May 2011

    Precautionary Savings And Global Imbalances In World General Equilibrium

    In this paper, the authors assess the implications of precautionary savings for global imbalances by considering a world economy model composed by the US, the Euro Area, Japan, China, oil-exporting countries, and the rest of the world. These areas are assumed to differ only with respect to GDP volatility which...

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  • White Papers // May 2011

    Sectoral Composition Of Foreign Direct Investment And External Vulnerability In Eastern Europe

    In the run up to the global crisis, countries in Central Eastern and Southeastern Europe attracted large capital inflows and some of them built up large external imbalances. This paper investigates whether these imbalances are linked to the sectoral composition of FDI. It shows that FDI in the tradable sectors...

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  • White Papers // May 2011

    Did Export Diversification Soften The Impact Of The Global Financial Crisis?

    This paper considers the role of export diversification in determining trade outcomes during the global financial crisis. The impact of export diversification (or concentration) is measured by assessing three different dimensions of specialization. First, concentration by geographic destination is considered; that is, whether the bulk of exports from a country...

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  • White Papers // May 2011

    Impact Of The Global Crisis On Banking Sector Soundness In Asian Low-Income Countries

    The paper takes stock of the impact of the global financial crisis that began in late 2007 on banking sectors of Asian low-income countries, by exploring bank-level data provided by Bankscope. The paper examines three key channels of possible crisis spillovers: exposures to valuation changes of mark-to-market financial assets, a...

    Provided By International Monetary Fund

  • White Papers // Apr 2011

    Toward Inflation Targeting In Sri Lanka

    This paper develops a practical model-based Forecasting and Policy Analysis System (FPAS) to support a transition to an inflation forecast targeting regime in Sri Lanka. The FPAS model provides a relatively good forecast for inflation and a framework to evaluate policy trade-offs. The model simulations suggest that an open-economy inflation...

    Provided By International Monetary Fund

  • White Papers // Apr 2011

    Evidence On Productivity, Comparative Advantage, And Networks In The Export Performance Of Firms

    This paper tests the effect of comparative advantage, size, and networking on the firm probability of exporting. The closest theoretical framework is the one of Bernard, Redding, and Schott (2007), with firm heterogeneity across countries and industries. The authors use a recently assembled multi-country multi-industry firm level dataset, and construct...

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  • White Papers // Apr 2011

    ICT, Financial Inclusion, And Growth: Evidence From African Countries

    This paper studies the impact of Information and Communication Technologies (ICT), especially mobile phone rollout, on economic growth in a sample of African countries from 1988 to 2007. Further, the authors investigate whether financial inclusion is one of the channels through which mobile phone development influences economic growth. In estimating...

    Provided By International Monetary Fund

  • White Papers // Apr 2011

    Reconsidering The Role Of Food Prices In Inflation

    Food prices are generally excluded from measures of inflation most closely watched by policymakers due either to their transitory nature or their higher volatility. However, in lower income countries, food price inflation is not only more volatile but also on average higher than nonfood inflation. Food inflation is also in...

    Provided By International Monetary Fund

  • White Papers // Mar 2011

    Modeling Inflation In Chad

    This paper examines the determinants of inflation in Chad using quarterly data from 1983:Q1 to 2009:Q3. The analysis is based on a single-equation model, completed by a structural vector auto regression model to capture inflation persistence. The results show that the main determinants of inflation in Chad are rainfall, foreign...

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  • White Papers // Mar 2011

    Fiscal Expectations Under The Stability And Growth Pact: Evidence From Survey Data

    The paper uses survey data to analyze whether financial market expectations on government budget deficits changed in France, Germany, Italy, and the United Kingdom during the period of the Stability and Growth Pact (SGP). The authors' findings indicate that accuracy of financial expert deficit forecasts increased in France. Convergence between...

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  • White Papers // Feb 2011

    Global Shocks And Their Impact On Low-Income Countries: Lessons From The Global Financial Crisis

    This paper investigates the short-run effects of the 2007 - 09 global financial crisis on growth in (mainly non-fuel exporting) Low-Income Countries (LICs). Four conclusions stand out. First, for many individual LICs, 2009 was not extraordinarily calamitous; however, aggregate LIC output declined sharply because LICs were unusually synchronized. Second, the...

