The Current Account Income Balance External Adjustment Channel Or Vulnerability Amplifier
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The Current Account Income Balance External Adjustment Channel Or Vulnerability Amplifier
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Author : Mr. Alberto Behar
language : en
Publisher: International Monetary Fund
Release Date : 2022-05-27
The Current Account Income Balance External Adjustment Channel Or Vulnerability Amplifier written by Mr. Alberto Behar 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 2022-05-27 with Business & Economics categories.
In terms of size, the net income balance (IB) is comparable to the trade balance (TB) for many countries. Yet the role of the IB in mitigating external vulnerabilities or complicating external adjustment remains underexplored. This paper studies the role of the IB in stabilizing or destabilizing the current account over the cycle and in crises. Our results show that, due to a negative correlation with the TB, the IB significantly dampens the time series volatility of the current account for most countries. However, the IB generally does not improve during crisis episodes, so current account adjustment occurs entirely through improvements in the TB. The paper also estimates IB semi-elasticities with respect to the exchange rate (ER). Semi-elasticities are small for most countries, so the IB is generally not a significant channel through which the ER stabilizes the current account, and trade-based semi-elasticities are, with some important exceptions, good proxies for current account semi-elasticities used in external sector assessments.
External Adjustment
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Author : Maurice Obstfeld
language : en
Publisher:
Release Date : 2004
External Adjustment written by Maurice Obstfeld and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2004 with Balance of trade categories.
"Gross stocks of foreign assets have increased rapidly relative to national outputs since 1990, and the short-run capital gains and losses on those assets can amount to significant fractions of GDP. These fluctuations in asset values render the national income and product account measure of the current account balance increasingly inadequate as a summary of the change in a country's net foreign assets. Nonetheless, unusually large current account imbalances, especially deficits, should remain high on policymakers' list of concerns, even for the richer and less credit-constrained countries. Extreme imbalances signal the need for large and perhaps abrupt real exchange rate changes in the future, changes that might have undesired political and financial consequences given the incompleteness of domestic and international asset markets. Furthermore, of the two sources of the change in net foreign assets -- the current account and the capital gain on the net foreign asset position -- the former is better understood and more amenable to policy influence. Systematic government attempts to manipulate international asset values in order to change the net foreign asset position could have a destabilizing effect on market expectations"--NBER website
The Responsiveness Of The Income Balance To The Exchange Rate
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Author : Alberto Behar
language : en
Publisher:
Release Date : 2023
The Responsiveness Of The Income Balance To The Exchange Rate written by Alberto Behar and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2023 with categories.
The role of the income balance in mitigating external vulnerabilities remains underexplored. We estimate income balance semi-elasticities with respect to the exchange rate. Semi-elasticities are small for most countries. Therefore, the income balance is generally not a significant channel through which the exchange rate stabilizes the current account and most exchange rate misalignment estimates can focus on trade, but there is a significant minority of exceptions.
2022 Update Of The External Balance Assessment Methodology
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Author : Mr. Cian Allen
language : en
Publisher: International Monetary Fund
Release Date : 2023-03-03
2022 Update Of The External Balance Assessment Methodology written by Mr. Cian Allen 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 2023-03-03 with Business & Economics categories.
The assessment of external positions and exchange rates of member countries is a key mandate of the IMF. The External Balance Assessment (EBA) methodology has provided the framework for conducting external sector assessments by Fund staff since its introduction in 2012. This paper provides the latest version of the EBA methodology, updated in 2022 with additional refinements to the current account and real exchange rate regression models, as well as updated estimates for other components of the EBA methodology. The paper also includes an assessment of how estimated current account gaps based on EBA are associated with future external adjustment.
Adjustment Of External Imbalances
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Author : Ruizhi Xie
language : en
Publisher:
Release Date : 2011
Adjustment Of External Imbalances written by Ruizhi Xie and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with Foreign exchange rates categories.
