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Business and Economics > Banks and Banking

You are looking at 1 - 10 of 36 items for :

  • Type: Journal Issue x
  • Macroeconomic Aspects of International Trade and Finance: General x
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Cover IMF Working Papers
On Cross-Border Crypto Flows: Measurement Drivers and Policy Implications
Pamela Cardozo
,
Andrés Fernández
,
Jerzy Jiang
, and
Felipe D Rojas
Cross-border crypto flows (CBCFs) are not systematically measured and are poorly understood. After defining CBCFs and the channels through which they materialize, we review the various approaches to measure them through two case studies. We also quantify the dynamics and drivers of CBCFs through a push/pull factor SVAR model. We find an increasingly large volume of CBCFs, although considerable heterogeneity remains across estimates. Furthermore, CBCFs are more sensitive to push factors than regular capital flows. Our findings call for accurate and comprehensive measurement and monitoring of CBCFs and the need to rethink capital account restrictions in a more digitalized world.
Keywords:
Crypto assets; cross-border flows; capital flows; measurement; push-pull factors; capital account restrictions; Brazil CBCFs; policy implication; capital account restriction; monitoring of CBCFs; drivers of CBCFs; Central bank bills; Foreign direct investment; Global
Cover External Sector Report, 2023
External Sector Report, 2023
External Rebalancing in Turbulent Times
International Monetary Fund. Research Dept.

Abstract

Global current account balances—the overall size of headline current account deficits and surpluses—widened for a third consecutive year in 2022. Main drivers were Russia’s invasion of Ukraine, the uneven recovery from the pandemic, and the rapid tightening of US monetary policy. Concurrently, the US dollar appreciated substantially, and the uphill capital flow reappeared. IMF’s external sector assessments suggest that the overall size of excess current account deficits and surpluses has remained unchanged since 2021, after declining for several years. This highlights the importance of efforts in both excess surplus and deficit economies to promote external rebalancing. The US dollar appreciation under the “global dollar cycle”, which is driven primarily by global financial risks, has negative spillovers on activity and imports that fall on emerging market economies more severely than on advance economies. More flexible exchange rates and more anchored inflation expectations can mitigate negative spillovers to emerging markets.

