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Western Hemisphere > Argentina

You are looking at 1 - 10 of 48 items for :

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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
Cross-Border Payments Integration in Latin America and the Caribbean
Dimitris Drakopoulos
,
Yibin Mu
,
Dmitry Vasilyev
, and
Mauricio Villafuerte
Cross-border payment inefficiencies are a significant barrier to trade both within Latin America and the Caribbean (LAC) and between LAC and other regions. This paper provides a comprehensive review of historical efforts undertaken by various countries within the LAC region to address these challenges. We also explore the potential of recent financial innovations, such as digital currencies and blockchain technology, to enhance cross-border payments. While new technologies do not substitute for prudent and credible macroeconomic policies, leveraging these technologies can help LAC countries reduce transaction costs and times, thus enhancing economic efficiency and fostering deeper regional and global trade relationships.
Keywords:
Cross-Border Payments; Financial Innovation; International Trade; Economic Integration.; LAC payment infrastructure; payment arrangement; cross-border payment inefficiency; integration in Latin America and the Caribbean; cross-border payments integration; Payment systems; Currencies; Financial inclusion; Anti-money laundering and combating the financing of terrorism (AML/CFT); Caribbean; Central America; South America; Global; East Asia
Cover IMF Staff Country Reports
Argentina: Fifth and Sixth Reviews Under the Extended Arrangement Under the Extended Fund Facility, Request for Rephasing of Access, Waivers of Nonobservance of Performance Criteria, Modification of Performance Criteria and Financing Assurances Review-Press Release; Staff Report; and Statement by the Executive Director for Argentina
International Monetary Fund. Western Hemisphere Dept.
This paper presents Argentina’s Fifth and Sixth Reviews under the Extended Arrangement under the Extended Fund Facility, Request for Rephasing of Access, Waiver of Nonobservance of Performance Criteria, Modification of Performance Criteria, and Financing Assurances Review. Since completion of the fourth review, key program targets were missed reflecting the historic drought along with policy slippages. Against the backdrop of high inflation and rising balance of payments pressures, agreement was reached on a new policy package centered on rebuilding reserves and enhancing fiscal order. Continued strong policy implementation will be critical in the period ahead to safeguard stability and strengthen medium-term sustainability. Risks remain elevated, reflecting an increasingly fragile economic and social situation, rising program implementation difficulties, and election-related uncertainties. In addition, risks could intensify should the projected improvements in climate conditions not materialize, or external conditions worsen. Moreover, even with steadfast implementation, elements of the new policy package may still need to be recalibrated to secure the intended results.
Keywords:
recovery objective; electricity price; staff appraisal; waivers of nonobservance of performance criteria; production cost estimate; policy package; Exchange restrictions; Multiple currency practices; Currency markets; Exchange rates; Global; Caribbean
Cover Global Financial Stability Notes
Multi-Sector Bond Funds in Emerging Markets—Easy Come, Easy Go
Fabio Cortes
and
Luca Sanfilippo
Unconstrained multi-sector bond funds (MSBFs) can be a source of spillovers to emerging markets and potentially exert a sizable impact on cross-border flows. MSBFs have grown their investment in emerging markets in recent years and are highly concentrated—both in their positions and their decision-making. They typically also exhibit opportunistic behavior much more so than other investment funds. Theoretically, their size, multisector mandate, and unconstrained nature allows MSBFs to be a source of financial stability in periods of wide-spread market turmoil while others sell at fire-sale prices. However, this note, building on the analysis of Cortes and Sanfilippo (2020) and incorporating data around the COVID-19 crisis, finds that MSBFs could have contributed to increase market stress in selected emerging markets. When faced with large investor redemptions during the crisis, our sample of MSBFs chose to rebalance their portfolios in a concentrated manner, raising a large proportion of cash in a few specific local currency bond markets. This may have contributed to exacerbating the relative underperformance of these local currency bond markets to broader emerging market indices.
