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Mr. Johan Mathisen and Mr. Anthony J. Pellechio

Abstract

A distinguishing feature of emerging market crises in the 1990s and early 2000s was the sudden disruption in the capital accounts of key sectors of the economy. Capital account crises typically occur as creditors quickly lose confidence, prompting sudden and large-scale portfolio adjustments such as massive withdrawals of bank deposits, panic sales of securities, or abrupt halts of debt rollovers. As the exchange rate, interest rates, and other asset prices adjust, the balance sheet of an entire economy can sharply deteriorate.

Mr. Johan Mathisen and Mr. Anthony J. Pellechio

Abstract

The purpose of the BSA is to analyze vulnerabilities of sectors and transmission mechanisms among them. Key vulnerabilities that the BSA framework aims to capture can be summarized as follows:4

Mr. Johan Mathisen and Mr. Anthony J. Pellechio

Abstract

The particular framework of a BSA application—a matrix of intersectoral balance sheets in terms of sectors of the economy and components of the balance sheet (Table 1)—depends on the focus of analysis and, as a practical matter, the availability of data. Allen and others (2002) provide a generic matrix encompassing four sectors (government, financial, nonfinancial, nonresident) with assets and liabilities broken down by (short- and long-term) maturity and currency (domestic, foreign). The framework presented in this paper uses the same breakdown of assets and liabilities but expands it to seven sectors.6

Mr. Johan Mathisen and Mr. Anthony J. Pellechio

Abstract

Recent improvements in statistical methodologies and data availability are enhancing the potential for detecting and monitoring macroeconomic balance sheet vulnerabilities. In particular, some of the datasets introduced in recent years permit a much more frequent, detailed, and up-to-date analysis.

Mr. Johan Mathisen and Mr. Anthony J. Pellechio

Abstract

The most important aspect of the new datasets is that they permit tracking the evolution of balance sheet vulnerabilities—the potential for liquidity or solvency problems—on a regular and timely basis for surveillance purposes. As the example of South Africa illustrated, the new datasets—particularly the SRF, JEDH, QEDS, and CPIS—provide financial data with greater periodicity, detail, and timeliness, enabling better tracking of current vulnerabilities using the BSA. These data can be mapped into the 7 x 7 BSA framework for a monthly analysis of sectoral vulnerabilities. If needed, the framework also allows for a detailed breakdown by assets and liabilities by currency, which can be very useful when analyzing particular vulnerabilities. Recent applications of the BSA using these new databases illustrate some of the advantages for IMF surveillance. However, the full potential for detailed examination of a country’s vulnerabilities and cross-country analysis based on comparable data will be realized in future applications of the BSA using these databases.

Mr. Johan Mathisen and Mr. Anthony J. Pellechio

Abstract

Delineation of sectors and financial instruments in a matrix of balance sheets for an economy is central to specifying the BSA framework for analysis of the potential for emerging liquidity or solvency problems. The sectorization and financial instruments in the 7 x 7 matrix presented in this paper provide a useful baseline for applying the BSA and can be adapted to focus on particular sectors to assess vulnerabilities in the economy. This framework can also be modified to accommodate data limitations and still be useful for vulnerability analysis.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

This overview chapter discusses the evolution of and outlook for global external positions and summarizes the IMF staff’s external assessments for a globally representative set of economies in 2019, which are also detailed in Chapter 3, “2019 Individual Economy Assessments. “ These assessments are multilaterally consistent and draw on the latest vintage of the External Balance Assessment (EBA) methodology and consider a full set of external indicators, including current accounts, exchange rates, external balance sheets, capital flows, and international reserves. The assessments’ objectives and concepts are summarized in Box 1.1. The chapter is organized as follows: the first section, “Global Imbalances before the COVID-19 Crisis,” documents the evolution of current accounts, exchange rates, and international trade in 2019. It also presents IMF staff external sector assessments for 2019, providing a benchmark for assessing external positions as they were before the onset of the COVID-19 pandemic. The second section, “External Developments during the COVID-19 Crisis,” discusses the evolution of exchange rates, international trade in goods and services, capital flows, and current account balances in 2020, drawing on both recent data and IMF staff forecasts. The third section, “Significant Risks to the External Outlook,” discusses the elevated uncertainties and risks currently pertaining to the outlook. The final section, “Policy Priorities,” discusses policy responses for addressing these risks and responding to the crisis as well as reforms to reduce excess imbalances over the medium term in a manner supportive of global growth.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

The authors of this chapter are Swarnali A. Hannan and Pau Rabanal (co-leads) and Luis Cubeddu, with contributions from Suman Basu, Roberto Perrelli, and Weining Xin, and support from Kyun Suk Chang, Deepali Gautam, Jair Rodriguez, and Zijiao Wang.

International Monetary Fund. Monetary and Capital Markets Department

Abstract

The individual economy assessments use a wide range of methods to form an integrated and multilaterally consistent view on economies’ external sector positions. These methods are grounded in the latest vintage of the External Balance Assessment (EBA), developed by the IMF’s Research Department to estimate desired current account balances and real exchange rates.1 Model estimates and associated discussions on policy distortions (see Box 3.1 for an example) are accompanied by a holistic view of other external indicators, including capital and financial account flows and measures, foreign exchange intervention and reserves adequacy, and foreign asset or liability positions.2

Miss Rita Mesias

Abstract

This Coordinated Direct Investment Survey Guide (Guide) has been prepared to assist economies in participating in the Coordinated Direct Investment Survey (CDIS). The CDIS is being conducted under the auspices of the Statistics Department of the IMF across a wide range of economies. The survey is conducted simultaneously by all participating economies; uses consistent definitions; and encourages best practices in collecting, compiling, and disseminating data on direct investment positions. The CDIS is thus an important tool in capturing world totals and the geographic distribution of direct investment positions, thereby contributing to important new understandings of the extent of globalization, and improving the overall quality of direct investment data worldwide. As of the writing of this updated Guide, more than 100 economies participate in the CDIS.