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Business and Economics > Banks and Banking

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Cover IMF Working Papers
Deciphering Delphic Guidance: The Bank of England and Brexit
Jagjit Chadha
,
Corrado Macchiarelli
,
Satyam Goel
,
Arno Hantzsche
, and
Sathya Mellina
In response to the 2016 referendum on EU Membership and the ensuing uncertainty as to the eventual consequences of Brexit, the Bank of England (BoE) adopted various methods of influencing market rates, including conventional, unconventional monetary policy measures and communications on forward guidance. To investigate the effectiveness of BoE’s communication, we first decompose long-dated yields into a risk neutral and term premium component. Text-based analysis of Monetary Policy Committee minutes is then used to measure the stance of policy, attitudes to QE and Brexit. We show that the Bank’s communication strategy acted to complement the stance of monetary policy, which had responded by lowering Bank rate and expanding QE, and acted to lower the term premium that might otherwise have risen in response to Brexit uncertainty.
Keywords:
UK referendum; Brexit; risk premium; monetary policy; central bank communication; text mining; BoE action; BoE strategy; Bank of England MPC communication; BoE's monetary policy; Brexit referendum; Yield curve; Unconventional monetary policies; Central bank policy rate; Sovereign bonds; Global
Cover Handbook on Measuring Digital Trade
Handbook on Measuring Digital Trade
Second edition
World Trade Organization
,
Organization for Economic Co-operation and Development
,
International Monetary Fund
, and
United Nations

Abstract

Digital technologies have made it increasingly feasible for buyers and sellers to place and receive orders on a global scale. They also enable the instantaneous remote delivery of services directly into businesses and homes, including internationally. The Handbook on Measuring Digital Trade sets out a conceptual and measurement framework for digital trade that aligns with the broader standards for macroeconomic statistics. It aims to help statistical compilers to address policymakers’ needs for statistical evidence on digital trade. It includes extensive compilation guidance, drawing upon substantive inputs and case studies from both developed and developing economies and covering a variety of survey and non-survey sources. This second edition of the Handbook builds upon the concepts set out in the first edition, published in 2019. Focusing on cross-border digitally ordered goods and services, on digitally delivered services, and on the role played by digital intermediation platforms the Handbook provides a framework and template for the compilation of internationally comparable statistics on digital trade.

Keywords:
Digital trade; digitalization; international trade; digital intermediation platforms; statistics; measurement; trade transaction; delivered trade; trade statistics; ICT-enabled trade; ordered trade; Trade in services; Imports; Exports; Trade in goods; Service exports; Global; Asia and Pacific
Cover IMF Staff Country Reports
Ireland: Financial Sector Assessment Program-Technical Note on Banking Supervision
International Monetary Fund. Monetary and Capital Markets Department
This Technical Note discusses Ireland’s report on Banking Supervision. Supervision of less significant institutions is largely effective in Ireland. The Central Bank’s supervisory approach to LSIs is intrusive and well-developed supervisory tools are appropriately applied. The prudential regulation of banks has improved greatly since the 2016 Financial System Assessment Program. The EU framework has largely managed to embrace international regulatory reforms, following up on the causes of the Global Financial Crisis. The banking supervision has been tested by severe headwinds, with the final outcomes still in play. Supervision went through a period of major challenges for the economy and the financial system, namely from Brexit and the pandemic. The continued effectiveness of banking supervision in Ireland will depend on its success in solving several complicated problems. This note provides the main recommendations to enhance the supervision of the banking activities conducted in Ireland with a direct bearing on its financial stability.
Keywords:
supervision of the banking activity; broker-dealer supervision division; EU banking systems; business model; Central Bank approach; COVID-19; Credit risk; Bank supervision; Global
Cover IMF Working Papers
U.S. Monetary Policy Spillovers to GCC Countries: Do Oil Prices Matter?
