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Business and Economics > Banks and Banking

You are looking at 1 - 10 of 96 items for :

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Cover IMF Working Papers
FINEX - A New Workhorse Model for Macroeconomic Forecasting and Policy Analysis
Mr. Andrew Berg
,
Yaroslav Hul
,
Mr. Philippe D Karam
,
Adam Remo
, and
Diego Rodriguez Guzman
This paper presents a semi-structural macroeconomic model aimed at facilitating policy analysis and forecasting, primarily in countries with imperfect capital mobility and hybrid monetary policy regimes. Compared to earlier gap-trend projection models, the Forecasting Model of Internal and External Balance (FINEX) contains three main innovations: it accentuates external and internal balances; explicitly incorporates fiscal policy; and partly endogenizes the main trends. FINEX thus covers a broad set of policy instruments, including foreign exchange interventions (FXI), capital flow management measures (CFM), as well as common fiscal policy instruments. The model incorporates insights from the recent DSGE literature, while maintaining a more accessible gap-trend structure that lends itself to practical policy applications. While the paper refrains from drawing broad policy lessons, it emphasizes the model's ability to interpret recent data in terms of structural shocks and policy responses, thereby aiding policymakers in constructing coherent economic narratives and considering alternative scenarios.
Keywords:
Semi-Structural Modeling; Monetary Policy; Fiscal Policy; Foreign Exchange Intervention; Forecasting; Imperfect Capital Mobility; policy analysis; fiscal policy instrument; gap-trend projection model; IMF working papers; foreign currency; policy lesson; Interest rate parity; Exchange rates; Capital account; Global
Cover IMF Staff Country Reports
Seychelles: Technical Assistance Report-Stress Testing the Central Bank Balance Sheet
International Monetary Fund. Monetary and Capital Markets Department
This Technical Assistance Report on the Seychelles discusses Stress Testing the Central Bank Balance Sheet (CBS). The CBS balance sheet is weak, due to the cost of carrying foreign exchange (FX) reserves. The conditions of CBS lending in Seychellois rupees (SCR) also contributed to weakening the CBS balance sheet. Multiyear budget planning would support the CBS’s balance sheet strength. A capital injection is necessary to strengthen the CBS’s balance sheet. The income stream of the CBS should be strengthened, through an increase in the authorized capital, to cover operational costs and the carry cost of the FX reserve. In addition, the profit distribution rule should be revised to allow the CBS to retain all distributable earnings if statutory capital is below the target level of 10 percent of monetary liabilities. A communications strategy should be prepared to bolster public support for the recapitalization plan. Communications should explain the causes of the losses, reiterate the commitment to the policy objective regardless of financial considerations, and present the solution devised to address the financial weakness.
Keywords:
Central bank stress-testing; Recapitalization; Financial reporting in IFRS 9; Operating expenses international comparison.; CBS balance sheet; balance sheet model; B. forecasting balance sheet item; MCM Department; IMF executive director; Financial statements; Central bank policy rate; Inflation; Exchange rate risk; Income
Cover IMF Staff Country Reports
West Bank and Gaza: Report to the Ad Hoc Liaison Committee
International Monetary Fund. Middle East and Central Asia Dept.
This paper focuses on West Bank and Gaza’s report to the ad hoc liaison committee. The outlook for the Palestinian economy remains dire, with risks tilted to the downside. Achieving higher growth and overcoming the fiscal crisis are intertwined objectives, requiring coordinated efforts from the Palestinian Authority, Israel, and the international donor community. This report elaborates on the transformative fiscal and structural reforms needed to improve the Palestinian living standards over the medium term. The report recommends consolidating the strong fiscal revenue performance and pursues ambitious expenditure reforms in a gradual and socially balanced way, first focused on the wage bill, health system, and net lending. It is also imperative to continue to try to engage the Government of Israel to achieve tangible outcomes to alleviate Israeli-imposed movement, access, and investment restrictions and to resolve the outstanding fiscal files, including Area C taxation. In addition, adopt reforms to further enhance the business climate, advance the digital transformation of the economy, and carry out critical energy infrastructure projects.
Keywords:
Expenditure; Financial sector; International organization; Pension spending; Public debt; Revenue administration; Structural reforms; expenditure reform; research assistance; Palestinian economic recovery; taxation framework; wage bill; Arrears; Global
Cover FinTech Notes
How Should Central Banks Explore Central Bank Digital Currency?