Keywords:
Current account; Capital flows; Exchange rate; Global dollar cycle; Spillovers; External sector; dollar appreciation; dollar cycle; commodity exporter; CA deficit; CA surplus; CA gap; Real effective exchange rates; Current account balance; Emerging and frontier financial markets; Global; Africa
Cover IMF Working Papers
The Anatomy of Monetary Policy Transmission in an Emerging Market
Kodjovi M. Eklou
Monetary policy transmission in EMs has been found to be weak historically due to under-developed financial markets and heavy central bank intervention in FX markets that undermine the exchange rate channel. Against this background, this paper investigates the transmission of monetary policy, including the role of external factors, in Malaysia and highlight findings that could be relevant for other EMs. We find an important role for the credit and the exchange rate channels. Further, we also find a complementary role for policy tools including Foreign Exchange Intervention (FXI) and liquidity tools such as Statutory Reserve Requirement in shaping the transmission of monetary policy. We then explore the spillover effects of external global factors including global monetary policy and global commodity prices on monetary policy transmission in a small open economy such as Malaysia. The results show that while global commodity prices do not impair monetary policy transmission, global monetary policy tightening could complement domestic efforts to achieve price stability by inducing a global disinflation. Finally, monetary policy transmission is delayed and weakened in high inflationary environment, with the implication that more aggressive and preemptive policy actions may be needed in such cases.
Keywords:
Monetary Policy; Emerging markets; Exchange rate; Credit; Inflation; Economic activity; Global monetary policy; monetary policy transmission; transmission of monetary policy; spillover effect; monetary policy shock; policy tool; Exchange rates; Monetary tightening; Central bank policy rate; Asset prices; Global
Cover IMF Working Papers
Central Banks as Dollar Lenders of Last Resort: Implications for Regulation and Reserve Holdings
Ms. Mitali Das
,
Ms. Gita Gopinath
,
Mr. Taehoon Kim
, and
Jeremy C. Stein
This paper explores how non-U.S. central banks behave when firms in their economies engage in currency mismatch, borrowing more heavily in dollars than justified by their operating exposures. We begin by documenting that, in a panel of 53 countries, central bank holdings of dollar reserves are significantly correlated with the dollar-denominated bank borrowing of their non-financial corporate sectors, controlling for a number of known covariates of reserve accumulation. We then build a model in which the central bank can deal with private-sector mismatch, and the associated risk of a domestic financial crisis, in two ways: (i) by imposing ex ante financial regulations such as bank capital requirements; or (ii) by building a stockpile of dollar reserves that allow it to serve as an ex post dollar lender of last resort. The model highlights a novel externality: individual central banks may tend to over-accumulate dollar reserves, relative to what a global planner would choose. This is because individual central banks do not internalize that their hoarding of reserves exacerbates a global scarcity of dollar-denominated safe assets, which lowers dollar interest rates and encourages firms to increase the currency mismatch of their liabilities. Relative to the decentralized outcome, a global planner may prefer stricter financial regulation (e.g., higher bank capital requirements) and reduced holdings of dollar reserves.
Keywords:
Foreign reserves; central banks; currency mismatch; lender of last resort; financial regulation; dollar reserve; bank borrowing; post dollar lender of last resort; dollar interest rates; reserve holding; International reserves; Banking crises; Currency mismatches; Reserves accumulation; Exchange rates; Global
Cover IMF Working Papers
The Return of Expansionary Austerity: Firms’ Investment Response to Fiscal Adjustments in Emerging Markets
Mr. Nicolas E Magud
and
Samuel Pienknagura
We study the response of corporate investment in Emerging Markets to unexpected fiscal shocks. We find that, although firm-level investment decreases on impact following unexpected public expenditure adjustments (classical Keynesian multiplier effect), it quickly rises above pre-shock levels. The rebound in investment is facilitated by fiscal space, flexible exchange rates, and more predictable fiscal policy. We also show that the composition of fiscal adjustments matters for investment’s response—compared to public investment adjustments, reductions in public consumption lead to larger private investment contractions on impact, but drive private investment to above pre-shock levels. Finally, we exploit firm-level heterogeneity in several dimensions, including to show that corporate investment’s recovery is stronger in firms in the tradable sector and in larger and less indebted firms, and to show that the long-run benefits to economic activity of the fiscal shock appear to outweigh its short-run costs.
Keywords:
Fiscal shocks; adjustment; corporate investment; emerging markets; firms' investment response; rebound in investment; government expenditure Forecast Error; firm level; sales growth; Fiscal consolidation; Corporate investment; Capital adequacy requirements; Middle East and Central Asia; Europe; Africa; Global; Asia and Pacific
Cover IMF Working Papers
Statistical Coverage of Trade Finance - Fintechs and Supply Chain Financing
Cornelia Lotte van Wersch
Trade finance is the backbone of international trade for entities ranging from a small businesses to multi-national corporations. An estimated 80 percent of world trade relies on this form of finance (WTO, 2017). Despite its systemic importance and rapid growth, data availability is only partial. During the 2008 financial crisis, policy makers, notably the G20 recognized that the absence of comprehensive trade finance data posed a significant hurdle for policy-makers to make informed, timely decisions. This paper proposes a stand-alone dataset to reflect the scope, dynamic and recent innovations of the trade finance market to support macroeconomic policy analysis.