Mr. Olumuyiwa S Adedeji
,
Mr. Erik Roos
,
Mr. Sohaib Shahid
, and
Ling Zhu
This paper provides empirical evidence that the size of the spillovers from U.S. monetary policy to non-oil GDP growth in the GCC countries depends on the level of oil prices. The potential channels through which oil prices could affect the effectiveness of monetary policy are discussed. We find that the level of oil prices tends to dampen or amplify the growth impact of changes in U.S. monetary policy on the non-oil economies in the GCC.
Keywords:
WP; oil price; price; federal funds rate; GCC.; Growth; Gulf Corporation Council; Spillovers; U.S. Monetary Policy; liquidity fluctuation; monetary policy spillover; GCC country; interaction term; Oil prices; Real interest rates; Central bank policy rate; Liquidity; Global
Cover Staff Discussion Notes
A Capital Market Union for Europe
Mr. Ashok Vir Bhatia
,
Ms. Srobona Mitra
,
Mr. Shekhar Aiyar
,
Luiza Antoun de Almeida
,
Cristina Cuervo
,
Mr. Andre O Santos
, and
Tryggvi Gudmundsson
This note weighs the merits of a capital market union (CMU) for Europe, identifies major obstacles in its path, and recommends a set of carefully targeted policy actions. European capital markets are relatively small, resulting in strong bank-dependence, and are split sharply along national lines. Results include an uneven playing field in terms of corporate funding costs, the rationing out of collateral-constrained firms, and limited shock absorption. The benefits of integration center on expanding financial choice, ultimately to support capital formation and resilience. Capital market development and integration would support a healthy diversity in European finance. Proceeding methodically, the note identifies three key barriers to greater capital market integration in Europe: transparency, regulatory quality, and insolvency practices. Based on these findings, the note urges three policy priorities, focused on the three barriers. There is no roadblock—such steps should prove feasible without a new grand bargain.
Keywords:
SDN; EU counterparty; EU capital market practitioner; euro area; EU capital market rule; EU treaty; EU venture capital funds; Capital market union; financial integration; bilateral portfolio flows; monetary union; investment firm; funding cost; growth performance; private equity; equity valuation; capital market market fragmentation; nonfinancial firm; company information; Capital markets; Securities; Stocks; Mutual funds; Solvency; Europe; Global
Cover IMF Working Papers
Saudi’s Growth and Financial Spillovers to Other GCC Countries: An Empirical Analysis
Mr. Olumuyiwa S Adedeji
,
Mr. Sohaib Shahid
, and
Ling Zhu
This paper examines real and financial linkages between Saudi Arabia and other GCC countries. Growth spillovers from Saudi Arabia to Bahrain are found to be sizeable and statistically significant, but those to other GCC countries are not found to be significant. Equity market movements in Saudi Arabia are found to have significant implications for other GCC countries, while there is no evidence of co-movements in bonds markets. These findings suggest some degree of interdependence among GCC countries.
Keywords:
WP; GCC country; GCC sovereign bond market spillover; Growth; Gulf Corporation Council; Spillovers; growth shock; equity market movement; GCC bond spread; GCC equity; Stock markets; Yield curve; Sovereign bonds; Oil prices; Global
Cover IMF Staff Country Reports
United Kingdom: 2018 Article IV Consultation-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for United Kingdom
International Monetary Fund. European Dept.
