Mr a I T's Books

How Much is A Lot? Historical Evidence on the Size of Fiscal Adjustments

By: Mr.Julio Escolano,Laura Jaramillo,Mr.Carlos Mulas-Granados,Mr.G. Terrier

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How Much is A Lot? Historical Evidence on the Size of Fiscal Adjustments

By: Mr.Julio Escolano,Laura Jaramillo,Mr.Carlos Mulas-Granados,Mr.G. Terrier

The sizeable fiscal consolidation required to stabilize the debt-to-GDP ratios in several countries in the aftermath of the global crisis raises a crucial question on its feasibility. To answer this question, we rely on historical evidence from a sample of 91 adjustment episodes of countries during 1945–2012 that needed and wanted to adjust in order to stabilize debt to GDP. We find that, in at least half the cases, countries improved their cyclically adjusted primary balances by close to 5 percent of GDP. We also observe that, while countries typically make substantial efforts to stabilize debt, once this objective is achieved, they tend to ease their primary balances and do not necessarily get back to their initial lower debt-to-GDP ratio. We find that consolidations tended to be larger when the initial deficit was high and adjustment efforts were sustained over time. Fiscal adjustments also tended to be larger when accompanied by an easing of monetary conditions and, to a lesser extent, by an improvement in credit conditions.

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International Monetary Fund

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ISBN 10

1484378865

ISBN 13

9781484378861

Assessing Reserve Adequacy in Low-Income Countries

By: Mr.Valerio Crispolti,Ms.Era Dabla-Norris,Mr.Jun Il Kim,Ms.Kazuko Shirono,Mr.George C. Tsibouris

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Assessing Reserve Adequacy in Low-Income Countries

By: Mr.Valerio Crispolti,Ms.Era Dabla-Norris,Mr.Jun Il Kim,Ms.Kazuko Shirono,Mr.George C. Tsibouris

Low-income countries routinely experience exogenous disturbances—sharp swings in the terms of trade, export demand, natural disasters, and volatile financial flows—that contribute to higher volatility in aggregate output and consumption compared with other countries. Assessing Reserve Adequacy in Low-Income Countries presents the findings of an analysis of a range of external shocks faced by these countries, beginning with a discussion of the impact of external shocks on macroeconomic growth, volatility, and welfare. Although sound macroeconomic and prudential policy frameworks are the first line of defense for limiting vulnerability, international reserves constitute the main form of self-insurance against such shocks. The evidence suggests that low-income countries with reserve coverage above three months of imports were better able to smooth consumption and absorption in the face of external shocks compared with those with lower reserve holdings. The analysis also points to the importance of country characteristics and vulnerabilities in assessing reserve adequacy.

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International Monetary Fund

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ISBN 10

1616354127

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9781616354121

The East African Community

Prospects for Sustained Growth

By: Ms.Catherine McAuliffe,Ms.Sweta Chaman Saxena,Mr.Masafumi Yabara

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The East African Community

Prospects for Sustained Growth

By: Ms.Catherine McAuliffe,Ms.Sweta Chaman Saxena,Mr.Masafumi Yabara

The East African Community (EAC) has been among the fastest growing regions in sub-Saharan Africa in the past decade or so. Nonetheless, the recent growth path will not be enough to achieve middle-income status and substantial poverty reduction by the end of the decade—the ambition of most countries in the region. This paper builds on methodologies established in the growth literature to identify a group of countries that achieved growth accelerations and sustained growth to use as benchmarks to evaluate the prospects, and potential constraints, for EAC countries to translate their recent growth upturn into sustained high growth. We find that EAC countries compare favorably to the group of sustained growth countries—macroeconomic and government stability, favorable business climate, and strong institutions—but important differences remain. EAC countries have a smaller share of exports, lower degree of financial deepening, lower levels of domestic savings, higher reliance on donor aid, and limited physical infrastructure and human capital. Policy choices to address some of these shortcomings could make a difference in whether the EAC follows the path of sustained growth or follows other countries where growth upturns later fizzled out.

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International Monetary Fund

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1475586310

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9781475586312

A Requiem for the Fiscal Theory of the Price Level

By: Mr.Roger Farmer,Pawel Zabczyk

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A Requiem for the Fiscal Theory of the Price Level

By: Mr.Roger Farmer,Pawel Zabczyk

The Fiscal Theory of the Price Level (FTPL) is the claim that, in a popular class of theoretical models, the price level is sometimes determined by fiscal policy rather than monetary policy. The models where this claim has been established assume that all decisions are made by an infinitely-lived representative agent. We present an alternative, arguably more realistic model, populated by sixty-two generations of people. We calibrate our model to an income profile from U.S. data and we show that the FTPL breaks down. In our model, the price level and the real interest rate are indeterminate, even when monetary and fiscal policy are both active. Our findings challenge established views about what constitutes a good combination of fiscal and monetary policies.

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International Monetary Fund

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ISBN 10

1513517341

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9781513517346

How Does Trade Evolve in the Aftermath of Financial Crises?