Keywords:
WP; firm; provider; trade; financing
Cover IMF Working Papers
Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries
Mr. Kangni R Kpodar
,
Mr. Maelan Le Goff
, and
Mr. Raju J Singh
This paper contributes to the literature by looking at the possible relevance of the structure of the financial system—whether financial intermediation is performed through banks or markets—for macroeconomic volatility, against the backdrop of increased policy attention on strengthening growth resilience. With low-income countries (LICs) being the most vulnerable to large and frequent terms of trade shocks, the paper focuses on a sample of 38 LICs over the period 1978-2012 and finds that banking sector development acts as a shock-absorber in poor countries, dampening the transmission of terms of trade shocks to growth volatility. Expanding the sample to 121 developing countries confirms this result, although this role of shock-absorber fades away as economies grow richer. Stock market development, by contrast, appears neither to be a shock-absorber nor a shock-amplifier for most economies. These findings are consistent across a range of econometric estimators, including fixed effect, system GMM and local projection estimates.
Keywords:
WP; terms of trade shock; terms of trade volatility; Banks; stock markets; terms of trade shocks; growth volatility; terms of trade fluctuation; terms of trade stock; standard deviation; shocks to growth volatility; Terms of trade; Commercial banks; Financial sector development; Credit; Global
Cover IMF Working Papers
Accounting for Macrofinancial Fluctuations and Turbulence
Mr. Francis Vitek
This paper investigates the sources of macrofinancial fluctuations and turbulence within the framework of an approximate linear dynamic stochastic general equilibrium model of the world economy, augmented with structural shocks exhibiting potentially asymmetric generalized autoregressive conditional heteroskedasticity. Very strong evidence of asymmetric autoregressive conditional heteroskedasticity is found, providing a basis for jointly decomposing the levels and volatilities of key macrofinancial variables into time varying contributions from sets of shocks. Risk premia shocks are estimated to contribute disproportionately to cyclical output fluctuations and turbulence during swings in financial conditions, across the fifteen largest national economies in the world.
Keywords:
WP; marginal revenue; shadow price; utility function; Macrofinancial analysis; World economy; Dynamic stochastic general equilibrium model; Autoregressive conditional heteroskedasticity; physical capital; transfer payment; constant returns to scale; price inflation; demand shock; stochastic process; production function; maximization problem; contagion economy; markup shock; good firm; Return on investment; Mortgages; Consumption; Loans; Imports; Global
Cover IMF Working Papers
The Global Macrofinancial Model
Mr. Francis Vitek
This paper documents the theoretical structure and empirical properties of the latest version of the Global Macrofinancial Model (GFM). This dynamic stochastic general equilibrium model of the world economy, disaggregated into forty national economies, was developed to support multilaterally consistent macrofinancial policy, risk and spillover analysis. It features a range of nominal and real rigidities, extensive macrofinancial linkages, and diverse spillover transmission channels. These macrofinancial linkages encompass bank and capital market based financial intermediation, with financial accelerator mechanisms linked to the values of the housing and physical capital stocks. A variety of monetary policy analysis, fiscal policy analysis, macroprudential policy analysis, spillover analysis, and forecasting applications of the GFM are demonstrated. These include quantifying the monetary, fiscal and macroprudential policy transmission mechanisms, accounting for business cycle fluctuations, and generating relatively accurate forecasts of inflation and output growth.
Keywords:
WP; shadow price; utility function; Monetary policy; Fiscal policy; Macroprudential policy; Spillovers; Forecasting; Dynamic stochastic general equilibrium model; World economy; transfer payment; marginal revenue; physical capital; demand shock; constant returns to scale; money stock; price inflation; markup shock; good firm; yield to maturity; production function; Mortgages; Return on investment; Consumption; Loans; Imports; Global; Africa
Cover IMF Working Papers
Policy, Risk and Spillover Analysis in the World Economy: A Panel Dynamic Stochastic General Equilibrium Approach
Mr. Francis Vitek
This paper develops a structural macroeconometric model of the world economy, disaggregated into forty national economies, to facilitate multilaterally consistent macrofinancial policy, risk and spillover analysis. This panel dynamic stochastic general equilibrium model features a range of nominal and real rigidities, extensive macrofinancial linkages, and diverse spillover transmission channels. These macrofinancial linkages encompass bank and capital market based financial intermediation, with financial accelerator mechanisms linked to the values of the housing and physical capital stocks. A variety of monetary policy analysis, fiscal policy analysis, macroprudential policy analysis, spillover analysis, and forecasting applications of the estimated model are demonstrated. These include quantifying the monetary, fiscal and macroprudential transmission mechanisms, accounting for business cycle fluctuations, and generating relatively accurate forecasts of inflation and output growth.
Keywords:
WP; marginal revenue; Monetary policy analysis; Fiscal policy analysis; Macroprudential policy analysis; Spillover analysis; Forecasting; World economy; Bayesian econometrics; demand shock; price inflation; physical capital; utility function; constant returns to scale; output price inflation; transfer payment; markup shock; money stock; default rate; consumption price inflation; Mortgages; Consumption; Return on investment; Terms of trade; Loans; Global; Africa