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Western Hemisphere > Argentina

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Cover IMF Working Papers
Spillovers from Large Emerging Economies: How Dominant Is China?
Hany Abdel-Latif
and
Adina Popescu
This paper investigates the global economic spillovers emanating from G20 emerging markets (G20-EMs), with a particular emphasis on the comparative influence of China. Employing a Bayesian Global Vector Autoregression (GVAR) model, we assess the impacts of both demand-side and supply-side shocks across 63 countries, capturing the nuanced dynamics of global economic interactions. Our findings reveal that China's contribution to global economic spillovers significantly overshadows that of other G20-EMs. Specifically, China's domestic shocks have significantly larger and more pervasive spillover effects on global GDP, inflation and commodity prices compared to shocks from other G20-EMs. In contrast, spillovers from other G20-EMs are more regionally contained with modest global impacts. The study underscores China's outsized role in shaping global economic dynamics and the limited capacity of other G20-EMs to mitigate any potential negative implications from China's economic slowdown in the near term.
Keywords:
Emerging Economies; Growth Spillover; Global transmission; GVAR model; outsized role; China's contribution; IMF working paper No. 25/27; domestic shock; Spillovers; Supply shocks; Emerging and frontier financial markets; Oil prices; Global value chains; Global
Cover IMF Working Papers
Inelastic Demand Meets Optimal Supply of Risky Sovereign Bonds
Matías Moretti
,
Lorenzo Pandolfi
,
German Villegas Bauer
,
Sergio L. Schmukler
, and
Tomás Williams
We present evidence of inelastic demand for risky sovereign bonds and explore its implications for optimal government debt policies. Using monthly changes in the composition of a major international bond index, we identify flow shocks unrelated to fundamentals that shift the available bond supply. From these shocks, we estimate an inverse demand elasticity of -0.30 and show that it increases with countries’ default risk. We formulate a sovereign debt model with endogenous default and inelastic investors, calibrated to our empirical estimates. By penalizing additional borrowing, an inelastic demand acts as a disciplining device that reduces default risk and bond spreads.
Keywords:
inelastic financial markets; institutional investors; international capital markets; sovereign debt; IMF working paper research Department; debt issuance; price reaction; convenience yield; default cost parameter; long-term debt; U.S. dollar; bond payoff; investor demand; bond characteristics-month; inelastic investor; bond price change; unit price; price movement; Bonds; Asset prices; Demand elasticity; Debt default; Sovereign bonds; Global
Cover IMF Working Papers
Uncertainty Premia, Sovereign Default Risk, and State-Contingent Debt
Mr. Francisco Roch
and
Francisco Roldán
We analyze how concerns for model misspecification on the part of international lenders affect the desirability of issuing state-contingent debt instruments in a standard sovereign default model à la Eaton and Gersovitz (1981). We show that for the commonly used threshold state-contingent bond structure (e.g., the GDP-linked bond issued by Argentina in 2005), the model with robustness generates ambiguity premia in bond spreads that can explain most of what the literature has labeled as novelty premium. While the government would be better off with this bond when facing rational expectations lenders, this additional source of premia leads to welfare losses when facing robust lenders. Finally, we characterize the optimal design of the state-contingent bond and show how it varies with the level of robustness. Our findings rationalize the little use of these instruments in practice and shed light on their optimal design.
Keywords:
Sovereign debt; default; state-contingent debt instruments; robust control; ambiguity premia; probability distortion; robust lender; State-contingent debt; ambiguity aversion; debt structure; threshold bond; Bonds; Debt default; Rational expectations; Asset prices
Cover IMF Working Papers
Markups, Quality, and Trade Costs
Natalie Chen
and
Luciana Juvenal
We investigate theoretically and empirically how exporters adjust their markups across destinations depending on bilateral distance, tariffs, and the quality of their exports. Under the assumption that trade costs are both ad valorem and per unit, our model predicts that markups rise with distance and fall with tariffs, but these effects are heterogeneous and are smaller in magnitude for higher quality exports. We find strong support for the predictions of the model using a unique data set of Argentinean firm-level wine exports combined with experts wine ratings as a measure of quality.
Keywords:
WP; trade cost; FOB price; free on board; unit value; export price; wine export; Tariffs; Exports; Public expenditure review; Export prices; Demand elasticity; North America; Distance; export unit values; heterogeneity; markups; quality; trade costs; exports data
Cover IMF Working Papers
How Well Do Economists Forecast Recessions?
Zidong An
,
João Tovar Jalles
, and
Mr. Prakash Loungani
We describe the evolution of forecasts in the run-up to recessions. The GDP forecasts cover 63 countries for the years 1992 to 2014. The main finding is that, while forecasters are generally aware that recession years will be different from other years, they miss the magnitude of the recession by a wide margin until the year is almost over. Forecasts during non-recession years are revised slowly; in recession years, the pace of revision picks up but not sufficiently to avoid large forecast errors. Our second finding is that forecasts of the private sector and the official sector are virtually identical; thus, both are equally good at missing recessions. Strong booms are also missed, providing suggestive evidence for Nordhaus’ (1987) view that behavioral factors—the reluctance to absorb either good or bad news—play a role in the evolution of forecasts.