By: Mr.Abdul Abiad,Petia Topalova,Ms.Prachi Mishra

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How Does Trade Evolve in the Aftermath of Financial Crises?

By: Mr.Abdul Abiad,Petia Topalova,Ms.Prachi Mishra

We analyze trade dynamics following past episodes of financial crises. Using an augmented gravity model and 179 crisis episodes from 1970-2009, we 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 persistent, with imports recovering to their gravity-predicted levels only after 10 years. In contrast, exports of the crisis country are not adversely affected, and they remain close to the predicted level in both the short and medium-term.

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International Monetary Fund

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ISBN 10

1455211818

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9781455211814

Inflation Dynamics and Monetary Policy in Bolivia

By: Mr.Alejandro D. Guerson

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Inflation Dynamics and Monetary Policy in Bolivia

By: Mr.Alejandro D. Guerson

This paper explores inflation dynamics and monetary policy in Bolivia. Bolivia’s monetary policy framework has been effective in stabilizing inflation in recent times. This has been a challenging task given high price volatility of key consumer goods subject to recurrent supply shocks, especially food items. Empirical testing indicates that the monetary policy framework has contributed to the stabilization of inflation, with effective transmission through the bank lending channel, while the defacto dollar peg has also played a role. Looking ahead, the current framework will be tested by the new commodity price normal and a potentially permanent adjustment in relative prices. Against this background, consideration could be given to a more flexible exchange rate policy arrangement, with short term interest rates as the main policy instrument.

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International Monetary Fund

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ISBN 10

1513586130

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9781513586137

Systemic Risk, Aggregate Demand, and Commodity Prices

By: Javier Gómez-Pineda,Mr.Dominique M. Guillaume,Kadir Tanyeri

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Systemic Risk, Aggregate Demand, and Commodity Prices

By: Javier Gómez-Pineda,Mr.Dominique M. Guillaume,Kadir Tanyeri

The paper presents a global model with systemic and country risks, as well as commodity prices.We show that systemic risk shocks have an important impact on world economic activity, with the busts in world output gap corresponding to unobserved systemic risk associated with major financial events. In addition, systemic risk shocks are shown to be important drivers of output gaps while country risk premium shocks can have important effects on the trade balance. Commodity prices, in particular the price of oil, are shown to be demand driven. The model performs well at one- and four-quarter horizons compared to a survey of analysts' forecasts. In addition, systemic risk shocks explain a large share of the forecast variance for the world output gap, country output gaps, the price of oil, and country risk premiums. The importance of systemic risk shocks lends support for financial surveillance with a systemic focus.

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International Monetary Fund

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ISBN 10

1513552546

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9781513552545

Foreign Exchange Intervention under Policy Uncertainty

By: Gustavo Adler,Mr.Ruy Lama,Juan Pablo Medina Guzman

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Foreign Exchange Intervention under Policy Uncertainty

By: Gustavo Adler,Mr.Ruy Lama,Juan Pablo Medina Guzman

We study the use of foreign exchange (FX) intervention as an additional policy instrument in an environment with learning, where agents infer the central bank policy rules from its policy actions. Under full information, a central bank focused on stabilizing output and inflation can achieve better outcomes by using FX intervention as an additional policy tool. Under policy uncertainty, where agents perceive that monetary policy may also have exchange rate stabilization goals, the use of FX intervention entails a trade-off, reducing output volatility while increasing inflation volatility. While having an additional policy tool is always beneficial, we find that the optimal magnitude of intervention is higher in monetary policy regimes with lower uncertainty. These results indicate that the benefits of using FX intervention as an additional stabilization tool are greater in regimes where monetary policy is credibly focused on output and inflation stabilization.

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International Monetary Fund

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ISBN 10

1475520417

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9781475520415

“Monetary and Fiscal Rules in an Emerging Small Open Economy”

By: Nicoletta Batini,Mr.Paul Levine,Joseph Pearlman

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“Monetary and Fiscal Rules in an Emerging Small Open Economy”

By: Nicoletta Batini,Mr.Paul Levine,Joseph Pearlman

We develop a optimal rules-based interpretation of the 'three pillars macroeconomic policy framework': a combination of a freely floating exchange rate, an explicit target for inflation, and a mechanism than ensures a stable government debt-GDP ratio around a specified long run. We show how such monetary-fiscal rules need to be adjusted to accommodate specific features of emerging market economies. The model takes the form of two-blocs, a DSGE emerging small open economy interacting with the rest of the world and features, in particular, financial frictions It is calibrated using Chile and US data. Alongside the optimal Ramsey policy benchmark, we model the three pillars as simple monetary and fiscal rules including and both domestic and CPI inflation targeting interest rate rules alongside a 'Structural Surplus Fiscal Rule' as followed recently in Chile. A comparison with a fixed exchange rate regime is made. We find that domestic inflation targeting is superior to partially or implicitly (through a CPI inflation target) or fully attempting to stabilizing the exchange rate. Financial frictions require fiscal policy to play a bigger role and lead to an increase in the costs associated with simple rules as opposed to the fully optimal policy.