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  • White Papers // Feb 2011

    Overborrowing, Financial Crises And 'Macroprudential' Policy

    This paper studies over borrowing, financial crises and macro-prudential policy in an equilibrium model of business cycles and asset prices with collateral constraints. Agents in a decentralized competitive equilibrium do not internalize the negative effects of asset fire-sales on the value of other agents' assets compared with a constrained social...

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  • White Papers // Feb 2011

    New Indicators For Tracking Growth In Real Time

    The authors develop monthly indicators for tracking growth in 32 advanced and emerging-market economies. They test the historical performance of the indicators and find that they do a good job at describing the business cycle. In a recursive out-of-sample forecasting exercise, they find that the indicators generally produce good GDP...

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  • White Papers // Jan 2011

    Asian Financial Integration: Trends And Interruptions

    The paper compares trends in financial integration within Asia with those in industrialized countries and other regional groups. Declines in cross-country dispersion in equity returns and interest rates suggest increased Asian integration, with the process interrupted by crises and global volatility. Cross-border equity and bond holdings have also increased, but...

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  • White Papers // Jan 2011

    How Does Trade Evolve In The Aftermath Of Financial Crises?

    The authors analyze trade dynamics following past episodes of financial crises. Using an augmented gravity model and 179 crisis episodes from 1970-2009, They find that there is a sharp decline in a country's imports in the year following a crisis - 19 percent, on average - and this decline is...

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  • White Papers // Jan 2011

    A Barrel Of Oil Or A Bottle Of Wine: How Do Global Growth Dynamics Affect Commodity Prices?

    This paper investigates the causes of extreme fluctuations in commodity prices from 1990 to 2010. Analyzing two very distinct commodities - crude oil and fine wine, the authors find that macroeconomic factors are the main determinants of commodity prices. Although supply constraints have the expected effect, aggregate demand growth is...

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  • White Papers // Jan 2011

    Trade And Trade Finance In The 2008-09 Financial Crisis

    Global merchandise trade sharply declined in late 2008 and early 2009, and some press and financial market reports assigned a large role for the decline to trade finance. However, the available evidence suggests that shocks to trade finance were not the major factor in the decline in trade. Surveys of...

    Provided By International Monetary Fund

  • White Papers // Jan 2011

    To Fire Or To Hoard? Explaining Japan's Labor Market Response In The Great Recession

    The Great Recession pushed Japan's unemployment rate to historic highs, but the increase has been small by international standards and small relative to the large output shock. This paper explores Japan's cyclical labor market response to the global financial crisis. These findings suggest that the employment responsiveness has been historically...

    Provided By International Monetary Fund

  • White Papers // Jan 2011

    Interpreting Currency Movements During The Crisis: What's The Role Of Interest Rate Differentials?

    Using an adaptation of the Uncovered Interest Parity (UIP) condition, this paper analyzes the drivers behind the large, symmetric exchange rate swings observed during the financial crisis of 2008 - 2010. Employing a Nelson-Siegel model, the authors estimate yield curves and decompose the exchange rate movements into changes they attribute...

    Provided By International Monetary Fund

  • White Papers // Jan 2011

    The Impact Of Fiscal Consolidation And Structural Reforms On Growth In Japan

    With Japan's public debt reaching historical levels, the need for fiscal consolidation and structural reforms have increased. As fiscal consolidation will require a sustained and large adjustment in the fiscal balance, its growth effect is a concern particularly for the short run. This paper uses the IMF's Global Integrated Monetary...

    Provided By International Monetary Fund

  • White Papers // Jan 2011

    How Does Political Instability Affect Economic Growth?

    This paper is to empirically determine the effects of political instability on economic growth. Using the system-GMM estimator for linear dynamic panel data models on a sample covering up to 169 countries, and 5-year periods from 1960 to 2004, the author find that higher degrees of political instability are associated...

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  • White Papers // Jan 2011

    The Spanish Labor Market In A Cross-Country Perspective

    The Spanish labor market is not working: the unemployment rate is structurally very high; wages are not very responsive to labor market conditions, causing a high cyclicality of unemployment; and the labor market is highly dual. Compared with the EU15, Spanish labor market institutions and policies stand out by the...