Keywords:
multi-sector bond funds, emerging markets, cross-border flows, COVID-19; unconstrained multi-sector bond funds; emerging market market index; sample of MSBFs; spillovers to emerging markets; portfolio dynamics; Emerging and frontier financial markets; Currencies; Bonds; Income; Currency markets; Global
Cover IMF Working Papers
Public Debt Dynamics and Intra-Year Exchange Rate Fluctuations
Mr. Santiago Acosta Ormaechea
The public sector, in carrying out its operations, often incurs foreign currency denominated liabilities and, as such, is exposed to exchange rate fluctuations that could affect the value of public debt to GDP ratios over time. This paper shows that converting foreign currency denominated flows and stocks into local currency using the average and the end-of-period exchange rates, respectively, as envisaged in public finance manuals, gives rise to an identifiable stock-flow adjustment term—due to intra-year exchange rate fluctuations—that affects public debt accumulation. Importantly, the inclusion of this often-ignored stock-flow adjustment term is critical to accurately project public debt levels and any related indicator that could in turn inform about the risk of debt distress. Using a novel dataset covering 82 countries during 2008–19, the paper shows that this stock flow adjustment term is sizable in countries experiencing large exchange rate depreciations, namely above the 99th percentile of the full sample, reaching 1.2 percent of GDP. Interestingly, the measurement of policy-related concepts such as interest rate-growth differentials and debt stabilizing primary balances are also affected by intra-year exchange rate fluctuations, and in non-negligible ways.
Keywords:
Public debt dynamics; intra-year exchange rate fluctuations; interest rate-growth differential; debt stabilizing primary balance.; WP; year exchange rate fluctuation; debt projection; accumulation equation; end-of-period exchange rates; heightened exchange rate volatility; nominal exchange rate depreciation; debt stabilizing primary balance; Exchange rates; Fiscal stance; Currencies; Asset valuation; Global
Cover IMF Working Papers
Pricing Sovereign Debt in Resource-Rich Economies
Thomas McGregor
How do oil price movements affect sovereign spreads in an oil-dependent economy? I develop a stochastic general equilibrium model of an economy exposed to co-moving oil price and output processes, with endogenous sovereign default risk. The model explains a large proportion of business cycle fluctuations in interest-rate spreads in oil-exporting emerging market economies, particularly the countercyclicallity of interest rate spreads and oil prices. Higher risk-aversion, more impatient governments, larger oil shares and a stronger correlation between domestic output and oil price shocks all lead to stronger co-movements between risk premiums and the oil price.
Keywords:
WP; oil price; open economy; Risk premium; natural resources; sovereign debt; and default; development; cost parameter; policy makers; oil revenue cost; standard deviation terms; equilibrium bond price; oil price volatility; oil revenue cost of default; oil price state; steady-state price; steady state bond price; output volatility; Oil prices; Emerging and frontier financial markets; Asset prices; Consumption; Oil; gas and mining taxes; Global; Sub-Saharan Africa; Asia and Pacific
Cover Policy Papers
Review Of The Fund’s Policy On Multiple Currency Practices: Initial Considerations
International Monetary Fund. Legal Dept.
,
International Monetary Fund. Monetary and Capital Markets Department
,
International Monetary Fund. Strategy, Policy, &amp
,
Review Department
, and
International Monetary Fund. Research Dept.
This paper reviews the Fund’s policy on multiple currency practices (MCPs). There remain strong economic and legal reasons to retain a policy on MCPs. The over-arching aim of the review is to make the policy and its application more effective. Based on this review, the paper proposes initial considerations for reforming features of the policy that have created challenges. • Clarifying the concept of “official action” to focus on measures that segment FX markets. • Eliminating potentiality. • Updating the threshold for permissible FX spreads. • Adjusting approval policies. • Reviewing links with capital transactions. • Considering merits of a remedial framework.