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International Monetary Fund

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ISBN 10

1451871694

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9781451871692

Exchange-Rate Dark Matter

By: Mr.Martin D. Evans

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Exchange-Rate Dark Matter

By: Mr.Martin D. Evans

Dark matter accounts for 83 percent of the matter in the universe and plays a central role in cosmology modeling. This paper argues that an analogous form of dark matter plays a similarly important role in international macroeconomics. Exchange-rate dark matter is invisible, but its existence can be inferred from observations on real exchange rates and interest rates. I first show that dark matter is the dominant driver of short- and medium-term changes in real exchange rates for the G-7 countries; accounting for more than 90 percent of the variance at the five-year horizon. I then develop a model in which risk shocks account for dark matter's role as a driver of exchange-rate dynamics and other macro variables.

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International Monetary Fund

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1463938438

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9781463938437

Interest Rate Models: an Infinite Dimensional Stochastic Analysis Perspective

By: René Carmona,M R Tehranchi

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Interest Rate Models: an Infinite Dimensional Stochastic Analysis Perspective

By: René Carmona,M R Tehranchi

This book presents the mathematical issues that arise in modeling the interest rate term structure by casting the interest-rate models as stochastic evolution equations in infinite dimensions. The text includes a crash course on interest rates, a self-contained introduction to infinite dimensional stochastic analysis, and recent results in interest rate theory. From the reviews: "A wonderful book. The authors present some cutting-edge math." --WWW.RISKBOOK.COM

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236

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Springer Science & Business Media

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ISBN 10

3540270671

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9783540270676

Limited Information Bayesian Model Averaging for Dynamic Panels with An Application to a Trade Gravity Model

By: Huigang Chen,Mr.Alin Mirestean,Mr.Charalambos G. Tsangarides

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Limited Information Bayesian Model Averaging for Dynamic Panels with An Application to a Trade Gravity Model

By: Huigang Chen,Mr.Alin Mirestean,Mr.Charalambos G. Tsangarides

This paper extends the Bayesian Model Averaging framework to panel data models where the lagged dependent variable as well as endogenous variables appear as regressors. We propose a Limited Information Bayesian Model Averaging (LIBMA) methodology and then test it using simulated data. Simulation results suggest that asymptotically our methodology performs well both in Bayesian model averaging and selection. In particular, LIBMA recovers the data generating process well, with high posterior inclusion probabilities for all the relevant regressors, and parameter estimates very close to their true values. These findings suggest that our methodology is well suited for inference in short dynamic panel data models with endogenous regressors in the context of model uncertainty. We illustrate the use of LIBMA in an application to the estimation of a dynamic gravity model for bilateral trade.

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International Monetary Fund

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1463921306

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9781463921309

Optimal Control of a Global Model of Climate Change with Adaptation and Mitigation

By: Manoj Atolia,Mr.Prakash Loungani,Helmut Maurer,Willi Semmler

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Optimal Control of a Global Model of Climate Change with Adaptation and Mitigation

By: Manoj Atolia,Mr.Prakash Loungani,Helmut Maurer,Willi Semmler

The Integrated Assessment Model (IAM) has extensively treated the adverse effects of climate change and the appropriate mitigation policy. We extend such a model to include optimal policies for mitigation, adaptation and infrastructure investment studying the dynamics of the transition to a low fossil-fuel economy. We focus on the adverse effects of increase in atmospheric CO2 concentration on households. Formally, the model gives rise to an optimal control problem of finite horizon consisting of a dynamic system with five-dimensional state vector consisting of stocks of private capital, green capital, public capital, stock of brown energy in the ground, and emissions. Given the numerous challenges to climate change policies the control vector is also five-dimensional. Our solutions are characterized by turnpike property and the optimal policy that accomplishes the objective of keeping the CO2 levels within bound is characterized by a significant proportion of investment in public capital going to mitigation in the initial periods. When initial levels of CO2 are high, adaptation efforts also start immediately, but during the initial period, they account for a smaller proportion of government's public investment.

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International Monetary Fund

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1484390652

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9781484390658

Learning, Monetary Policy and Asset Prices

By: Mr.Marco Airaudo,Salvatore Nisticò,Luis-Felipe Zanna

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Learning, Monetary Policy and Asset Prices

By: Mr.Marco Airaudo,Salvatore Nisticò,Luis-Felipe Zanna

We explore the stability properties of interest rate rules granting an explicit response to stock prices in a New-Keynesian DSGE model populated by Blanchard-Yaari non-Ricardian households. The constant turnover between long-time stock holders and asset-poor newcomers generates a financial wealth channel where the wedge between current and expected future aggregate consumption is affected by the market value of financial wealth, making stock prices non-redundant for the business cycle. We find that if the financial wealth channel is sufficiently strong, responding to stock prices enlarges the policy space for which the rational expectations equilibrium is both determinate and learnable (in the E-stability sense of Evans and Honkapohja, 2001). In particular, the Taylor principle ceases to be necessary and also mildly passive policy responses to inflation lead to determinacy and E-stability. Our results appear to be more prominent in economies characterized by a lower elasticity of substitution across differentiated products and/or more rigid labor markets.