    Provided By International Monetary Fund

  • White Papers // Jan 2011

    What Is Driving Financial De-dollarization In Latin America?

    In the last decade, a group of Latin American countries (Bolivia, Paraguay, Peru, and Uruguay) experienced a gradual, yet sustained decline in financial dollarization. This paper documents the stylized facts and uses a standard VAR approach to examine the drivers of both deposit and credit de-dollarization. It finds that the...

    Provided By International Monetary Fund

  • White Papers // Jan 2011

    Capital Flows, Exchange Rate Flexibility, And The Real Exchange Rate

    This paper analyzes the impact of capital inflows and exchange rate flexibility on the real exchange rate in developing countries based on panel co-integration techniques. The results show that public and private flows are associated with a real exchange rate appreciation. Among private flows, portfolio investment has the highest appreciation...

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  • White Papers // Jan 2011

    The Effects Of Housing Prices And Monetary Policy In A Currency Union

    The recent boom-and-bust cycle in housing prices has refreshed the debate on the drivers of housing cycles as well as the appropriate policy response. The authors analyze the case of Spain, where housing prices have soared since it joined the EMU. They present evidence based on a VAR model, and...

    Provided By International Monetary Fund

  • White Papers // Jan 2011

    Monetary Policy Transmission In An Emerging Market Setting

    Some emerging economies have a relatively ineffective monetary policy transmission owing to weaknesses in the domestic financial system and the presence of a large and segmented informal sector. At the same time, small open economies can have a substantial monetary policy transmission through the exchange rate channel. In order to...

    Provided By International Monetary Fund

  • White Papers // Jan 2011

    Government Debt Issuance In The Euro Area: The Impact Of The Financial Crisis

    This paper documents and analyzes crisis-related changes in government debt issuance practices in the 16 euro zone countries and Denmark. Using a newly constructed database on primary market debt issuance during 2007 - 09, the authors find evidence of a shift away from pre-crisis standards of best funding practices -...

    Provided By International Monetary Fund

  • White Papers // Jan 2011

    Armenia: An Assessment Of The Real Exchange Rate And Competitiveness

    This paper uses a range of different methodologies to estimate the equilibrium real exchange rate in Armenia with both single-country and panel estimation techniques. The authors estimate a country specific autoregressive distributed lag model and then proceed with the estimation of a co-integrated panel consisting of transition economies in Europe...

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  • White Papers // Jan 2011

    Investment Objectives Of Sovereign Wealth Funds-A Shifting Paradigm

    While SWF investment objectives to some extent reflect inherent characteristics, notable differences in Strategic Asset Allocation (SAA) exist even amongst SWFs of similar types. Even so, this paper shows that the global crisis may have changed SWF's asset allocations in ways that may not be ideal or justified in all...

    Provided By International Monetary Fund

  • White Papers // Dec 2010

    Lessons From The Financial Crisis On Modelling Systemic And Sovereign Risk

    The complex interactions, spillovers and feedbacks of the global crisis that began in 2007 remind us how important it is to improve the authors' analyzes and modelling of financial crises and sovereign risk. This paper provides a broad framework to examine how vulnerabilities can build up and suddenly erupt in...

    Provided By International Monetary Fund

  • White Papers // Dec 2010

    Macroeconomic Effects Of Public Pension Reforms

    The paper explores the macroeconomic effects of three public pension reforms, namely an increase in retirement age, a reduction in benefits and an increase in contribution rates. Using a five-region version of the IMF's Global Integrated Monetary and Fiscal model (GIMF), the authors find that public pension reforms can have...

    Provided By International Monetary Fund

  • White Papers // Dec 2010

    Learning About Inflation Measures For Interest Rate Rules

    Empirical evidence suggests that goods are highly heterogeneous with respect to the degree of price rigidity. The authors develop a DSGE model featuring heterogeneous nominal rigidities across two sectors to study the equilibrium determinacy and stability under adaptive learning for interest rate rules that respond to inflation measures differing in...