Gabriel Soderberg
,
Mr. John Kiff
,
Hervé Tourpe
,
Ms. Marianne Bechara
,
Stephanie Forte
,
Kathleen Kao
,
Ashley Lannquist
,
Tao Sun
, and
Akihiro Yoshinaga
Digitalization of the economy provides both challenges and opportunities. Central banks should ensure that they have the capacity to continue to meet their policy objectives in the digital age. It is in this context that central bank digital currency (CBDC) should be evaluated. If designed appropriately, CBDCs could allow central banks to modernize payment systems and future-proof central bank money as the pace and shape of digitalization continues to evolve. However, the decision to proceed with CBDC exploration and an eventual launch would need to be jurisdiction specific, depending on the degree of digitalization of the economy, the legal and regulatory frameworks, and the central bank’s internal capacity. This paper proposes a dynamic decision-making framework under which the central bank can make decisions under uncertainty. A phased and iterative approach could allow central banks to adjust the pace, scale, and scope of their CBDC projects as the domestic and international environment changes.
Keywords:
Central bank digital currency; project management; digitalization; payments; IMF Fintech Note 2023/008; IMF Library; Fintech note; decision-making framework; publication order; CBDC project; Central Bank digital currencies; Payment systems; Commercial banks; Currencies; Sub-Saharan Africa; Global
Cover IMF Working Papers
Central Bank Digital Currency and Financial Inclusion
Brandon Tan
In this paper, we develop a model incorporating the impact of financial inclusion to study the implications of introducing a retail central bank digital currency (CBDC). CBDCs in developing countries (unlike in advanced countries) have the potential to bank large unbanked populations and boost financial inclusion which can increase overall lending and reduce bank disintermediation risks. Our model captures two key channels. First, CBDC issuance can increase bank deposits from the previously unbanked by incentivizing the opening of bank accounts for access to CBDC wallets (offsetting potential flows from deposits to CBDCs among those already banked). Second, data from CBDC usage allows for the building of credit to reduce credit-risk information asymmetry in lending. We find that CBDC can increase overall lending if (1) bank deposit liquidity risk is low, (2) the size and relative wealth of the previously unbanked population is large, and (3) CBDC is valuable to households as a means of payment or for credit-building. CBDC can still be optimal for household welfare even when overall lending decreases as households benefit from the value of using CBDC for payments, CBDC provides an alternative "safe" savings vehicle, and CBDC generates greater surplus in lending by reducing credit-risk information asymmetry. Most countries are considering a "two-tier" CBDC model, where central banks issue CBDC to commercial banks which in turn distribute them to consumers. If non-bank payment system providers can distribute CBDC, fewer funds will flow into deposit accounts from the unbanked because a bank account is no longer needed to access CBDC. If CBDC data is shareable with banks, those without bank accounts can still build credit and access lower interest rate loans. This design is optimal for welfare if the gains from greater access to CBDC outweigh the contraction in lending.
Keywords:
CBDC; Financial Inclusion; Digital currency; CBDC issuance; credit-risk information asymmetry; CBDC data; CBDC model; CBDC wallet; Central Bank digital currencies; Commercial banks; Deposit rates; Loans; Global
Cover IMF Staff Country Reports
West Bank and Gaza: Selected Issues
International Monetary Fund. Middle East and Central Asia Dept.
For more than a decade, commercial banks in West Bank and Gaza (WBG) have struggled to manage buildups of excess physical Israeli shekel cash. Banks elsewhere typically manage the amount and currency composition of physical cash they hold in their vaults through transactions with other commercial banks and central banks. However, citing money laundering and terrorism financing (ML/TF) concerns, the two Israeli banks that currently offer correspondent services to banks operating in WBG no longer offer them cash services. The Bank of Israel (BoI) has imposed limits on the amount of shekel coins and notes it accepts back from Palestinian banks. This has long hindered liquidity management and been a drag on the profitability of Palestinian banks, but periodic large increases in excess cash in recent years have created additional risks and raised the costs to the Palestinian banking system.
Keywords:
cash shipment; shekel cash; excess cash; cash in West Bank; Palestinian banking system; Commercial banks; Correspondent banking; Anti-money laundering and combating the financing of terrorism (AML/CFT); Financial inclusion; Middle East; North Africa; Global
Cover IMF Working Papers
Legal Aspects of Central Bank Digital Currency: Central Bank and Monetary Law Considerations
Wouter Bossu
,
Mr. Masaru Itatani
, and
Arthur D. P. Rossi
This paper analyzes the legal foundations of central bank digital currency (CBDC) under central bank and monetary law. Absent strong legal foundations, the issuance of CBDC poses legal, financial and reputational risks for central banks. While the appropriate design of the legal framework will up to a degree depend on the design features of the CBDC, some general conclusions can be made. First, most central bank laws do not currently authorize the issuance of CBDC to the general public. Second, from a monetary law perspective, it is not evident that “currency” status can be attributed to CBDC. While the central bank law issue can be solved through rather straithforward law reform, the monetary law issue poses fundmental legal policy challenges.