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International Monetary Fund

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1498343724

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9781498343725

Fuzzy Preference Modelling and Multicriteria Decision Support

By: J.C. Fodor,M.R. Roubens

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Fuzzy Preference Modelling and Multicriteria Decision Support

By: J.C. Fodor,M.R. Roubens

This book provides in-depth coverage of the most important results about fuzzy logic including negations, conjunctions, disjunctions, implications and gives the interrelations between those different connectives. The work brings together multiple results about valued binary relations satisfying diverse transitivity-type conditions. The authors propose the first sound introduction to valued preference modelling through the systematic use of fuzzy set theory and functional equations and derive the possible foundations for multicriteria decision aid using aggregation, ranking and choice procedures on the basis of axiomatic results. The text presents a unified view of various multicriteria decision making tools that have been independently derived in the past, dealing with pairwise comparisons. The monograph is mathematically oriented but the results will be of the greatest interest for engineers and economists who design and implement decision support systems in practice. It is also supplied with a sufficient number of examples to make it attractive to nonspecialists.

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265

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Springer Science & Business Media

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ISBN 10

940171648X

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9789401716482

Credit Supply and Productivity Growth

By: Francesco Manaresi,Mr.Nicola Pierri

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Credit Supply and Productivity Growth

By: Francesco Manaresi,Mr.Nicola Pierri

We study the impact of bank credit on firm productivity. We exploit a matched firm-bank database covering all the credit relationships of Italian corporations, together with a natural experiment, to measure idiosyncratic supply-side shocks to credit availability and to estimate a production model augmented with financial frictions. We find that a contraction in credit supply causes a reduction of firm TFP growth and also harms IT-adoption, innovation, exporting, and adoption of superior management practices, while a credit expansion has limited impact. Quantitatively, the credit contraction between 2007 and 2009 accounts for about a quarter of observed the decline in TFP.

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International Monetary Fund

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ISBN 10

1498315259

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9781498315258

Growth Determinants Revisited

By: Mr.Charalambos G. Tsangarides,Mr.Alin Mirestean

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Growth Determinants Revisited

By: Mr.Charalambos G. Tsangarides,Mr.Alin Mirestean

This paper revisits the cross-country growth empirics debate using a novel Limited Information Bayesian Model Averaging framework to address model uncertainty in the context of a dynamic growth model in panel data with endogenous regressors. Our empirical findings suggest that once model uncertainty is accounted for there is strong evidence that initial income, investment, life expectancy, and population growth are robustly correlated with economic growth. We also find evidence that debt, openness, and inflation are robust growth determinants. Overall, the set of our robust growth determinants differs from those identified by other studies that incorporate model uncertainty, but ignore dynamics and/or endogeneity. This underscores the importance of accounting for model uncertainty and endogeneity in the investigation of growth determinants.

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International Monetary Fund

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1451874138

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9781451874136

To Starve or Not to Starve the Beast?

By: Mr.Michael Kumhof,Mr.Daniel Leigh,Mr.Douglas Laxton

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To Starve or Not to Starve the Beast?

By: Mr.Michael Kumhof,Mr.Daniel Leigh,Mr.Douglas Laxton

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 and welfare gains accompanied by losses elsewhere. But negative effects can easily arise in the presence of longer policy implementation lags, utility-enhancing government spending, and productive government capital. Overall, the analysis finds no support for the idea that starving the beast is a foolproof way towards higher output and welfare.

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International Monetary Fund

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ISBN 10

145520529X

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9781455205295

Macro-Financial Implications of Corporate (De)Leveraging in the Euro Area Periphery

By: Ms.Manuela Goretti,Mr.Marcos Souto

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Macro-Financial Implications of Corporate (De)Leveraging in the Euro Area Periphery

By: Ms.Manuela Goretti,Mr.Marcos Souto

High corporate indebtedness can pose an important threat to the adjustment processes in some of the Euro area periphery countries, through its drag on investment as well as the possible migration of private sector losses to the sovereign balance sheet. This paper examines the macroeconomic implications of corporate debt overhang in recent years, confirming empirical evidence in the literature on the relationship between a firm’s balance sheet position and its investment choices, especially beyond certain threshold levels. Building on an event study of past crisis experiences with corporate deleveraging, it also discusses the expected macro-financial impact of the ongoing deleveraging processes in these countries, presenting available policy options to facilitate an orderly balance-sheet adjustment and support a return to productivity and growth.