Keywords:
WP; recession; recession year; bias; efficiency; information rigidity; forecast comparison; forecasted recession; IMF World Economic Outlook; comparing recession; recession episode; Production growth; Rational expectations; Global
Cover IMF Working Papers
Accounting for Output Drops in Latin America
Mr. Ruy Lama
This paper evaluates what type of models can account for the recent episodes of output drops in Latin America. I develop an open economy version of the business cycle accounting methodology (Chari, Kehoe, and McGrattan, 2007) in which output fluctuations are decomposed into four sources: total factor productivity (TFP), a labor wedge, a capital wedge, and a bond wedge. The paper shows that the most promising models are the ones that induce fluctuations of TFP and the labor wedge. On the other hand, models of fnancial frictions that translate into a bond or capital wedge are not successful in explaining output drops in Latin America. The paper also discusses the implications of these results for policy analysis using alternative DSGE models.
Keywords:
WP; open economy; labor wedge; working capital
Cover IMF Working Papers
Bolivia: The Hydrocarbons Boom and the Risk of Dutch Disease
Mr. Eugenio M Cerutti
and
Mr. Mario Mansilla
The hydrocarbons sector has become one of the most dynamic economic activities in the Bolivian economy and the main driver of improved export performance and international reserve accumulation. The central role of the hydrocarbons sector in the economy is attributable to the high levels of investment made in the late 1990s, which permitted much higher production levels, particularly of natural gas. However those positive developments in the hydrocarbons sector have given rise to the possibility of a new case of "Dutch disease." While Bolivia's economy has already seen many benefits from its higher gas exports, especially in terms of lower external vulnerability and improved fiscal stance, the new resources could also limit the development of other economic sectors in terms of output and factor income. This paper explores the transmission channels of Dutch disease, as well as its main symptom, the appreciation of the real exchange rate
Keywords:
WP; government; price; effect; export; YPFB
Cover IMF Working Papers
Long Memory Processes and Chronic Inflation: Detecting Homogeneous Components in a Linear Rational Expectation Model
Mr. Fabio Scacciavillani
This paper is an empirical study of the links between monetary variables and inflation based on Cagan’s equation and its rational expectations solution, when the forcing variable is a fractionally integrated process. As demonstrated by Hamilton and Whiteman, the existence of bubbles and other extraneous influences can be detected only by verifying the difference in the order of integration between the monetary base and the price level series. This paper shows that a fractionally differenced model overcomes Evans’ critique of this test and that chronic inflation is essentially a monetary phenomenon caused by fiscal imbalance.
Keywords:
WP; price level; money supply; present value; consumer price price level; model ARFIMA; ARFIMA process; inflation expectation; stochastic process; Monetary base; Inflation; Hyperinflation; Rational expectations
Cover IMF Working Papers
Credibility Effects of Price Controls in Disinflation Programs
Pierre-Richard Agénor
This paper examines whether price controls may enhance the credibility of a disinflation program, using a framework in which agents behave strategically. The analysis indicates that a partial price freeze is not fully credible, and may result in inflation inertia. The authorities may be able to determine optimally the intensity of price controls so as to minimize the policy loss associated with a discretionary monetary strategy. But the optimal intensity of controls is shown to be significantly different from zero only if the cost of enforcing price ceilings is not too high, or if the weight attached to price distortions in the policymaker’s loss function is small.
Keywords:
WP; demand shock; price-control policy; price expectation; price rule; intensity of price controls; price distortion; Price controls; Inflation; Asset prices; Optimal taxation; Demand elasticity
Cover IMF Staff Papers
IMF Staff papers: Volume 4 No. 3
International Monetary Fund. Research Dept.
This paper outlines the payment agreements and trade agreements. Resident inconvertibility in relation to other inconvertible countries is largely organized on the basis of bilateral trade agreements establishing quotas for imports, exports, and invisibles, and of the Organization for European Economic Cooperation (OEEC) Code of Liberalization. Resident inconvertibility vis-a-vis convertible countries is implemented mainly by unilaterally imposed quantitative import and exchange restrictions that usually are subject to a high degree of administrative discretion. Under bilateral payments agreements, the partner countries undertake to affect their reciprocal current settlements in a way that will minimize the use of convertible exchange and gold. In a typical case, the two central banks open accounts in their respective currencies in each other’s names, but agreements may also provide for one (main) agreement account. Settlements in convertible currencies or gold have to be made only when one partner’s net debtor position in the designated accounts exceeds an amount established in the agreement as the limit up to which each partner is prepared to sell its currency for the other’s currency without demanding cover.
Keywords:
SP; mixed-citation publication-type; payments agreement; predetermined variable; forecasting equation; government purchase; rate of interest; Journal de la Société de Statistique de Paris; Monetary base; Exports; Trade agreements; Currencies; Personal income; Europe; South America; Western Europe; Eastern Europe; Middle East