This thesis investigates the nature of the dynamic relationship between external balances and exchange rate dynamics in a macroeconomy. Specifically, this study focuses on how various measures of external balances serve as economic buffers to mitigate the effect of exchange rate shock to the economy. It examines the dynamic relationship between external balances and exchange rate shock via the application of cointegrated vector autoregression method and innovation accounting with generalized impulse responses and forecast error variance decompositions. The data sample spans the period 1986-2008 and includes three important developing countries: Brazil, China and India. Empirical evidence shows that for China and India, understanding of the exchange rate dynamics is helpful in predicting the movement of external balances. But for Brazil, the reverse path is true. Results of generalized impulse responses suggest that external balances demonstrate a predictable and systematic pattern after a one-time exchange rate shock. Specifically, the results indicate that exchange rate shock generates a positive response in current account adjustment and has a negative impact on capital gains. The latter soon gives rise to a small drop in current account balance due to temporary income shock and capital mobility. Taking account of the overall current account and capital gains adjustment (one positive and one negative), change in net foreign assets (NFA) position is largely cushioned from exchange rate shock. Integrating the results of generalized impulse responses and Granger causality tests, it is easy to find that there exists a feedback mechanism which significantly contributes to the adjustment of external imbalances. Moreover, terms of trade and domestic productivity serve as transmission channels which play a critical role in the system. From a policy perspective, in coping with enlarged global imbalances, exchange rate as well as terms of trade and domestic productivity should receive more attention in policy decisions to stabilize the economy.
The Turning Tide How Vulnerable Are Asian Corporates
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Author : Bo Jiang
language : en
Publisher: International Monetary Fund
Release Date : 2019-05-06
The Turning Tide How Vulnerable Are Asian Corporates written by Bo Jiang 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 2019-05-06 with Business & Economics categories.
Using a new firm-level dataset with comprehensive information on Asian firms’ FX liabilities, we show that Asia’s nonfinancial corporate sector is vulnerable to a tightening of global financial conditions. Higher global interest rates and exchange rate depreciation increase the probability of default of Asian firms. A 30 percent currency depreciation is associated with a two-notch downgrade in the corporate credit rating (e.g., from A to BBB+), resulting in 7 percent of Asian firms falling into bankruptcy. But the impact is nonlinear—as the firms’ FX liability increases, the balance sheet channel of exchange rate offsets, then dominates, the competitiveness channel. The balance sheet channel offsets the competitiveness channel when the share of U.S. dollar debt is between 10 and 20 percent. We also find that currency depreciation increases firm-level investment on average, but for firms with the share of FX liabilities above 20 percent, investment contracts with depreciation.
Cross Border Currency Exposures
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Author : Luciana Juvenal
language : en
Publisher: International Monetary Fund
Release Date : 2019-12-27
Cross Border Currency Exposures written by Luciana Juvenal 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 2019-12-27 with Business & Economics categories.
This paper provides a dataset on the currency composition of the international investment position for a group of 50 countries for the period 1990-2017. It improves available data based on estimates by incorporating actual data reported by statistical authorities and refining estimation methods. The paper illustrates current and new uses of these data, with particular focus on the evolution of currency exposures of cross-border positions.
Global Waves Of Debt
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Author : M. Ayhan Kose
language : en
Publisher: World Bank Publications
Release Date : 2021-03-03
Global Waves Of Debt written by M. Ayhan Kose and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-03-03 with Business & Economics categories.
The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
Staff Guidance Note On Macroprudential Policy
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Author : International Monetary Fund
language : en
Publisher: International Monetary Fund
Release Date : 2014-06-11
Staff Guidance Note On Macroprudential Policy 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 2014-06-11 with Business & Economics categories.
This note provides guidance to facilitate the staff’s advice on macroprudential policy in Fund surveillance. It elaborates on the principles set out in the “Key Aspects of Macroprudential Policy,” taking into account the work of international standard setters as well as the evolving country experience with macroprudential policy. The main note is accompanied by supplements offering Detailed Guidance on Instruments and Considerations for Low Income Countries
Stress Testing At The Imf
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Author : Mr.Tobias Adrian
language : en
Publisher: International Monetary Fund
Release Date : 2020-02-05
Stress Testing At The Imf written by Mr.Tobias Adrian 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 2020-02-05 with Business & Economics categories.
This paper explains specifics of stress testing at the IMF. After a brief section on the evolution of stress tests at the IMF, the paper presents the key steps of an IMF staff stress test. They are followed by a discussion on how IMF staff uses stress tests results for policy advice. The paper concludes by identifying remaining challenges to make stress tests more useful for the monitoring of financial stability and an overview of IMF staff work program in that direction. Stress tests help assess the resilience of financial systems in IMF member countries and underpin policy advice to preserve or restore financial stability. This assessment and advice are mainly provided through the Financial Sector Assessment Program (FSAP). IMF staff also provide technical assistance in stress testing to many its member countries. An IMF macroprudential stress test is a methodology to assess financial vulnerabilities that can trigger systemic risk and the need of systemwide mitigating measures. The definition of systemic risk as used by the IMF is relevant to understanding the role of its stress tests as tools for financial surveillance and the IMF’s current work program. IMF stress tests primarily apply to depository intermediaries, and, systemically important banks.