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International Monetary Fund

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ISBN 10

1475577567

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9781475577563

Terms-of-Trade Cycles and External Adjustment

By: Gustavo Adler,Mr.Nicolas E Magud,Alejandro M. Werner

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Terms-of-Trade Cycles and External Adjustment

By: Gustavo Adler,Mr.Nicolas E Magud,Alejandro M. Werner

We study the process of external adjustment to large terms-of-trade level shifts—identified with a Markov-switching approach—for a large set of countries during the period 1960–2015. We find that adjustment to these shocks is relatively fast. Current accounts experience, on average, a contemporaneous variation of only about 1⁄2 of the magnitude of the price shock—indicating a significant volume offset—and a full adjustment within 3–4 years. Dynamics are largely symmetric for terms-of-trade booms and busts, as well as for advanced and emerging market economies. External adjustment is driven primarily by offsetting shifts in domestic demand, as opposed to variations in output (also reflected in the response of import rather than export volumes), indicating a strong income channel at play. Exchange rate flexibility appears to have played an important buffering role during booms, but less so during busts; while international reserve holdings have been a key tool for smoothing the adjustment process.

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International Monetary Fund

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1475584067

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9781475584066

IMF Staff Papers, Volume 51, Special Issue, IMF Fourth Annual Research Conference

By: Mr.Ashoka Mody,Mr.Robert P. Flood

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IMF Staff Papers, Volume 51, Special Issue, IMF Fourth Annual Research Conference

By: Mr.Ashoka Mody,Mr.Robert P. Flood

This is the 2004 (Volume 51) Special Issue of IMF Staff Papers, which includes 6 selected papers (from more than 20) that were presented at the IMF's Fourth Annual Research Conference, November 6-7, 2003.

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168

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International Monetary Fund

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1589063201

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9781589063204

Building Resilience to Natural Disasters: An Application to Small Developing States

By: Ricardo Marto,Mr.Chris Papageorgiou,Mr.Vladimir Klyuev

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Building Resilience to Natural Disasters: An Application to Small Developing States

By: Ricardo Marto,Mr.Chris Papageorgiou,Mr.Vladimir Klyuev

We present a dynamic small open economy model to explore the macroeconomic impact of natural disasters. In addition to permanent damages to public and private capital, the disaster causes temporary losses of productivity, inefficiencies during the reconstruction process, and damages to the sovereign's creditworthiness. We use the model to study the debt sustainability concerns that arise from the need to rebuild public infrastructure over the medium term and analyze the feasibility of ex ante policies, such as building adaptation infrastructure and fiscal buffers, and contrast these policies with the post-disaster support provided by donors. Investing in resilient infrastructure may prove useful, in particular if it is viewed as complementary to standard infrastructure, because it raises the marginal product of private capital, crowding in private investment, while helping withstand the impact of the natural disaster. In an application to Vanuatu, we find that donors should provide an additional 50% of pre-cyclone GDP in grants to be spent over the following 15 years to ensure public debt remains sustainable following Cyclone Pam. Helping the government build resilience on the other hand, reduces the risk of debt distress and at lower cost for donors.

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International Monetary Fund

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1484326296

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9781484326299

Predicting Downside Risks to House Prices and Macro-Financial Stability

By: Andrea Deghi,Mitsuru Katagiri,Mr.Sohaib Shahid,Nico Valckx

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Predicting Downside Risks to House Prices and Macro-Financial Stability

By: Andrea Deghi,Mitsuru Katagiri,Mr.Sohaib Shahid,Nico Valckx

This paper predicts downside risks to future real house price growth (house-prices-at-risk or HaR) in 32 advanced and emerging market economies. Through a macro-model and predictive quantile regressions, we show that current house price overvaluation, excessive credit growth, and tighter financial conditions jointly forecast higher house-prices-at-risk up to three years ahead. House-prices-at-risk help predict future growth at-risk and financial crises. We also investigate and propose policy solutions for preventing the identified risks. We find that overall, a tightening of macroprudential policy is the most effective at curbing downside risks to house prices, whereas a loosening of conventional monetary policy reduces downside risks only in advanced economies and only in the short-term.

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International Monetary Fund

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1513525832

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9781513525839

Fiscal Buffers, Private Debt, and Stagnation

The Good, the Bad and the Ugly

By: Nicoletta Batini,Mr.Giovanni Melina,Stefania Villa

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Fiscal Buffers, Private Debt, and Stagnation

The Good, the Bad and the Ugly

By: Nicoletta Batini,Mr.Giovanni Melina,Stefania Villa

We revisit the empirical relationship between private/public debt and output, and build a model that reproduces it. In the model, the government provides financial assistance to credit-constrained agents to mitigate deleveraging. As we observe in the data, surges in private debt are potentially more damaging for the economy than surges in public debt. The model suggests two policy implications. First, capping leverage leads to milder recessions, but also implies more muted expansions. Second, with fiscal buffers, financial assistance to credit-constrained agents helps avoid stagnation. The growth returns from intervention decline as the government approaches the fiscal limit.

