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International Monetary Fund. Secretary's Department

of member policies. The policy agenda for the year is examined in further detail in Chapters 3 and 4 . Capacity Development As the year began, two existing IMF units were merged into the new Institute for Capacity Development, as part of a strategic approach to this core area of IMF activity. Significant accomplishments in the institute’s first year included an agreement to establish a regional training center in Mauritius, key preparatory work for the opening of a new regional technical assistance center in West Africa, and a seminar celebrating the

Peter B. Clark and Mr. Ronald MacDonald

wholesale or producer price index (PPI) relative to the corresponding weighted average of partner country ratios, using the same weights as described above. This variable is expressed in logs: ltnt Source: CPI, IMF World Economic Outlook database; PPI, IMF Unit Labor Cost database. Net foreign assets: nfa This variable is the stock of net foreign assets, defined as total foreign assets (less official gold holding) minus total liabilities to foreigners. In the empirical analysis below, the stock of net foreign assets is scaled by dividing by the nominal value

International Monetary Fund

not be sufficient to support the expansion of world trade. (The main reserve assets at the time were gold and U.S. dollars.) The SDR was introduced as a supplementary reserve asset, which the IMF could “state” periodically to members when the need arose, and cancel, as necessary. IMF member countries may use SDRs in transactions among themselves, with 16 Institutional’ holders of SDRs, and with the IMF. The SDR is also the IMF's unit of account. A number of other international and regional organizations and international conventions use it as a unit of account, or

International Monetary Fund. European Dept.

Rate (Index, 2010=100) Source: IMF. Unit Labor Cost (Index. 2000=100; based on hours worked) Sources Eurostat and Fund staff calculations. Annex II. A Simple Model for Danish Wage Formation 1. Nominal wage developments have followed the economic cycle . Total hourly compensation dropped with the decline in economic activity and slow recovery since the crisis. The average annual nominal y/y growth currently stands at 2.2 percent (through end-2017), from 3.9 percent in the pre-crisis 2000–07 period. Wage increases are markedly higher for

Peter B. Clark and Mr. Ronald MacDonald

) relative to the equivalent foreign effective (trade-weighted) ratio. This Variable Is Expressed In Logs: ltnt Source : CPI, IMF World Economic Outlook database; PPI, IMF Unit Labor Cost database. net foreign assets: nfa This variable is the stock of net foreign assets, defined as total foreign assets (less official gold holding) minus total liabilities to foreigners, expressed as a ratio to GNP. Source : Masson, Kremers, and Home (1993) for data from 1960–1990. Data from 1991–1996 obtained from the same publications cited in the source for this variable

Mr. Peter B. Clark and Mr. Ronald MacDonald
In this paper we extend the BEER (Behavioral Equilibrium Exchange Rate) approach which identifies an estimated equilibrium relationship between the real exchange rate and economic fundamentals. Here the economic fundamentals are decomposed using Johansen cointegration methods into transitory and permanent components, with the latter used to estimate the Permanent Equilibrium Exchange Rate, or PEER, for the U.S. and Canadian dollars and the pound sterling. The BEER and the PEER move closely together for the U.S. and Canadian dollars and generally track the actual exchange rate. By contrast, for the pound sterling the BEER and the PEER diverge sharply, with the latter following the actual exchange rate quite closely.
Mr. Ronald MacDonald and Mr. Peter B. Clark
This paper compares two approaches for examining the extent to which a country’s actual real effective exchange rate is consistent with economic fundamentals: the FEER approach, which involves calculating the real exchange rate that equates the current account at full employment with sustainable net capital flows, and the BEER approach, which uses econometric methods to establish a behavioral link between the real rate and relevant economic variables. An exchange rate model is estimated for the G-3 currencies to provide illustrative comparisons of BEERs and FEERs.
International Monetary Fund. External Relations Dept.
The Web edition of the IMF Survey is updated several times a week, and contains a wealth of articles about topical policy and economic issues in the news. Access the latest IMF research, read interviews, and listen to podcasts given by top IMF economists on important issues in the global economy. www.imf.org/external/pubs/ft/survey/so/home.aspx
Ryota Nakatani
How should resource-rich economies handle the balance of payments adjustment required after commodity price declines? This paper addresses the question theoretically by developing a simple two-period multi-sector model based on Nakatani (2016) to compare different exchange rate policies, and empirically by estimating elasticities of imports and commodity exports with respect to exchange rates using Papua New Guinean data. In the empirical part, using various econometric methods, I find the statistically significant elasticities of commodity exports to real exchange rates. In the theoretical part, by introducing the notion of a shadow exchange rate premium, I show how the rationing of foreign exchange reduces consumer welfare. Using the estimated elasticities and theoretical outcomes, I further discuss policy implications for resource-rich countries with a focus on Papua New Guinea.
Mr. Giovanni Dell'Ariccia, Mr. Jeromin Zettelmeyer, and Ms. Isabel Schnabel
We test for the existence of a moral hazard effect attributable to official crisis lending by analyzing the evolution of sovereign bond spreads in emerging markets before and after the Russian crisis. The nonbailout of Russia in August 1998 is interpreted as an event that decreased the perceived probability of future crisis lending to emerging markets. In the presence of moral hazard, such an event should raise not only the level of spreads, but also the sensitivity with which spreads reflect fundamentals as well as their cross-country dispersion. We find strong evidence for all three effects.