Leaning Against The Wind A Cost Benefit Analysis For An Integrated Policy Framework
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Leaning Against The Wind A Cost Benefit Analysis For An Integrated Policy Framework
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Author : Mr.Luis Brandao-Marques
language : en
Publisher: International Monetary Fund
Release Date : 2020-07-07
Leaning Against The Wind A Cost Benefit Analysis For An Integrated Policy Framework written by Mr.Luis Brandao-Marques and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2020-07-07 with Business & Economics categories.
This paper takes a new approach to assess the costs and benefits of using different policy tools—macroprudential, monetary, foreign exchange interventions, and capital flow management—in response to changes in financial conditions. The approach evaluates net benefits of policies using quadratic loss functions, estimating policy effects on the full distribution of future output growth and inflation with quantile regressions. Tightening macroprudential policy dampens downside risks to growth stemming from loose financial conditions, and is beneficial in net terms. By contrast, tightening monetary policy entails net losses, calling for caution in the use of monetary policy to “lean against the wind.” These findings hold when policies are used in response to easing global financial conditions. Buying foreign-exchange or tightening capital controls has small net benefits.
Analyzing Capital Flow Drivers Using The At Risk Framework South Africa S Case
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Author : Rohit Goel
language : en
Publisher: International Monetary Fund
Release Date : 2021-10-22
Analyzing Capital Flow Drivers Using The At Risk Framework South Africa S Case written by Rohit Goel and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-10-22 with Business & Economics categories.
Cross-border capital flows are important for South Africa. They fund the nation’s relatively large external financing needs and have important financial stability implications evidenced by the large capital outflows and asset price selloffs during the COVID-19 pandemic. This paper adds to the literature on the drivers of South Africa’s capital flows by applying the ‘at-risk’ framework––which differentiates between the likelihood of “extreme” inflows (surges) and outflows (reversals) and of “typical” flows––to both nonresident and resident capital flows. Estimated results show that among nonresident flows, the portfolio debt component is most sensitive to changes in external risk sentiment particularly during reversals. This applies to flows to the sovereign sector. Nonresident equity flows, both portfolio and FDI, are most sensitive to domestic economic activity especially during surges. This applies to flows to the corporate and banking sectors. Results also suggest that resident flows, in particular the FDI component, tend to offset nonresident flows, thus acting as buffers against funding withdrawal during periods of global risk aversion.
Shocks And Capital Flows
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Author : Mr. Gaston Gelos
language : en
Publisher: International Monetary Fund
Release Date : 2023-10-27
Shocks And Capital Flows written by Mr. Gaston Gelos and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-10-27 with Business & Economics categories.
The high exposure of open economies to shocks makes them particularly vulnerable to volatile capital flows and advanced economy monetary policy spillovers. How should and do domestic policymakers respond? The traditional answer has been to use flexible exchange rates as a shock absorber. But flexible exchange rates may not offer full insulation when financial markets are imperfect. This book brings together recent empirical studies at the International Monetary Fund (IMF) on the effectiveness of different tools in responding to such shocks. The 18 chapters in this volume provide a rich background to the recently launched Integrated Policy Framework by the IMF. They comprise assessments of countries’ actual use of different tools, as well as in-depth evaluations of their effectiveness and side effects, covering macroprudential policies, monetary policy, foreign-exchange intervention, and capital flow management policies. Many of the studies involve new data and methods to tackle the inherently difficult problems in identifying and comparing the effects of policies under different circumstances. As a result, the volume offers the reader a comprehensive, in-depth coverage of the policy-oriented empirical research that has informed the development of a new way of thinking about open-economy macroeconomics at the IMF.
Loose Financial Conditions Rising Leverage And Risks To Macro Financial Stability
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Author : Mr. Adolfo Barajas
language : en
Publisher: International Monetary Fund
Release Date : 2021-08-20
Loose Financial Conditions Rising Leverage And Risks To Macro Financial Stability written by Mr. Adolfo Barajas and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-08-20 with Business & Economics categories.
After a steady increase following the global financial crisis, private nonfinancial sector leverage rose further during the COVID-19 on the back of easy financial conditions induced by unprecedented policy support. We investigate the empirical relationships between increased leverage, financial conditions, and macro-financial stability in a sample of major advanced and emerging market economies. We find that loose financial conditions contribute to leverage buildups and generate an intertemporal tradeoff: financial stability risk is lessened in the near term but exacerbated in the medium term. The tradeoff is amplified during credit booms, when debt service burdens are particularly high, or when the share of foreign currency debt is high in emerging markets. Selected macroprudential tools can arrest leverage buildups and mitigate the tradeoff.
Micro Assessment Of Macroprudential Borrower Based Measures In Lithuania
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Author : Mantas Dirma
language : en
Publisher: International Monetary Fund
Release Date : 2023-10-27
Micro Assessment Of Macroprudential Borrower Based Measures In Lithuania written by Mantas Dirma and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-10-27 with Business & Economics categories.
Despite having introduced borrower-based measures (BBM), Lithuania's housing and mortgage markets were booming during the low-interest-rate period, casting doubt on the macroprudential toolkit's ability to contain excessive mortgage growth. This paper assesses the adequacy of BBMs’ parametrization in Lithuania. We do so by building a novel lifetime expected credit loss framework that is founded on actual loan-level default and household income data. We show that the BBM package effectively contains mortgage credit risk and that housing loans are more resilient to stress than in the preregulatory era. Our BBM limit calibration exercise reveals that (1) in the low-rate environment, income-based measures could have been tighter; and (2) borrowers taking out secondary mortgages rightly are and should be required to pledge a higher down payment.