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International Monetary Fund

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1475526318

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9781475526318

Determinants of Emerging Market Sovereign Bond Spreads

Fundamentals vs Financial Stress

By: Iva Petrova,Mr.Michael G Papaioannou,Mr.Dimitri Bellas

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Determinants of Emerging Market Sovereign Bond Spreads

Fundamentals vs Financial Stress

By: Iva Petrova,Mr.Michael G Papaioannou,Mr.Dimitri Bellas

This paper analyses the determimants of emerging market sovereign bond spreads by examining the short and long-run effects of fundamental (macroeconomic) and temporary (financial market) factors on these spreads. During the current global financial and economic crisis, sovereign bond spreads widened dramatically for both developed and emerging market economies. This deterioration has widely been attributed to rapidly growing public debts and balance sheet risks. Our results indicate that in the long run, fundamentals are significant determinants of emerging market sovereign bond spreads, while in the short run, financial volatility is a more important determinant of sperads than fundamentals indicators.

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International Monetary Fund

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1455210889

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9781455210886

The Growth Comeback in Developing Economies

A New Hope or Back to the Future?

By: Mr.John C Bluedorn,Rupa Duttagupta,Mr.Jaime Guajardo,MissNkunde Mwase

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The Growth Comeback in Developing Economies

A New Hope or Back to the Future?

By: Mr.John C Bluedorn,Rupa Duttagupta,Mr.Jaime Guajardo,MissNkunde Mwase

Growth takeoffs in developing economies have rebounded in the past two decades. Although recent takeoffs have lasted longer than takeoffs before the 1990s, a key question is whether they could unravel like some did in the past. This paper finds that recent takeoffs are associated with stronger economic conditions, such as lower post-takeoff debt and inflation levels; more competitive real exchange rates; and better structural reforms and institutions. The chances of starting a takeoff in the 2000s was triple that before the 1990s, with domestic conditions accounting for most of the increase. The findings suggest that if today’s dynamic developing economies sustain their improved policies; they are more likely to stay on course compared to many of their predecessors.

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International Monetary Fund

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ISBN 10

1484358864

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9781484358863

A General Equilibrium Model of Sovereign Default and Business Cycles

By: Mr.Enrique G. Mendoza,MissZhanwei Z. Yue

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A General Equilibrium Model of Sovereign Default and Business Cycles

By: Mr.Enrique G. Mendoza,MissZhanwei Z. Yue

Emerging markets business cycle models treat default risk as part of an exogenous interest rate on working capital, while sovereign default models treat income fluctuations as an exogenous endowment process with ad-noc default costs. We propose instead a general equilibrium model of both sovereign default and business cycles. In the model, some imported inputs require working capital financing; default on public and private obligations occurs simultaneously. The model explains several features of cyclical dynamics around default triggers an efficiency loss as these inputs are replaced by imperfect substitutes; and default on public and private obligations occurs simultaneously. The model explains several features of cyclical dynamics around deraults, countercyclical spreads, high debt ratios, and key business cycle moments.

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International Monetary Fund

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146230222X

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9781462302222

Mother, Can I Trust the Government? Sustained Financial Deepening

A Political Institutionsview

By: Ms.Genevieve Verdier,Mr.Marc Quintyn

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Mother, Can I Trust the Government? Sustained Financial Deepening

A Political Institutionsview

By: Ms.Genevieve Verdier,Mr.Marc Quintyn

Only a minority of countries have succeeded in establishing a developed financial system, despite widespread financial liberalization. Confronted with this finding, the political institutions view claims that sustained financial deepening is most likely to take place in institutional environments where governments effectively impose constraints on their own powers in order to create trust. This paper identifies over 200 post-1960 episodes of accelerations in financial development in a large cross-section of countries. We find that the likelihood of an acceleration leading to sustained financial development increases greatly in environments that have high-quality political institutions.

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International Monetary Fund

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1455205419

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9781455205417

Financial Crises in DSGE Models

A Prototype Model

By: Mr.Jaromir Benes,Mr.Michael Kumhof,Mr.Douglas Laxton

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Financial Crises in DSGE Models

A Prototype Model

By: Mr.Jaromir Benes,Mr.Michael Kumhof,Mr.Douglas Laxton

This paper presents the theoretical structure of MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of financial cycles. A companion paper studies the simulation properties of MAPMOD.

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International Monetary Fund

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ISBN 10

1475540892

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9781475540895

Statistical Methods and Practice

Recent Advances

By: N. Balakrishnan,N. Kannan,M. R. Srinivasan

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Statistical Methods and Practice

Recent Advances

By: N. Balakrishnan,N. Kannan,M. R. Srinivasan

Chiefly papers presented at the Symposium; festschrift for K.N. Ponnuswamy, b. 1940, and K. Suresh Chandra, b. 1940, Indian statisticians.

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396

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Alpha Science Int'l Ltd.

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ISBN 10

8173194831

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9788173194832

Governments and Promised Fiscal Consolidations

Do They Mean What They Say?

By: Mr.Sanjeev Gupta,João Tovar Jalles,Mr.Carlos Mulas-Granados,Michela Schena

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Governments and Promised Fiscal Consolidations

Do They Mean What They Say?