Keywords:
PP; article; The Fund; MCP Policy; market; transaction; exchange transaction; exchange restriction; fund member; transaction vis-à-vis; Multiple currency practices; Exchange rates; Exchange restrictions; Currencies; Global; IMF's transparency policy; Middle East; Central Africa; East Africa
Cover IMF Working Papers
Media Sentiment and International Asset Prices
Samuel P. Fraiberger
,
Dongyeol Lee
,
Mr. Damien Puy
, and
Mr. Romain Ranciere
We assess the impact of media sentiment on international equity prices using more than 4.5 million Reuters articles published across the globe between 1991 and 2015. News sentiment robustly predicts daily returns in both advanced and emerging markets, even after controlling for known determinants of stock prices. But not all news-sentiment is alike. A local (country-specific) increase in news optimism (pessimism) predicts a small and transitory increase (decrease) in local returns. By contrast, changes in global news sentiment have a larger impact on equity returns around the world, which does not reverse in the short run. We also find evidence that news sentiment affects mainly foreign – rather than local – investors: although local news optimism attracts international equity flows for a few days, global news optimism generates a permanent foreign equity inflow. Our results confirm the value of media content in capturing investor sentiment.
Keywords:
WP; equity fund; Asset Pricing; Capital Flows; Behavioral Finance; Investor Sentiment; News Media; Natural Language Processing; sentiment shock; sentiment index; state dependence; D. News sentiment; multi-country news; equity return; equity price; Stocks; Asset prices; Stock markets; Emerging and frontier financial markets; Global
Cover IMF Working Papers
A Primer on Managing Sovereign Debt-Portfolio Risks
Thordur Jonasson
and
Mr. Michael G. Papaioannou
This paper provides an overview of sovereign debt portfolio risks and discusses various liability management operations (LMOs) and instruments used by public debt managers to mitigate these risks. Debt management strategies analyzed in the context of helping reach debt portfolio targets and attain desired portfolio structures. Also, the paper outlines how LMOs could be integrated into a debt management strategy and serve as policy tools to reduce potential debt portfolio vulnerabilities. Further, the paper presents operational issues faced by debt managers, including the need to develop a risk management framework, interactions of debt management with fiscal policy, monetary policy, and financial stability, as well as efficient government bond markets.
Keywords:
WP; interest rate; exchange rate risk; debt manager; Public Debt Management; Financial Risk; Foreign Exchange Hedging; Government Securities Markets; foreign currency; short-term debt; debt portfolio; borrowing cost; portfolio risk; bond issue; Government debt management; Debt management; Bonds; Credit risk; Global
Cover IMF Working Papers
Are Foreign Banks a 'Safe Haven'? Evidence from Past Banking Crises
Gustavo Adler
and
Mr. Eugenio M Cerutti
The presence of foreign banks in emerging markets has increased markedly over the last two decades, raising questions about their potentially stabilizing or destabilizing role during times of financial distress. Most studies on this subject have focused on banks’ asset side (i.e., their lending behavior). This paper focuses on their liability side, studying the behavior of depositors vis-à-vis foreign banks. We rely on data from the banking crises in Argentina and Uruguay over the period 1994-2002 to conduct the study. The paper focuses on three questions; (i) are foreign banks perceived as a safe haven during bank runs?; (ii) does their legal structure (branch versus subsidiary) matter?; (iii) do perceptions depend on the nature of the crisis? Contrary to the commonly held view that foreign banks play a stabilizing role during domestic banking crises, we do not find robust evidence in this regard. Only in one (large) bank run episode, out of five studied, there is evidence of safe haven perceptions towards foreign branches.
Keywords:
WP; deposit; depositor; bank run; branch; banking; crisis; foreign banks; deposit loss; bank run episode; non-resident deposit; depositor base; deposit run; deposit withdrawal; Commercial banks; Exchange rate risk; State-owned banks; Bank deposits