International Monetary Fund. Strategy, Policy, & Review Department
The Fund has a range of modalities and tools to cover spillovers. However, there remains scope to enhance synergies between global and country-specific spillover coverage and to foster cross-country dialogue. Practical guidance and enhanced information-sharing would also allow for more systematic surveillance of spillovers. Furthermore, the COVID-19 pandemic has underscored the need to continue expanding the research frontier covering new spillovers and channels and developing new tools and data sets. Therefore, filling these remaining gaps in the Fund’s spillover work would allow for a more coordinated and evenhanded surveillance of spillovers.
Rocio Gondo, Altynai Aidarova, and Mr. Manmohan Singh
This paper discusses migration and remittances trends, and calculates the natural (or benchmark) level of dollarization in Caucasus, Central Asia and others in the region. This natural level of dollarization is conceptually linked to the currency allocation in a portfolio of deposits to maximize welfare, in line with Ize and Levy Yeyati (2003). The fall in remittances due to the economic slowdown since the spread of COVID-19 affects the macroeconomic fundamentals that determine demand for foreign currency deposits. We calculate the natural dollarization level by integrating structural macroeconomic characteristics. We show that despite the reduction in deposit dollarization, there is still a gap with respect to the natural level of dollarization, especially in a scenario of (persistent) lower remittance inflows.
The external imbalances that accompanied Latvia’s integration into the global economy have generated mixed effects. Stabilizing net foreign liabilities will require an improvement in the goods and services balance. Outward migration from Latvia has raised concerns about social and economic stresses that could intensify in the near future if labor flow increases. Several steps have to be taken to mitigate any adverse consequences of outward migration. The purpose of this paper is to examine macroeconomic and prudential aspects of the rapid growth of lending in Latvia.
The Selected Issues paper and Statistical Appendix on Cape Verde review determinants of emigrant deposits (ED). EDs have provided a substantial source of foreign exchange to the Cape Verdean economy, and have been vital in maintaining the fixed exchange rate. Prospects for growth in Cape Verde are improving and immigration legislation abroad is tightening. Both trends argue against further accumulation of ED. Among the developments in favor of ED, of considerable importance is their past stability, the limited convertibility of deposits, the favorable business outlook, and the stable political climate.