By: Mr.Sanjeev Gupta,João Tovar Jalles,Mr.Carlos Mulas-Granados,Michela Schena

This paper analyses the causes and consequences of fiscal consolidation promise gaps, defined as the distance between planned fiscal adjustments and actual consolidations. Using 74 consolidation episodes derived from the narrative approach in 17 advanced economies during 1978 – 2015, the paper shows that promise gaps were sizeable (about 0.3 percent of GDP per year, or 1.1 percent of GDP during an average fiscal adjustment episode). Both economic and political factors explain the gaps: for example, greater electoral proximity, stronger political cohesion and higher accountability were all associated with smaller promise gaps. Finally, governments which delivered on their fiscal consolidation plans were rewarded by financial markets and not penalized by voters.

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International Monetary Fund

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ISBN 10

1475584679

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9781475584677

Credit-Supply Shocks and Firm Productivity in Italy

By: Sebastian Dörr,Mr.Mehdi Raissi,Anke Weber

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Credit-Supply Shocks and Firm Productivity in Italy

By: Sebastian Dörr,Mr.Mehdi Raissi,Anke Weber

The Italian economy has been struggling with low productivity growth and bank balance sheet strains. This paper examines the implications for firm productivity of adverse shocks to bank lending in Italy, using a novel identification scheme and loan-level data on syndicated lending. We exploit the heterogeneous loan exposure of Italian banks to foreign borrowers in distress, and find that a negative shock to bank credit supply reduces firms' loan growth, investment, capital-to-labor ratio, and productivity. The transmission from changes in credit supply to firm productivity relates to labor market rigidities, which delay or distort the adjustment of firms' desired labor and capital allocations, and thereby reduce firms' productivity. Effects are stronger for firms with higher capital intensity and external financial dependence.

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International Monetary Fund

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ISBN 10

1475588941

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9781475588941

Capital Flows, Financial Intermediation and Macroprudential Policies

By: Matteo Ghilardi,Mr.Shanaka J. Peiris

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Capital Flows, Financial Intermediation and Macroprudential Policies

By: Matteo Ghilardi,Mr.Shanaka J. Peiris

This paper develops an open-economy DSGE model with an optimizing banking sector to assess the role of capital flows, macro-financial linkages, and macroprudential policies in emerging Asia. The key result is that macro-prudential measures can usefully complement monetary policy. Countercyclical macroprudential polices can help reduce macroeconomic volatility and enhance welfare. The results also demonstrate the importance of capital flows and financial stability for business cycle fluctuations as well as the role of supply side financial accelerator effects in the amplification and propagation of shocks.

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International Monetary Fund

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1498365655

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9781498365659

Money Targeting in a Modern Forecasting and Policy Analysis System

an Application to Kenya

By: Michal Andrle,Mr.Andrew Berg,Mr.Enrico Berkes,Mr.Rafael A Portillo,Mr.Jan Vlcek,Mr.R. Armando Morales

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Money Targeting in a Modern Forecasting and Policy Analysis System

an Application to Kenya

By: Michal Andrle,Mr.Andrew Berg,Mr.Enrico Berkes,Mr.Rafael A Portillo,Mr.Jan Vlcek,Mr.R. Armando Morales

We extend the framework in Andrle and others (2013) to incorporate an explicit role for money targets and target misses in the analysis of monetary policy in low-income countries (LICs), with an application to Kenya. We provide a general specification that can nest various types of money targeting (ranging from targets based on optimal money demand forecasts to those derived from simple money growth rules), interest-rate based frameworks, and intermediate cases. Our framework acknowledges that ex-post adherence to targets is in itself an objective of policy in LICs; here we provide a novel interpretation of target misses in terms of structural shocks (aggregate demand, policy, shocks to money demand, etc). In the case of Kenya, we find that: (i) the setting of money targets is consistent with money demand forecasting, (ii) targets have not played a systematic role in monetary policy, and (iii) target misses mainly reflect shocks to money demand. Simulations of the model under alternative policy specifications show that the stronger the ex-post target adherence, the greater the macroeconomic volatility. Our findings highlight the benefits of a model-based approach to monetary policy analysis in LICs, including in countries with money-targeting frameworks.

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International Monetary Fund

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ISBN 10

1475516681

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9781475516685

GPU Computing

By: Mr.Chitra Sabapathy Ranganathan

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GPU Computing

By: Mr.Chitra Sabapathy Ranganathan

Mr.Chitra Sabapathy Ranganathan, Associate Vice President, Mphasis Corporation, Arizona, USA

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131

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SK Research Group of Companies

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ISBN 10

811998000X

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9788119980000

Can International Technological Diffusion Substitute for Coordinated Global Policies to Mitigate Climate Change?

By: Mr. Philip Barrett

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Can International Technological Diffusion Substitute for Coordinated Global Policies to Mitigate Climate Change?