The United Kingdom is set to exit the European Union in March 2019. It is now in the process of negotiating its withdrawal from the EU. Once an agreement is reached, there will be an implementation period through the end of 2020. Complex issues still remain to be resolved, including the future status of the land border with Ireland. Growth over the past year has been moderate. The post-referendum depreciation caused an increase in inflation, depressing private consumption. Business investment growth has been constrained by protracted uncertainty about the future trade regime and potential increases in trading costs. Nonetheless, slack in the economy is limited as weaker demand is matched by slower supply growth. Growth is expected to continue at a moderate pace, conditional on a smooth Brexit transition and some recovery in labor productivity. A key downside risk is an exit
Keywords:
ISCR; CR; derivatives clearing service; IMF staff calculation; productivity challenge; Brexit negotiations; IMF staff estimate; EU exit; Brexit preparation work; Productivity; Income; Inflation; Global; IMF's transparency policy; eba stress test; Current account deficits
Cover Departmental Papers
Opening Up in the Caucasus and Central Asia: Policy Frameworks to Support Regional and Global Integration
Mr. Peter J Kunzel
,
Phil De Imus
,
Mr. Edward R Gemayel
,
Risto Herrala
,
Mr. Alexei P Kireyev
, and
Farid Talishli
The Caucasus and Central Asia (CCA) countries are at an important juncture in their economic transition. Following significant economic progress during the 2000s, recent external shocks have revealed the underlying vulnerabilities of the current growth model. Lower commodity prices, weaker remittances, and slower growth in key trading partners reduced CCA growth, weakened external and fiscal balances, and raised public debt. the financial sector was also hit hard by large foreign exchange losses. while commodity prices have recovered somewhat since late 2014, to boost its economic potential, the region needs to find new growth drivers, diversify away from natural resources, remittances, and public spending, and generate much stronger private sector-led activity.
Keywords:
DPPP; DP; CCA country; capital account; CCA region; external shock; labor market; monetary policy; oil exporter; CCA commodity exporter; CCA oil importer; CCA banking sectors; CCA economy; Inflation targeting; Global; Central Asia and the Caucasus; Middle East; Central Asia
Cover IMF Working Papers
Are the Asia and Pacific Small States Different from Other Small States?
Ms. Patrizia Tumbarello
,
Ezequiel Cabezon
, and
Mr. Yiqun Wu
The small states of the Asia and Pacific region face unique challenges in raising their growth potential and living standards relative to other small states due to their small populations, geographical isolation and dispersion, narrow export and production bases, exposure to shocks, and heavy reliance on aid. Higher fixed government costs, low access to credit by the private sector, and capacity constraints are also key challenges. The econometric analysis confirms that the Pacific Island Countries (PICs) have underperformed relative to their peers over the last 20 years. Although these countries often face more limited policy tools, policies do matter and can further help build resilience and raise potential growth, as evidenced in the recent business cycle. The Asia and Pacific small states should continue rebuilding buffers and improve the composition of public spending in order to foster inclusive growth. Regional solutions should also continue to be pursued.
Keywords:
WP; IMF staff calculation; micro state; country authorities; real GDP; Asia and Pacific; small states; micro states; Pacific islands; growth; volatility; Asia-Pacific small state government; ECCU country; effective purchasing power; Pacific region; small states-Asia; country information; Income; Terms of trade; Government consumption; Climate change
Cover IMF Working Papers
Global and Regional Spillovers to Pacific Island Countries
Mr. Yiqun Wu
,
Ms. Patrizia Tumbarello
, and
Niamh Sheridan
Regional integration of Pacific Island countries (PICs) with Australia, New Zealand, and emerging Asia has increased over the last two decades. PICs have become more exposed to the region’s business cycles, and spillovers from regional economies are more important for PICs than from advanced economies outside the region. While strong linkages with Asia would help in the event of a global downturn, PICs remain particularly vulnerable to global commodity price shocks. In this paper, we use a Vector Error Correction Model (VECM) for each PIC to gauge the impact of global and regional growth spillovers. The analysis reveals that the impact on PICs’ growth from an adverse oil shock would be substantial, and in some cases even larger than from a negative global demand shock. We also assess the spillovers to the financial sector from the deterioration of the global outlook. PICs should continue to rebuild policy buffers and implement growth-oriented structural reforms to ensure sustained and inclusive growth.
Keywords:
WP; Pacific island country; IMF staff calculation; commodity; commodity importer; Pacific islands; spillover; downside scenarios; commodity prices; commodity exporter; commodity price; business cycle; PIC importer; Extra-budgetary funds; Spillovers; Remittances; Commercial banks; Global; Australia and New Zealand