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Mr. Andrew Berg and Mr. Rafael A Portillo

Abstract

Central banks (CBs) in sub-Saharan Africa (SSA) have made great progress over the past two decades in stabilizing inflation, to single digits on average, in the context of greater central bank independence, support from fiscal-based stabilization efforts, and more sustained and stable growth. They have done so by relying on monetary policy arrangements centred, at least de jure, on money targets, often with some form of a de facto exchange rate peg.

International Monetary Fund

Abstract

1.1 The purpose of the External Debt Statistics: Guide for Compilers and Users (the Guide) is to provide comprehensive guidance for the measurement and presentation of external debt statistics. It also provides advice on the compilation of these data and on their analytical use. The intention is to contribute to both an improvement in, and a greater understanding of, external debt statistics. In doing so, the Guide is responding to the concerns of markets and policymakers for better external debt statistics to help assess external vulnerabilities at a time when increasing international capital flows are resulting in greater market interdependence.

Mr. Andrew Berg and Mr. Rafael A Portillo

Abstract

In this chapter1 we use a stylized open-economy model to define, analytically, first-round effects on inflation stemming from international food price shocks. This is an important issue for African countries, which have faced large swings in international food prices in recent years. Policy advice usually calls for the central bank to respond only to ‘second-round’ effects—spillovers from food prices to wage and core inflation—and accommodate, instead, ‘first-round’ effects.2 What is meant by first-round effects is not always clear. It is often assumed that first-round effects capture the direct impact of food price shocks on the consumer price index (CPI) and, therefore, depend on the weight of food in this index, but in the absence of a clear analytical framework it is difficult to provide a more formal definition.

International Monetary Fund

Abstract

10.1 External debt statistics can be compiled from a variety of sources, using a range of methods. Statistics can be collected from the debtor, from the creditor, or indirectly through information from financial intermediaries in the form of surveys, regulatory reports, and/or from other government administrative records. But a precondition for reliable and timely statistics is that the country has a strong and well-organized institutional setting for the compilation of statistics on public debt—so that all public and publicly guaranteed debt is well monitored and managed (see UNCTAD, 1993)—and private debt, and for the compilation of aggregate external debt statistics.

International Monetary Fund

Abstract

11.1 The Guide recommends that the collection of data on a government’s external debt be linked to the work of those responsible for managing the government’s debt position, for the purposes of administrative efficiency and quality control. Those responsible for government debt are invariably a government debt office, either within the ministry of finance or constituted as a separate agency within the government sector, or the central bank, or another government agency. For reasons outlined in the previous chapter, it is also important that the agency responsible for government data cooperate, as appropriate, with any other agencies involved with the compilation of external debt data.

Mr. Andrew Berg and Mr. Rafael A Portillo

Abstract

Central banks in low-income countries (LICs) have been adopting elements of inflation targeting since the mid-1990s, including an elevated focus on price stability and a commitment to transparency in the conduct of policy (Chapter 1).1 In concert with a move to market-determined exchange rates and interest rates, these developments have narrowed the gap between the monetary policy frameworks in use among LICs and those employed by emerging-market and high-income economies.

International Monetary Fund

Abstract

12.1 In circumstances where controls on foreign borrowing are still in place, it is possible for the central bank to compile information on private sector borrowing from information provided by borrowers for regulatory purposes, such as when they seek approval for foreign borrowing. Also, commercial banks might well be required to report on foreign transactions of their private sector clients. However, as liberalization of financial transactions proceeds, and such information becomes less readily available, there is a need to develop methods of collecting data on private sector debt through other means. This chapter considers the collection of these data from banks and “other sectors” when financial transactions are liberalized. The measurement of external debt in the form of traded securities is covered in the next chapter.

Mr. Andrew Berg and Mr. Rafael A Portillo

Abstract

African countries are exposed to a variety of external shocks, which can generate large swings in output, inflation, and the balance of payments. The impact on the domestic economy is typically mediated by the broad policy response to these shocks, though the role of different types of policy is often not fully understood. This is the case for example with (unexpected) changes in aid flows. Much of the discussion typically assumes that the effects of aid depend mainly on the fiscal response. To the extent aid is used to finance higher government spending, then it is assumed that it must also help finance a higher current account deficit net of aid, i.e., higher absorption. The appreciation of the real exchange rate plays an important role in this process: it helps reallocate private demand away from non-traded goods (which is what the government typically spends on) and toward traded goods (which helps absorb the additional aid).

Mr. Andrew Berg and Mr. Rafael A Portillo

Abstract

Monetary policy is defined by the objectives, targets, and instruments that both guide and characterize the behaviour of central banks.1 Until recently, a typical summary of monetary policy would list price stability as the main policy objective, inflation (or the exchange rate or monetary aggregates in some cases) as the intermediate target, and short-term interest rate as the sole instrument. The above view was also reflected in the standard macroeconomic model, the New Keynesian framework, which typically models policy as a rule in which interest rates respond to deviations of inflation from its target.

International Monetary Fund

Abstract

13.1 External debt in the form of traded securities corresponds to debt securities in the inward portfolio investment component of the balance of payments and IIP. In recent decades, the relaxation of restrictions on the foreign investment activities of banks and other institutional investors, combined with continued financial innovation, has resulted in a surge of cross-border investment in bonds (and equities). This has increased the interest of policymakers in data on this activity.