Keywords:
Central Bank Digital Currency; CBDC; Blockchain; Cryptocurrency; Crypto assets; WP; central bank law; monetary unit; book money; digital currency; law reform; token-based CBDC; Central Bank digital currencies; Currencies; Central bank legislation; Legal support in revenue administration; Payment systems
Cover IMF Working Papers
The Monetary Policy Credibility Channel and the Amplification Effects in a Semi-structural Model
Thitipat Chansriniyom
,
Mr. Natan P. Epstein
, and
Valeriu Nalban
The paper extends a standard semi-structural model to account for nonlinear and asymmetric effects of monetary policy credibility. In our setting, central bank credibility is proportional to the deviation of inflation expectations from the announced inflation target, with positive deviations being more costly compared to negative ones. A loss in policy credibility as a result of shocks leads to a more persistent, backward-looking inflation process, and is associated with lower output. We find that the extended model with credibility effects matches well the key macroeconomic data over specific past episodes for Indonesia and Philippines and consider its adaptation to integrated policy frameworks as an area for further exploration.
Keywords:
WP; inflation expectation; transmission mechanism; MP credibility; high-inflation regime; inflation variability; exchange rate; inflation persistence; inflation target; inflation deviation; inflation development; Inflation; Output gap; Central bank policy rate; Inflation targeting; Price stabilization; Southeast Asia; Monetary policy credibility; Inflation expectations; Indonesia; Philippines; Asia and Pacific
Cover IMF Working Papers
Financial Inclusion: What Have We Learned So Far? What Do We Have to Learn?
Mr. Adolfo Barajas
,
Thorsten Beck
,
Mohammed Belhaj
, and
Samy Ben Naceur
The past two decades have seen a rapid increase in interest in financial inclusion, both from policymakers and researchers. This paper surveys the main findings from the literature, documenting the trends over time and gaps that have arisen across regions, income levels, and gender, among others. It points out that structural, as well as policy-related, factors, such as encouraging banking competition or channeling government payments through bank accounts, play an important role, and describes the potential macro and microeconomic benefits that can be derived from greater financial inclusion. It argues that policy should aim to identify and reduce frictions holding back financial inclusion, rather than targeting specific levels of inclusion. Finally, it suggests areas for future research.
Keywords:
WP; bank account; economic growth; incorporated firm; financial activity; household enterprise; loan officer; Financial Inclusion; Financial Development; Fintech; Economic Growth; Income Inequality; Financial Frictions; financial system; external finance; private sector; comparative advantage; Credit; Mobile banking; Financial sector development; Global; fixed cost; credit market; firm owner; firms' use
Cover IMF Working Papers
Intervention Under Inflation Targeting--When Could It Make Sense?
Mr. David J Hofman
,
Mr. Marcos d Chamon
,
Mr. Pragyan Deb
,
Mr. Thomas Harjes
,
Umang Rawat
, and
Itaru Yamamoto
We investigate the motives inflation-targeting central banks in emerging markets may have for intervening in foreign exchange markets and evaluate the case for such interventions based on the existing literature. Our findings suggest that the rationale for interventions depends on initial conditions and country-specific circumstances. The case is strongest in the presence of large currency mismatches or underdeveloped markets. While interventions can have benefits in the short-term, sustained over time they could entrench unfavorable initial conditions, though more work is needed to establish this empirically. A first effort to measure the cost of interventions to the credibility of policy frameworks suggests that the negative impact may be smaller than often assumed—at least for the set of more sophisticated inflation-targeting emerging-market central banks considered here.
Keywords:
WP; Bank FXI; central bank intervention; emerging market; EME inflation targeters; inflation-targeting Asian EMEs; IT literature; inflation expectation; managed exchange rate regime; FX intervention; intervention rule; FX market intervention; market condition; inflation credibility concern; exchange rate volatility; intervention strategy; Exchange rates; Inflation; Inflation targeting; Exchange rate flexibility; Global; emerging markets; monetary and exchange rate policies; foreign exchange intervention; capital flows; Currency markets