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  • White Papers // Dec 2010

    European Financial Linkages: A New Look At Imbalances

    The authors document external investment positions among European Union countries at the start of the financial crisis through the creation of a new database comprising bilateral external financial asset and liabilities, excluding reserve assets and derivatives. While there are some gaps in the data, the overall coverage of reported bilateral...

    Provided By International Monetary Fund

  • White Papers // Dec 2010

    Japan's Quest For Growth: Exploring The Role Of Capital And Innovation

    As labor input in Japan shrinks with population aging, capital accumulation and productivity gains will drive growth over the medium-term. At the same time, a changing global landscape calls for a shift in export-oriented investment toward new markets and a new generation of products, as well as increased investment by...

    Provided By International Monetary Fund

  • White Papers // Dec 2010

    Estimating A Structural Model Of Herd Behavior In Financial Markets

    The authors develop a new methodology to estimate the importance of herd behavior in financial markets: They build a structural model of informational herding that can be estimated with financial transaction data. In the model, rational herding arises because of information-event uncertainty. They estimate the model using data on a...

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  • White Papers // Dec 2010

    The Cost Of Private Debt Over The Credit Cycle

    The authors identify global and regional fluctuations in international private debt flows to emerging and developing countries using data on cross border loans and international bond issuance over 1993 - 2009. They estimate the effects of individual borrower characteristics as well as macroeconomic conditions on the cost of foreign borrowing...

    Provided By International Monetary Fund

  • White Papers // Dec 2010

    Into The Great Unknown: Stress Testing With Weak Data

    Stress testing has become the risk management tool du jour in the wake of the global financial crisis. In countries where the information reported by financial institutions is considered to be of sufficiently good quality, and supervisory and regulatory standards are high, stress tests can be of significant value. In...

    Provided By International Monetary Fund

  • White Papers // Sep 2010

    Commodity Windfalls, Polarization, And Net Foreign Assets: Panel Data Evidence On The Voracity Effect

    This paper examines the effect that windfalls from international commodity price booms have on net foreign assets in a panel of 145 countries during the period 1970-2007. The main finding is that windfalls from international commodity price booms lead to a significant increase in net foreign assets, but only in...

    Provided By International Monetary Fund

  • White Papers // Sep 2010

    Bank Capital And Uncertainty

    An important role for bank capital is that of a buffer against unexpected losses. As uncertainty about these losses increases, the theory predicts an increase in the optimal level of bank capital. This paper investigates this implication empirically with U.S. Commercial Banks data and finds statistically significant and robust evidence...

    Provided By International Monetary Fund

  • White Papers // Sep 2010

    Investment-Specific Technology Shocks And International Business Cycles: An Empirical Assessment

    In this paper, the authors first introduce investment-specific technology (IST) shocks to an otherwise standard international real business cycle model and show that a thoughtful calibration of them along the lines of Raffo (2009) successfully addresses the "quantity", "international comovement", "Backus-Smith", and "price" puzzles. Second, they use OECD data for...

    Provided By International Monetary Fund

  • White Papers // Sep 2010

    Why Does Bad News Increase Volatility And Decrease Leverage?

    The literature on leverage until now shows how an increase in volatility reduces leverage. However, in order to explain pro-cyclical leverage it assumes that bad news increases volatility. This paper suggests a reason why bad news is more often than not associated with higher future volatility. The authors show that,...

    Provided By International Monetary Fund

  • White Papers // Sep 2010

    The End Of An Era? The Medium And Long-Term Effects Of The Global Crisis On Growth

    This paper investigates the medium- and long-term growth effects of the global financial crises on Low-Income Countries (LICs). Using several methodological approaches, including impulse response function analysis, growth spells techniques and panel regressions, The authors show that external demand (ED) shocks are not historically associated with sharp declines in output...

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  • White Papers // Sep 2010

    Information Content Of DQAF Indicators - Empirical Entropy Analysis

    The study presents an analysis of the information content of IMF's Data Quality Assessment Framework (DQAF) indicators. There are significant differences in the quantity of information between DQAF dimensions and sub-dimensions. The most informative DQAF dimension is accessibility, followed by the prerequisites of quality and accuracy and reliability. The least...

