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Business and Economics > Banks and Banking

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Cover FinTech Notes
Estimating the Impact of Digital Money on Cross-Border Flows: Scenario Analysis Covering the Intensive Margin
Eugenio M Cerutti
,
Melih Firat
, and
Hector Perez-Saiz
Digital money and digital payments innovations have the potential for improving cross-border payments by reducing costs, enhancing speed, and improving transparency. This note performs an empirical analysis of the potential impact of digital money on the volume and transaction costs of cross-border payments, with a focus on the short-term intensive margin. The market of cross-border payments is very large, with retail transactions having a low share of the total but the highest transaction costs, particularly for remittances. Our illustrative scenarios assume an estimated 60 percent reduction in transaction costs and short-term elasticities to changes in costs estimated from remittances data. The results show two outcomes. First, the cross-border volume increases could be sizable for countries that are large remittance recipients and face expensive transaction costs. Second, even with a large drop in transaction costs, the short-term rise in global cross-border transaction volumes could be limited as a result of the low transaction costs of the wholesale segment. Moving outside the short-term intensive margin, the impact could potentially be much larger as digital currencies and other digital payments innovations—together with tokenization of assets on programmable platforms—could move the financial system into a transformative new era by fostering financial development and promoting further inclusion across borders.
Keywords:
Digital money; cross-border payments; transaction costs; digital payments; payments innovation; cross-border payment; scenario analysis; IMF Fintech Brownbag Seminar; IMF seminar; Remittances; Central Bank digital currencies; Anti-money laundering and combating the financing of terrorism (AML/CFT); Correspondent banking; Global
Cover IMF Staff Country Reports
Samoa: Selected Issues
International Monetary Fund. Asia and Pacific Dept
2024 Selected Issues
Keywords:
money transfer operator; sectoral risk assessment; Australia labour mobility; transaction report; remittance corridor; risk remittance product; Remittances; Anti-money laundering and combating the financing of terrorism (AML/CFT); Medium taxpayer office; Correspondent banking; Financial sector; Australia and New Zealand; Pacific Islands; Global
Cover IMF Working Papers
Portfolio Inertia and Expected Excess Returns in Currency Markets: Evidence from Advanced Economies
Bas B. Bakker
The economic literature has long attributed non-zero expected excess returns in currency markets to time-varying risk premiums demanded by risk-averse investors. This paper, building on Bacchetta and van Wincoop's (2021) portfolio balance framework, shows that such returns can also arise when investors are risk-neutral but face portfolio adjustment costs. Models with adjustment costs but no risk aversion predict a negative correlation between exchange rate levels and expected excess returns, while models with risk aversion but no adjustment costs predict a positive one. Using data from nine inflation targeting economies with floating exchange rates (2000–2024), we find strong empirical support for the adjustment costs framework. The negative correlation persists even during periods of low market stress, further evidence that portfolio adjustment costs, not risk premium shocks, drive the link between exchange rates and excess returns. Our model predicts that one-year expected excess returns should have predictive power for multi-year returns, with longer-term expected returns as increasing multiples of short-term expectations, and the predictive power strengthening with the horizon. We confirm these findings empirically. We also examine scenarios combining risk aversion and adjustment costs, showing that sufficiently high adjustment costs are essential to generate the observed negative relationship.These findings provide a simpler, testable alternative to literature relying on assumptions about unobservable factors like time-varying risk premiums, intermediary constraints, or noise trader activity.
Keywords:
Exchange Rates; Portfolio Balance; Uncovered Interest Parity; Portfolio Adjustment Costs; Risk Premium; Currency Markets; Expected Returns; excess return; portfolio adjustment; adjustment cost; portfolio balance framework; portfolio Inertia; Exchange rate adjustments; Return on investment; Currencies; Interest rate parity; Global
Cover Policy Papers
Central Bank Stress Testing—Guidance Note
International Monetary Fund. Monetary and Capital Markets Department
The expansion of central bank balance sheets has become a critical topic in the wake of the Global Financial Crisis and the COVID-19 pandemic. Central banks have taken unprecedented measures to ensure price stability and financial stability, particularly when traditional policy tools were insufficient. However, this expansion has led to significant balance sheet risks, resulting in notable losses as central banks have adjusted their policies in response to rising inflation. This guidance note explores these risks and introduces a modeling framework to assess them. While essential for achieving stability, the expansion of central bank balance sheets introduces significant risks that require careful management. The proposed modeling framework is a valuable tool for assessing these risks and guiding capital policy. Exploring the relationship between balance sheet size and economic outcomes could yield beneficial insights for future central bank strategies.
Keywords:
Central bank; balance sheet; stress testing; balance sheet risk; central bank equity; forecasting balance sheet; central bank bank transfer; balance sheet action; central bank profit; Financial statements; Central bank policy rate; Central bank balance sheet; Yield curve; International reserves; Global
Cover Regional Economic Outlook: Asia and Pacific, November 2024
Regional Economic Outlook: Asia and Pacific, November 2024
Asia and Pacific: Resilient Growth but Higher Risks
International Monetary Fund. Asia and Pacific Dept

