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Ján Klacso, Eugen Tereanu, Marco Forletta, and Mr. Marco Gross
We develop a semi-structural quantitative framework that combines micro and macroeconomic data to assess the effectiveness of combinations of borrower-based macroprudential measures in Slovakia. We expand on the integrated dynamic household balance sheet model of Gross and Población (2017) by introducing an endogenous loan granting feature, in turn to quantify the potential (ex-ante) impact of macroprudential measures on resilience parameters, compared with a counterfactual no-policy scenario, under adverse macroeconomic conditions. We conclude that (1) borrower-based measures can noticeably improve household and bank resilience to macroeconomic downturns, in particular when multiple measures are applied; (2) those measures tend to complement each other, as the impact of individual instruments is transmitted via different channels; and (3) the resilience benefits are more sizeable if the measures effectively limit the accumulation of risks before an economic downturn occurs, suggesting that an early, preemptive implementation of borrower-based measures is indeed warranted.
Mr. Marco Arena, Tingyun Chen, Mr. Seung M Choi, Ms. Nan Geng, Cheikh A. Gueye, Mr. Tonny Lybek, Mr. Evan Papageorgiou, and Yuanyan Sophia Zhang
Macroprudential policy in Europe aligns with the objective of limiting systemic risk, namely the risk of widespread disruption to the provision of financial services that is caused by an impairment of all or parts of the financial system and that can cause serious negative consequences for the real economy.
International Monetary Fund. European Dept.

Abstract

Economic activity continued to expand in the first half of 2018, albeit at a slower-than-expected pace, mainly in advanced Europe. Domestic demand, supported by stronger employment and wages, remains the main engine of growth. However, the external environment has become less supportive and is expected to soften further in 2019 owing to slowing global demand, trade tensions, and higher energy prices. Tighter financial conditions in vulnerable emerging market economies and maturing business cycles are also weighing on activity. Accordingly, growth is projected to moderate from 2.8 percent in 2017 to 2.3 percent in 2018 and 1.9 percent in 2019. That said, it is expected to remain above potential in most countries in the region.

Mr. Mick Thackray
The IMF Fiscal Affairs Department’s Revenue Administration Gap Analysis Program (RA-GAP) assists revenue administrations from IMF member countries in monitoring taxpayer compliance through tax gap analysis. The RA-GAP analytical framework for estimating excise gaps presented in this Technical Note sets out the steps and data required for comprehensive top-down gap estimates based on a comparison of actual collections to potential collections, which is estimated from consumption (or use) and expenditure of excise commodities. The note outlines the motivation for, and different approaches to, excise gap estimation; and identifies the design criteria for robust gap estimates. The note was jointly produced by RA-GAP team and the Slovak Republic’s Institute for Financial Policy, piloting the framework for the mineral oils excise gap in Slovakia.
International Monetary Fund. European Dept.
This Selected Issues paper examines the need of reformation of the Fiscal Responsibility Act (FRA) in the Slovakia. It is suggested that in light of experience gathered so far, FRA modifications should be considered. Clear guidelines regarding a cost-effective cash management strategy should be established. Debt brake level should be kept at the current limits, rather than lowered over time, to avoid unduly eroding fiscal space. Policies should aim to maintain a safe margin below debt thresholds to allow fiscal policy to play a counter-cyclical role in the future during downturns. Adjustment measures should be more gradual and the bias toward spending cuts should be lessened or removed.