    Provided By International Monetary Fund

  • White Papers // Sep 2010

    Data Dissemination Standards And The Statistical Quality Of The IMF?s World Economic Outlook Forecasts

    This paper analyzes the effects of IMF member countries participation in the IMF's Data Standards Initiatives (DSI) on the statistical quality of WEO forecasts. Results show that WEO forecasts for SDDS subscribers are in general better than for GDDS participants and those member countries than do not participate in the...

    Provided By International Monetary Fund

  • White Papers // Sep 2010

    The Unequal Benefits Of Fuel Subsidies: A Review Of Evidence For Developing Countries

    This paper reviews evidence on the impact of fuel subsidy reform on household welfare in developing countries. On average, the burden of subsidy reform is neutrally distributed across income groups; a $0.25 decrease in the per liter subsidy results in a 6 percent decrease in income for all groups. More...

    Provided By International Monetary Fund

  • White Papers // Sep 2010

    The Effects Of The Global Crisis On Islamic And Conventional Banks: A Comparative Study

    This paper examines the performance of Islamic banks (IBs) and conventional banks (CBs) during the recent global crisis by looking at the impact of the crisis on profitability, credit and asset growth, and external ratings in a group of countries where the two types of banks have significant market share....

    Provided By International Monetary Fund

  • White Papers // Sep 2010

    Optimal Price Indices For Targeting Inflation Under Incomplete Markets

    In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. The authors develop a two-sector two-good new-Keynesian model to study the optimal choice of price index in markets with financial frictions. They find that, in the presence of financial frictions,...

    Provided By International Monetary Fund

  • White Papers // Sep 2010

    To Starve Or Not To Starve The Beast?

    For thirty years prominent voices have advocated a policy of "starving the beast" - cutting taxes to force government spending cuts. This paper analyzes the macroeconomic and welfare consequences of this policy using a two-country general equilibrium model. Under several strong assumptions the policy, if fully implemented, produces domestic output...

    Provided By International Monetary Fund

  • White Papers // Aug 2010

    Sustainable Real Exchange Rates In The New EU Member States: What Did The Great Recession Change?

    The Great Recession affected export and import patterns in the sample countries, and these changes, coupled with a more volatile external environment, have profound impact on the estimates of real exchange rate misalignments and projections of sustainable real exchange rates. The authors find that real misalignments in several countries with...

    Provided By International Monetary Fund

  • White Papers // Aug 2010

    Estimates Of The Output Gap In Armenia With Applications To Monetary And Fiscal Policy

    This paper employs several econometric techniques to estimate the Armenian output gap. The findings indicate that the output gap is significantly positive in 2007 and 2008 and decreased dramatically in 2009. The paper uses these results to estimate a New Keynesian Phillips curve for Armenia, suggesting a significant role of...

    Provided By International Monetary Fund

  • White Papers // Aug 2010

    Can Global Liquidity Forecast Asset Prices?

    During the period leading up to the global financial crisis many asset classes registered rapid price increases. This coincided with a significant rise in global liquidity. This paper attempts to determine the extent to which the rise in asset prices was influenced by developments in global liquidity. The authors confirm...

    Provided By International Monetary Fund

  • White Papers // Aug 2010

    Islamic Banking: How Has It Diffused?

    This paper investigates the determinants of the pattern of Islamic bank diffusion around the world using country-level data for 1992 - 2006. The analysis illustrates that income per capita, share of Muslims in the population and status as an oil producer are linked to the development of Islamic banking, as...

    Provided By International Monetary Fund

  • White Papers // Aug 2010

    Measuring Financial Barriers Among East African Community Countries

    This paper seeks to quantify existing financial barriers among East African Community (EAC) member countries based on analysis of each member country's foreign exchange market. The primary contribution of this paper is the generation of an aggregate measure of financial barriers for the three relatively more advanced members (Kenya, Uganda,...

    Provided By International Monetary Fund

  • White Papers // Aug 2010

    The Effectiveness Of Macroeconomic Commitment In Weak(er) Institutional Environments

    This paper analyzes the institutional conditions affecting the establishment and effectiveness of independent central banks and of budgetary institutions. It draws on the recent theory developed by North, Wallis and Weingast on the transition from a closed and fragile state to an open economic and political environment. The paper presents...