Review Of The Institutional View On The Liberalization And Management Of Capital Flows Background Note On Capital Flows And Capital Flow Management Measures Benefits And Costs
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Author : Gurnain Kaur Pasricha
language : en
Publisher: International Monetary Fund
Release Date : 2022-03-30
Review Of The Institutional View On The Liberalization And Management Of Capital Flows Background Note On Capital Flows And Capital Flow Management Measures Benefits And Costs written by Gurnain Kaur Pasricha and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-03-30 with Business & Economics categories.
The Fund’s Institutional View (IV) recognizes the benefits of and risks associated with capital flows. Since the IV was adopted, a growing literature has provided additional insights into the benefits and risks from capital flows. This note summarizes the insights from the recent literature and the experiences of staff since the adoption of the IV that have informed this review.
Housing Market Stability And Affordability In Asia Pacific
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Author : Mr. Pragyan Deb
language : en
Publisher: International Monetary Fund
Release Date : 2022-12-14
Housing Market Stability And Affordability In Asia Pacific written by Mr. Pragyan Deb and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-12-14 with Business & Economics categories.
The paper intends to highlight challenges in Asian housing markets linked to fast price rises especially in the advanced economies since COVID, and more broadly including many EMs in the period leading up to COVID. It aims to draw policy lessons on how to manage stability aspects through macroprudential and other policies and how to support affordability through structural policies and targeted government support.
Firm Leverage And Boom Bust Cycles
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Author : Can Sever
language : en
Publisher: International Monetary Fund
Release Date : 2023-06-16
Firm Leverage And Boom Bust Cycles written by Can Sever and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023-06-16 with Business & Economics categories.
This paper explores the dynamic relationship between firm debt and real outcomes using data from 24 European economies over the period of 2000-2018. Based on macro data, it shows that a rise in credit to firms is associated with an increase in employment growth in the short-term, but employment growth declines in the medium-term. This pattern remains similar, even when the changes in credit to households are accounted for. Next, using data from a large sample of firms, it shows that firm leverage buildups predict similar boom-bust growth cycles in firm employment: Firms with a larger increase in leverage experience a boost in employment growth in the short-term, but employment growth decreases in the medium-term. Relatedly, the volatility of employment growth increases in the aftermath of firm leverage buildups. Finally, this paper provides suggestive evidence on the role of a financial channel in the relationship between firm leverage buildups and employment growth. The results show that a rise in firm leverage is associated with a persistently higher debt service ratio, pointing the drag on finances. Consistently, boom-bust growth cycles in the aftermath of firm leverage buildups are not limited to employment growth, but are also pronounced for investment. Moreover, the medium-term decline in firm employment growth as predicted by leverage buildups becomes even larger if aggregate financial conditions tighten. The findings are in favor of “lean against the wind” approach in policy making.
Review Of The Institutional View On The Liberalization And Management Of Capital Flows
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 2022-03-30
Review Of The Institutional View On The Liberalization And Management Of Capital Flows written by International Monetary Fund and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2022-03-30 with Business & Economics categories.
The Institutional View (IV) on the Liberalization and Management of Capital Flows, adopted in 2012, provides the basis for consistent advice, and where relevant, assessments on policies related to capital flows. This paper reviews the IV, informed by advances in research, notably the work on an Integrated Policy Framework (IPF), the findings of the 2020 evaluation by the Independent Evaluation Office (IEO) on IMF Advice on Capital Flows, and staff’s experience with the implementation of the IV. The core premises and objectives of the IV remain unchanged. The IV rests on the premises that capital flows are desirable as they can bring substantial benefits for countries, and that capital flow management measures (CFMs) can be useful in certain circumstances but should not substitute for warranted macroeconomic adjustment. With those premises in mind, the IV aims to help countries reap the benefits of capital flows, while managing the associated risks in a way that preserves macroeconomic and financial stability and does not generate significant negative outward spillovers.
Managing Remittances Inflows With Foreign Exchange Intervention
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Author : Ms. Maria-Angels Oliva
language : en
Publisher: International Monetary Fund
Release Date : 2024-09-06
Managing Remittances Inflows With Foreign Exchange Intervention written by Ms. Maria-Angels Oliva and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2024-09-06 with categories.
In a 157 emerging markets and developing countries sample, remittances continue to grow fast, outpacing other financial inflows (as a share of GDP), particularly in Asia. Without alternative policy instruments, foreign exchange interventions (FXIs) have often been the authorities’ go-to tool to manage the short-term effects of these remittance inflows. However, this practice comes at a cost. This paper shows that FXIs are quick, temporary solutions that often may hinder the development of the recipient country’s financial sector and may not support financial stability over the medium term. The analysis suggests that FXIs act as an insurance tool that, by mitigating FX volatility, protect remittance recipients and tradable sectors from FX risks, encouraging less bank deposits (consistent with more spending) and lower buffers in the banking sector. These costs add to other direct FXI-related costs already identified in the literature. The development of private sector market risk management tools should support longer-term structural reforms required to increase the absorptive capacity of additional FX inflows.