Weining Xin's Books

Upgrading Fiscal Frameworks in Asia-Pacific

By: Enrique Flores,Pranav Gupta,Miss Yinqiu Lu,Mr. Paulo A Medas,Dinar Prihardini,Hoda Selim,Weining Xin,Mr. Masafumi Yabara

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Upgrading Fiscal Frameworks in Asia-Pacific

By: Enrique Flores,Pranav Gupta,Miss Yinqiu Lu,Mr. Paulo A Medas,Dinar Prihardini,Hoda Selim,Weining Xin,Mr. Masafumi Yabara

This paper seeks to guide the reform of fiscal frameworks in Asia-Pacific in the context of calls for a more active fiscal policy in a shock-prone world. It highlights that the cost of fiscal support is large and that fiscal frameworks, including fiscal rules, are being put to the test given the sharp increase in debt, high interest and weaker growth prospects. The stress is only compounded by long-term challenges like aging populations, climate change and the need to deliver on the sustainable development goals. In this context, it is timely to review the effectiveness of fiscal policy in Asia-Pacific and seek for ways to strengthen fiscal frameworks. After the global financial crisis, fiscal policy in Asia-Pacific became more countercylical and stronger than in other regions—especially in advanced economies. The paper shows that the degree of countercyclicality has been asymetric, with larger responses during periods of weak growth, and in particular in response to large shocks—the global financial crisis and the pandemic. It highlights that responses to the pandemic were large and used a wide range of tools, and how fiscal and monetary policy complemented each as they responded to large shocks. It looks into the deterioration of debt dynamics in Asia-Pacific, as public debt has been rising persistently across most countries driven by declining growth and rising deficits—particualrly after the global financial crisis for advanced economies and after the pandemic for emerging market and low income countries. The paper reviews fiscal frameworks across Asia-Pacific, including the use of fiscal rules, medium-term fiscal frameworks, and fiscal councils. It describes the characteristics of fiscal rules, which usually focus on debt and budget balances and are set by law but tend to lack well-specified enforcement mechanism or escape clauses. It highlights that compliance with the rules has worsened following the pandemic as—in contrast with the outturns before the pandemic--Asia-Pacific countries tend to show larger deviations relative to other regions. It also shows that despite the increase adoption of medium-term fiscal frameworks in Asia-Pacific forward guidance has been hampered by the lack of binding targets and ex-post analysis. Moreover, they do not seem to have resulted in better macro-fiscal forecast in part due to weak capacity and enforcement, lack of integration with the annual budget, and exposure to shocks—with risk analysis mostly limited to qualitative discussions. Proposed reforms seek to implement a comprehensive, risk-based approach to public finances. They focus on strengthening the medium-term orientation of fiscal policy through credible medium-term fiscal plans, fiscal rules linked to the medium-term strategy and the annual budgets, and a stronger reliance on fiscal councils. They also emphasize the need for a broader view of the public sector as fiscal policy is being conducted through multiple channels, which requires assessing and managing vulnerabilities and a significant improvement in fiscal statistics. They also address aging and climate change by focusing on assessing large intergenerational trade-offs, reporting on long-term debt dynamics, and on green medium-term fiscal frameworks that incorporate the effects of climate change and climate policies.

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International Monetary Fund

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ISBN 13

9798400284915

Political Fragility: Coups D’État and Their Drivers

By: Aliona Cebotari,Enrique Chueca-Montuenga,Yoro Diallo,Yunsheng Ma,Ms. Rima A Turk,Weining Xin,Harold Zavarce

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Political Fragility: Coups D’État and Their Drivers

By: Aliona Cebotari,Enrique Chueca-Montuenga,Yoro Diallo,Yunsheng Ma,Ms. Rima A Turk,Weining Xin,Harold Zavarce

The paper explores the drivers of political fragility by focusing on coups d’état as symptomatic of such fragility. It uses event studies to identify factors that exhibit significantly different dynamics in the runup to coups, and machine learning to identify these stressors and more structural determinants of fragility—as well as their nonlinear interactions—that create an environment propitious to coups. The paper finds that the destabilization of a country’s economic, political or security environment—such as low growth, high inflation, weak external positions, political instability and conflict—set the stage for a higher likelihood of coups, with overlapping stressors amplifying each other. These stressors are more likely to lead to breakdowns in political systems when demographic pressures and underlying structural weaknesses (especially poverty, exclusion, and weak governance) are present or when policies are weaker, through complex interactions. Conversely, strengthened fundamentals and macropolicies have higher returns in structurally fragile environments in terms of staving off political breakdowns, suggesting that continued engagement by multilateral institutions and donors in fragile situations is likely to yield particularly high dividends. The model performs well in predicting coups out of sample, having predicted a high probability of most 2020-23 coups, including in the Sahel region.

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International Monetary Fund

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ISBN 13

9798400266751

U.S. Monetary Policy Spillovers to Middle East and Central Asia: Shocks, Fundamentals, and Propagations

By: Giovanni Ugazio,Weining Xin

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U.S. Monetary Policy Spillovers to Middle East and Central Asia: Shocks, Fundamentals, and Propagations

By: Giovanni Ugazio,Weining Xin

We empirically examine U.S. monetary policy spillovers to the Middle East and Central Asia (ME & CA) region by decomposing U.S. interest rates changes into two orthogonal shocks: the pure monetary policy shock and the information news shock. Using a sample of 16 ME & CA countries, we find that when interest rates increase, the two shocks have opposite spillovers on the region. Tightening driven by contractionary monetary policy shocks hinders growth, while tightening driven by positive information news shocks boosts growth despite higher interest rates. Countries with weaker fundamentals face more negative spillovers from contractionary monetary policy shocks but may sometimes benefit more from positive information news shocks. Moreover, high oil prices mitigate both spillovers for oil exporters while global risk appetite amplifies both spillovers. Finally, we estimate a large degree of heterogeneity in the impact of the 2022 U.S. tightening cycle on ME & CA countries, with oil exporters with stronger fundamentals withstanding well the shock and oil importers with weaker fundamentals being hit the most.

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9798400263101

Monitoring Privately-held Firms' Default Risk in Real Time: A Signal-Knowledge Transfer Learning Model

By: Mr. Jorge A Chan-Lau,Ruofei Hu,Luca Mungo,Ritong Qu,Weining Xin,Cheng Zhong

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Monitoring Privately-held Firms' Default Risk in Real Time: A Signal-Knowledge Transfer Learning Model

By: Mr. Jorge A Chan-Lau,Ruofei Hu,Luca Mungo,Ritong Qu,Weining Xin,Cheng Zhong

We develop a mixed-frequency, tree-based, gradient-boosting model designed to assess the default risk of privately held firms in real time. The model uses data from publicly-traded companies to construct a probability of default (PD) function. This function integrates high-frequency, market-based, aggregate distress signals with low-frequency, firm-level financial ratios, and macroeconomic indicators. When provided with private firms' financial ratios, the model, which we name signal-knowledge transfer learning model (SKTL), transfers insights gained from 35 thousand publicly-traded firms to more than 4 million private-held ones and performs well as an ordinal measure of privately-held firms' default risk.

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