    Provided By International Monetary Fund

  • White Papers // Aug 2010

    The Dynamic Effects Of Commodity Prices On Fiscal Performance In Latin America

    The recent boom and bust in commodity prices has raised concerns about the impact of volatile commodity prices on Latin American countries' fiscal positions. Using a novel quarterly data set??which includes unique country-specific commodity price indices and a comprehensive measure of public expenditures? This paper analyzes the dynamic effects of...

    Provided By International Monetary Fund

  • White Papers // Aug 2010

    A Macro Model Of The Credit Channel In A Currency Union Member: The Case Of Benin

    This paper applies and extends a theoretical model built by Agenor and Montiel (2007) by exploring the effectiveness of government bonds and monetary policy in a small, open, credit-based economy with a fixed exchange rate. The model is applied to Benin, a member of a currency union, using a general...

    Provided By International Monetary Fund

  • White Papers // Aug 2010

    Price Of Risk - Recent Evidence From Large Financials

    Probability of default (PD) measures have been widely used in estimating potential losses of, and contagion among, large financial institutions. In a period of financial stress however, the existing methods to compute PDs and generate loss estimates may vary significantly. This paper discusses three issues that should be taken into...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    Peru: Drivers Of De-dollarization

    Peru has successfully pursued a market-driven financial de-dollarization during the last decade. Dollarization of credit and deposit of commercial banks - across all sectors and maturities - has declined, with larger declines for commercial credit and time and saving deposits. The analysis presented in this paper confirms that de-dollarization has...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    Does Procyclical Fiscal Policy Reinforce Incentives To Dollarize Sovereign Debt?

    This paper explores the link between the cyclical patterns of macroeconomic and policy variables and the currency composition of domestic sovereign debt in emerging market countries. The empirical analysis is anchored in an equilibrium model, in which the dollarization of sovereign debt arises as a result of the optimal portfolio...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    Local Housing Market Cycle And Loss Given Default: Evidence From Sub-Prime Residential Mortgages

    This paper studies the impact of housing market cycles on loss given default (LGD). Previous studies have shown that the current loan-to-value ratio (CLTV) is the most important determinant of LGD. This paper establishes another linkage which is between the house price cycles before the time of mortgage origination and...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    How Do International Financial Flows To Developing Countries Respond To Natural Disasters?

    This paper uses multivariate dynamic panel analysis to examine the response of international financial flows to natural disasters. The models estimated for a large sample of developing countries point to differentiated responses of specific types of financial flows. The results show that remittance inflows increase significantly in response to shocks...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    China's Economic Growth: International Spillovers

    This paper presents some facts on China's role in the world economy and measures the impact of China's growth on growth in the rest of the world in the short and long term. Shortrun estimates based on VARs and error-correction models suggest that spillover effects of China's growth have increased...

    Provided By International Monetary Fund

  • White Papers // May 2010

    Financial Innovation, The Discovery Of Risk, And The U.S. Credit Crisis

    Uncertainty about the riskiness of new financial products was an important factor behind the U.S. credit crisis. The authors show that a boom-bust cycle in debt, asset prices and consumption characterizes the equilibrium dynamics of a model with a collateral constraint in which agents learn "by observation" the true riskiness...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    Budget Consolidation: Short-Term Pain And Long-Term Gain

    The paper evaluates the costs and benefits of fiscal consolidation using simulations based on the IMFs global DSGE model GIMF. Over the longer run, well-targeted permanent reductions in budget deficits lead to a considerable increase in both the growth rate and the level of output. The gains may be enhanced...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    Exchange Rate Assessment For Sub-Saharan Economies

    This paper provides an exchange rate assessment for sub-Saharan African economies by using methodologies similar to those developed by the International Monetary Fund's Consultative Group on Exchange Rate Issues. As in the World Economic Outlook (IMF, 2009a), the unbalanced panel dataset covers 182 countries from 1973 to 2014. The authors...

