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International Monetary Fund. Western Hemisphere Dept.

Abstract

The global economy continues to expand, though heterogeneity and downside risks persist. The recovery in most advanced economies—where output remains below trend—is proceeding only gradually, and will continue to be constrained by the need to repair household, government, and financial sector balance sheets. Growth in emerging economies remains robust fueled by favorable external conditions, yet policies need to be tightened to avoid overheating.

International Monetary Fund. Western Hemisphere Dept.

Abstract

The region continues to grow at a robust pace, led by rapidly expanding domestic demand. Growth is projected to moderate this year, though a quicker withdrawal of monetary and fiscal policy stimulus may be necessary to guard against rising overheating risks, particularly in economies experiencing strong “tailwinds” from rising commodity export revenues and capital inflows. In countries with the strongest real links to advanced economies, economic weakness was more prolonged, but their recoveries are gaining traction. Throughout the region, rising global prices of food and fuel are adding to challenges of containing inflation and protecting the poor. Downside risks to the global outlook highlight the need to build policy buffers and to guard against an eventual reversal of capital inflows.

International Monetary Fund. Western Hemisphere Dept.

Abstract

Emerging markets have increasingly relied on foreign exchange intervention to confront currency appreciation pressures arising from “easy external financing conditions.”Focusing on the last seven years, this chapter discusses the experience of selected Latin American economies with these policies, and compares them with those of other regions. It also examines the role of different modalities of intervention, and offers a new cross-country approach to assess its effectiveness and costs.

International Monetary Fund

Algeria remains heavily dependent on the hydrocarbon sector and still maintains a sizable and inefficient state-owned enterprise sector. Against this background, the paper addresses two different issues with important implications for macroeconomic stability in Algeria. The paper proposes the replacement of directed credit to large loss-making public enterprises with temporary and explicit budget subsidies. It also shows that money, volume of imports, and weather conditions have a strong impact on price movements in the short term, whereas the exchange rate has none.

Mr. Paulo Drummond, Mr. Ari Aisen, Mr. Emre Alper, Ms. Ejona Fuli, and Mr. Sébastien Walker
This paper examines how susceptible East African Community (EAC) economies are to asymmetric shocks, assesses the value of the exchange rate as a shock absorber for these countries, and reviews adjustment mechanisms that would help ensure a successful experience under a common currency. The report draws on analysis of recent experiences and examines likely future changes in the EAC economies.
J. J. Polak and William H. White

THERE IS AMPLE theoretical and empirical evidence that income expansion and inflation are often associated with increases in the money supply. Since, as a rule, monetary statistics are readily and currently available while inflationary pressure is a concept that is hard to measure, it has become customary to accept monetary statistics as reliable indicators of inflation and deflation, of expansion and contraction. When it is observed that the money supply in a country is rising, it is inferred that expansionary factors must be at work and that anti-inflationary policies should be introduced. Likewise, when the money supply declines, it is inferred that contractionary forces are more powerful and that anti-inflationary policies can safely be relaxed or reversed.

International Monetary Fund. Western Hemisphere Dept.

Abstract

The world economy continues to be buffeted by the burgeoning downdraft of the financial crisis and volatile commodity prices. As such, the outlook points to a major downturn for the global economy, with growth falling to its slowest pace since the 2001–02 recession. Levels of uncertainty and volatility are very high, presenting policymakers with a challenging environment to navigate.

International Monetary Fund. Western Hemisphere Dept.

Abstract

The regional outlook is being increasingly clouded by the deepening global financial turmoil. Growth is expected to slow markedly as the global slowdown and tightening financial conditions take hold, while external current accounts are set to weaken. Downside risks to growth have also increased, given the uncertain outlook for world commodity prices and the possibility of further spillovers from the strains to global financial stability. Flexible exchange rates should ease the adjustment for some. Policymakers face a delicate balance in mitigating the expected slowdown while maintaining orderly funding conditions, and seeking to anchor stability over the medium term.

International Monetary Fund. Western Hemisphere Dept.

Abstract

The recent inflationary episode in Latin America and the Caribbean has been the first real test of the region’s commitment to low inflation, especially for the countries with formal inflation-targeting (IT) frameworks. Inflation in the region—which rose to over 8 percent in August 2008—is expected to remain high through end-2008, before beginning to decline gradually in 2009. All other emerging markets have also experienced similar price pressures, with consumer prices rising by over 14 percent a year in the Middle East and by about 8 percent a year in emerging Asia and Europe. Within the region, inflation pressures have been most acute in countries with less flexible exchange rate regimes (including most countries in Central America, Bolivia, Ecuador, and, notably Venezuela, with inflation surpassing 30 percent). In contrast, the IT countries have the lowest inflation in the region, on average. Yet even in these countries headline inflation picked up on average by over 2 percentage points between August 2007 and August 2008, and exceeded the target range in most of the IT countries, often by a wide margin, as of August 2008.

International Monetary Fund

IMF Executive Board Completes Second Review Under Standby Arrangement with Solomon Islands, Approves US$4.98 Million Disbursement