By: Mr. Philip Barrett

In short, yes. I use a multi-region integrated assessment model with fuel-specific endogenous technical change to examine the impact of Europe and China reducing emissions to zero by mid-century. Without international technological diffusion this is insufficient to avoid catastrophic climate change. But when innovation can diffuse overseas, long-run temperature increases are limited to 3 degrees. This occurs because policy not only encourages green innovations but also dissuades dirty innovations which would otherwise spread. The most effective policy package in emissions-reducing regions is a research subsidy funded by a carbon tax, driven in the short term by the direct effect of the carbon tax on the composition of energy, and later by innovation induced by research subsidies. Green production subsidies are ineffective because they undermine incentives for innovation.

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International Monetary Fund

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1513585762

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9781513585765

Is the Cycle the Trend? Evidence From the Views of International Forecasters

By: Mr.John C Bluedorn,Mr.Daniel Leigh

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Is the Cycle the Trend? Evidence From the Views of International Forecasters

By: Mr.John C Bluedorn,Mr.Daniel Leigh

We revisit the conventional view that output fluctuates around a stable trend by analyzing professional long-term forecasts for 38 advanced and emerging market economies. If transitory deviations around a trend dominate output fluctuations, then forecasters should not change their long-term output level forecasts following an unexpected change in current period output. By contrast, an analysis of Consensus Economics forecasts since 1989 suggest that output forecasts are super-persistent—an unexpected 1 percent upward revision in current period output typically translates into a revision of ten year-ahead forecasted output by about 2 percent in both advanced and emerging markets. Drawing upon evidence from the behavior of forecast errors, the persistence of actual output is typically weaker than forecasters expect, but still consistent with output shocks normally having large and permanent level effects.

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International Monetary Fund

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1484369041

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9781484369043

Optimal Oil Production and the World Supply of Oil

By: Mr.Nikolay Aleksandrov,Mr.lajos Gyurko,Mr.Raphael A. Espinoza

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Optimal Oil Production and the World Supply of Oil

By: Mr.Nikolay Aleksandrov,Mr.lajos Gyurko,Mr.Raphael A. Espinoza

We study the optimal oil extraction strategy and the value of an oil field using a multiple real option approach. The numerical method is flexible enough to solve a model with several state variables, to discuss the effect of risk aversion, and to take into account uncertainty in the size of reserves. Optimal extraction in the baseline model is found to be volatile. If the oil producer is risk averse, production is more stable, but spare capacity is much higher than what is typically observed. We show that decisions are very sensitive to expectations on the equilibrium oil price using a mean reverting model of the oil price where the equilibrium price is also a random variable. Oil production was cut during the 2008–2009 crisis, and we find that the cut in production was larger for OPEC, for countries facing a lower discount rate, as predicted by the model, and for countries whose governments’ finances are less dependent on oil revenues. However, the net present value of a country’s oil reserves would be increased significantly (by 100 percent, in the most extreme case) if production was cut completely when prices fall below the country's threshold price. If several producers were to adopt such strategies, world oil prices would be higher but more stable.

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International Monetary Fund

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1616354836

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9781616354831

Systemic Contingent Claims Analysis

Estimating Market-Implied Systemic Risk

By: Mr.Andreas A. Jobst,Mr.Dale F. Gray

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Systemic Contingent Claims Analysis

Estimating Market-Implied Systemic Risk

By: Mr.Andreas A. Jobst,Mr.Dale F. Gray

The recent global financial crisis has forced a re-examination of risk transmission in the financial sector and how it affects financial stability. Current macroprudential policy and surveillance (MPS) efforts are aimed establishing a regulatory framework that helps mitigate the risk from systemic linkages with a view towards enhancing the resilience of the financial sector. This paper presents a forward-looking framework ("Systemic CCA") to measure systemic solvency risk based on market-implied expected losses of financial institutions with practical applications for the financial sector risk management and the system-wide capital assessment in top-down stress testing. The suggested approach uses advanced contingent claims analysis (CCA) to generate aggregate estimates of the joint default risk of multiple institutions as a conditional tail expectation using multivariate extreme value theory (EVT). In addition, the framework also helps quantify the individual contributions to systemic risk and contingent liabilities of the financial sector during times of stress.

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International Monetary Fund

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1475557531

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9781475557534

Latin America

New Challenges to Growth and Stability

By: Ms.Dora M. Iakova,Mr.Luis M. Cubeddu,Gustavo Adler,Mr.Sebastian Sosa

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Latin America

New Challenges to Growth and Stability

By: Ms.Dora M. Iakova,Mr.Luis M. Cubeddu,Gustavo Adler,Mr.Sebastian Sosa

Over the past fifteen years countries in Latin America made tremendous progress in strengthening their economies and improving living standards. Although output fell temporarily during the global financial crisis, most economies staged a rapid recovery. However, economic activity across the region has been cooling off and the region is facing a more challenging period ahead. This book argues that Latin America can rise to the challenge, and policymakers in the region are already implementing reforms in education, energy, and other sectors. More is needed, and more is possible, in Latin America’s quest to continue to improve living standards.

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270

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International Monetary Fund

Published Date

ISBN 10

1498328164

ISBN 13

9781498328166

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