    Provided By International Monetary Fund

  • White Papers // Jun 2010

    World Food Prices And Monetary Policy

    The large swings in world food prices in recent years renew interest in the question of how monetary policy in small open economies should react to such imported price shocks. The authors examine this issue in a canonical open economy setting with sticky prices and where food plays a distinctive...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    The Macroeconomics Of Medium-Term Aid Scaling-Up Scenarios

    The publishers develop a model to analyze the macroeconomic effects of a scaling-up of aid and assess the implications of different policy responses. The model features key structural characteristics of low-income countries, including varying degrees of public investment efficiency and a learning-by-doing (LBD) externality that captures Dutch disease effects. On...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    Inflation And Conflict In Iraq: The Economics Of Shortages Revisited

    Containing inflation has turned out to be one of the most challenging aspects of economic management in Iraq. This paper posits that conventional as well as unconventional factors explain inflation dynamics in the recent past. The authors build a theoretical model based on the insights into the workings of socialist...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    External Finance, Sudden Stops, And Financial Crisis: What Is Different This Time?

    This paper develops a two-country DSGE model to investigate the transmission of a global financial crisis to a small open economy. The authors find that economies hit by a sudden stop arising from financial distress in the global economy are likely to face a more prolonged crisis than sudden stop...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    Should African Monetary Unions Be Expanded?

    This paper develops a full-fledged cost-benefit analysis of monetary integration, and applies it to the currency unions actively pursued in Africa. The benefits of monetary union come from a more credible monetary policy, while the costs derive from real shock asymmetries and fiscal disparities. The model is calibrated using African...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    Of Runes And Sagas: Perspectives On Liquidity Stress Testing Using An Iceland Example

    The global financial crisis revealed weaknesses in the stress testing exercises performed on financial institutions and systems around the world. These failures were most evident in the area of liquidity risk, where now-obvious vulnerabilities were left largely undetected, with stress tests having largely focused on solvency risk. This paper uses...

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    Automatic Stabilizers And The Size Of Government: Correcting A Common Misunderstanding

    The size of government is a commonly used variable in many analytical studies on the effects of fiscal policy. An accepted practice is to measure it as the ratio of government spending to GDP. However, this is not the correct metric when computing the stabilization effects of nondiscretionary fiscal policy....

    Provided By International Monetary Fund

  • White Papers // Jul 2010

    The Impact Of Capital And Foreign Exchange Flows On The Competitiveness Of Developing Countries

    Attracting capital and foreign exchange flows is crucial for developing countries. Yet, these flows could lead to real exchange rate appreciation and may thus have detrimental effects on competitiveness, jeopardizing exports and growth. This paper investigates this dilemma by comparing the impact of six types of capital and foreign exchange...

    Provided By International Monetary Fund

  • White Papers // Jun 2010

    The Fundamental Determinants Of Credit Default Risk For European Large Complex Financial Institutions

    This paper attempts to identify the fundamental variables that drive the credit default swaps during the initial phase of distress in selected European Large Complex Financial Institutions (LCFIs). It uses yearly data over 2004 - 08 for 29 European LCFIs. The results from a dynamic panel data estimator show that...

    Provided By International Monetary Fund

  • White Papers // Jun 2010

    Monetary Policy Analysis And Forecasting In The Group Of Twenty

    This paper develops a panel unobserved components model of the monetary transmission mechanism in the world economy, disaggregated into twenty national economies along the lines of the Group of Twenty. A variety of monetary policy analysis and forecasting applications of the estimated model are demonstrated. These include the measurement of...

    Provided By International Monetary Fund

  • White Papers // Jun 2010

    Currency Hedging For International Portfolios

    This paper examines the benefits from hedging the currency exposure of international investments in single- and multi-country equity and bond portfolios from the perspectives of German, Japanese, British and American investors. Over the period 1975 to 2009, hedging of currency risk substantially reduced the volatility of foreign investments at a...

    Provided By International Monetary Fund

  • White Papers // Jun 2010

    Procyclicality In Central Bank Reserve Management: Evidence From The Crisis

    A decade-long diversification of official reserves into riskier investments came to an abrupt end at the beginning of the global financial crisis, when many central bank reserve managers started to withdraw their deposits from the banking sector in an apparent flight to quality and safety. The authors estimate that reserve...

    Provided By International Monetary Fund