With the rapid growth of countries' foreign asset and liability positions over the last two decades,
financial returns on those positions ('NFA returns') have become material drivers of current
accounts and net stock positions. This paper documents the relative importance of NFA return
versus trade channels in driving NFA dynamics, for a sample of 52 economies over 1990-2015.
While persistent trade imbalances have been a strong force leading to diverging NFA positions,
NFA returns have played an important stabilizing role, mitigating NFA divergence. The
stabilizing role of NFA returns primarily reflects the response of asset prices, rather than yield
differentials or exchange rates. There is also evidence of heterogeneity in the speed of NFA
adjustment, with emerging market economies adjusting more rapidly than advanced economies,
and reserve-currency countries adjusting more slowly than others. The paper also documents the
role of NFA returns as insurance against domestic and global income shocks, with a focus on
Gregorio Impavido, Mr. Heinz Rudolph, and Mr. Luigi Ruggerone
CESEE banks are reducing foreign funding sources in response to reduced external imbalances, reduced ability to tap international savings, banking group own strategies, initiatives by some regulators, and consistently with uncertainties surrounding the future of the banking union project. In the medium term, the global regulatory agenda and the high foreign presence and stock of FX loans exert opposite forces on rebalancing trends. In the long-term, any funding “new normal” will be determined by the future design of the EU financial architecture. In the meantime, limiting leverage, the use of FX loans and promoting aggregate saving through macro policies and capital market reforms will increase resilience against shocks going forward.
This paper suggests that it is essential to save a substantial portion of mineral revenues now to ensure fiscal sustainability for a post-diamond period. Taking the non-mineral primary balance into account can help clarify desirable fiscal policies. Botswana’s real effective exchange rate is broadly in line with economic fundamentals and consistent with external sustainability, indicating no threat to external stability. Export performance and other indicators suggest a number of structural competitiveness obstacles that could explain the low labor productivity and poor export and export diversification outcomes.
This paper focuses on expectations for the American economy focused on the likelihood of secular stagnation, which continued to be debated throughout the post-war period. Concerns rose during the late 1960s and early 1970s about rapid population growth smothering the potential for economic growth in developing countries were contradicted when, during the mid- and late-1970s, fertility rates began to decline rapidly. In policy-oriented institutions (and in most businesses and individual decision making), policymaking decisions are often guided by projections and forward-looking indicators. The case of Michael Mussa has been one of great anticipation, and of great accomplishment, and all the early optimistic forecasts about him have turned out to be correct. Within the sphere of economics, undoubtedly the most famous and widely used forecast—one, incidentally, that thus far has often been incorrect—is that based on the Malthusian doctrine of the relationship between resources and population.
This Background Paper describes economic and financial developments in Aruba during 1997–98. The paper highlights that in the mid-1990s, the boom in the hotel sector came to an end, and the economy started to grow at a more sustainable pace. The paper reviews real economic activity, employment, and domestic price movements. It covers public finances and fiscal policy, including the budget for 1999, and also addresses monetary and exchange policy and developments. An analysis of recent trends in the external current and capital accounts is also presented.
Written by Joseph Gold, former General Counsel and now Senior Consultant at the IMF, these volumes contain discussions of the ever-increasing body of cases in which the Articles have had a bearing on issues before the courts.
This paper discusses the Cuban insurance cases. The litigation in U.S. courts in which claims have been made under life insurance policies issued by U.S. or Canadian companies to applicants then resident in Cuba is the most extensive body of cases involving Article VIII, Section 2(6) that has come into the courts. The cases suggest that the benefits of Article VIII, Section 2(6), cease to be available to a country once it withdraws from the IMF, even in respect of contracts entered into when the country was a member. This conclusion seems to have been accepted by both courts and counsel in the cases.
The change of regime in Cuba in 1959 led to a considerable migration of citizens from that country. Many of these émigrés held insurance policies issued by U.S. or Canadian companies that had been doing business in Cuba. A wave of litigation based on these policies flooded into courts in the United States against both groups of companies.1 One company alone had more than 6,000 policies outstanding that had been issued through its Havana branch. “The pending suits involve all kinds of policy claims, including death claims, suits for cash surrender values of policies, annuity benefits and endowment proceeds, as well as actions to force insurers to accept premiums and maintain policies in force.” 2
In 1945 the defendant company, a Louisiana corporation, issued to the plaintiff three single premium annuity contracts under which his daughters were the annuitants and under which monthly payments were to begin as each of the plaintiff’s three daughters reached the age of 21. The signatures of the defendant’s officials executing the policies were authenticated before a notary in Havana, and the policies were delivered to the plaintiff there on payment of the premium in dollars by the plaintiff. The contracts provided that the annuities were to be paid in dollars, and that all liquidations were to be paid at the defendant’s head office in New Orleans on delivery of the contract to the defendant. The plaintiff, who was vested with control of the contract, demanded its cash surrender value in Florida after he became a resident of that state. On the defendant’s refusal to pay, the plaintiff sued and the defendant counterclaimed for a declaratory judgment of nonliability. One policy matured in May 1957 before suit was brought, and another in May 1961 in the course of the litigation.
A fundamental question raised by the cases is the relation of Article VIII, Section 2(b), to private international law. That branch of the law of each country includes a set of rules that determine the law by which contracts, including their performance, are governed. Article VIII, Section 2(b), also establishes a rule for the recognition of certain provisions of a particular system of law. It declares that, if suit is brought in a member’s court to enforce an exchange contract, the court must refuse enforcement if the contract is contrary to the exchange control regulations of another member whose currency is involved. In short, the law of the member whose currency is involved must be recognized in the circumstances and for the purpose prescribed by Article VIII, Section 2(b).
The Cuban insurance cases support the thesis that if a country withdraws from the Fund it loses the benefit of Article VIII, Section 2(b), even in respect of contracts that were entered into when it was a member. This had already been held by the New York Supreme Court in Stephen v. Zivnostenska Banka, National Corporation.63 In the Ugalde case, the plaintiff’s motion for reconsideration of the case because Cuba had withdrawn from the Fund was dismissed, but no reason was given by the court. The defendant had opposed the motion on the ground that there was an alternative basis for the verdict, the determination that Cuban law governed the contract under private international law. In the Varas case, after the withdrawal of Cuba the defendant company asked the Superior Court of Pennsylvania to disregard the defendant’s argument based on the Articles, and the court said that, as a result of the withdrawal, a new look had to be taken at the cases that had been based on the Articles when both Cuba and the United States were members.
The litigation in U.S. courts in which claims have been made under life insurance policies issued by U.S. or Canadian companies to applicants then resident in Cuba is the most extensive body of cases involving Article VIII, Section 2(b), that has come into the courts so far. The cases suggest the following reactions.