Abstract

Short-term prospects for Asia and the Pacific have improved slightly compared to the IMF’s April forecasts, even though growth is still expected to moderate in 2024 and 2025. The regional growth projection for 2024 has been marked up to 4.6 percent from 4.5 percent in April, largely reflecting the over-performance in the first half of the year, and the region is forecast to contribute roughly 60 percent to global growth in 2024. In 2025, more accommodative monetary conditions are expected to support activity, resulting in a slight upward growth revision to 4.4 percent from 4.3 percent in April. Inflation has retreated in much of the region. At the same time, risks have increased, reflecting rising geopolitical tensions, uncertainty about the strength of global demand, and potential for financial volatility. Demographic change will act increasingly as a brake on activity, though structural shifts into high-productivity sectors such as tradable services hold promise to sustain robust growth.

Keywords:
Asia and the Pacific; growth; inflation; monetary policy; fiscal policy; China; AE Asia; emerging economy; headline inflation; foreign direct investment; monetary management; Asia EMDEs; EM Asia; Pacific island economy; ASEAN region; export opportunity; exports to the world; monetary policy response; Exports; Emerging and frontier financial markets; Central bank policy rate; Foreign direct investment; Asia and Pacific; Global; Pacific Islands; Central Asia
Cover IMF Working Papers
A New Dataset of High-Frequency Monetary Policy Shocks
Marijn A. Bolhuis
,
Sonali Das
, and
Bella Yao
This paper presents a new dataset of monetary policy shocks for 21 advanced economies and 8 emerging markets from 2000-2022. We use daily changes in interest rate swap rates around central bank announcements to identify unexpected shocks to the path of monetary policy. The resulting series can be used to examine cross-country heterogeneity in the impact of monetary policy shocks. We establish a new empirical fact on monetary policy spillovers across countries: the monetary policy decisions of small open economy central banks, and not just major central banks, have substantial spillover effects on swap rates and bond yields in other countries.
Keywords:
monetary policy surprises; monetary policy shocks; central banks; central bank information effect; emerging markets; high-frequency method; spillovers; monetary policy spillovers; monetary policy spillover; monetary policy shock; information effect; monetary policy decision; monetary policy surprise; Yield curve; Sovereign bonds; Central bank policy rate; Emerging and frontier financial markets; Nominal effective exchange rate; Global
Cover La aduana, una institución clave
La aduana, una institución clave
Fortaleciendo la administración aduanera en un mundo de cambios
Augusto Azael Pérez Azcárraga
,
Tadatsugu Matsudaira
,
Gilles Montagnat-Rentier
,
Janos Nagy
, and
R. James Clark

Abstract

Las administraciones de aduanas ven surgir nuevos retos a medida que aumenta el volumen del comercio internacional, aparece nueva tecnología y cambian los modelo de negocio. Este libro analiza los cambios y desafíos que enfrentan las administraciones de aduanas y propone formas de abordarlos. Describe los problemas que las autoridades deben tener en cuenta a la hora de elaborar su propia hoja de ruta para la modernización de las aduanas.

Keywords:
aduana; cumplimiento tributario; recaudación de impuestos; evasión fiscal; facilitación del comercio; gestión del riesgo aduanero; seguridad de fronteras; comercio; regímenes fiscales; política comercial; ingreso tributario; operadores comerciales; modernización de la aduana; tecnologías digitales; economía del sector público; administración pública; finanzas públicas; desarrollo económico; avances tecnológicos
Cover IMF Working Papers
Central Banks and Climate Change: Key Legal Issues
Mario Tamez
,
Hans Weenink
, and
Akihiro Yoshinaga
Well-designed legal frameworks and institutional arrangments support the legitimacy of central banks’ autonomous decision-making when grounded on sound legal basis and can prevent over-stepping in the remit of other authorities. This paper explores the key legal intersections of climate change and central banks. Climate change could impact price and finanical stability, which are at the core of a central bank’s mandate. While central banks’ legal frameworks can support climate change efforts they also determine the boundaries of the measures they can adopt. Central banks need to assess their mandate and authority under their current legal frameworks when considering measures to contribute to the global response to climate change, while taking actions to fulfill their legal mandates.
Keywords:
Climate Change; Central Bank; Legal Framework; central bank development programs; autonomous decision-making; IMF working paper No. 24/192; central bank's mandate; core objective; Financial sector stability; Climate policy; Central bank mandate; Central bank legislation; Global
Cover IMF Staff Country Reports
United Kingdom: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper analyses monetary policy issues in the UK. It examines key macro and financial indicators and assesses the effects of the tightening thus far. The paper finds that monetary transmission has largely mirrored previous episodes, with the most notable exception of the mortgage channel, which has been slower due to a higher share of fixed-rate mortgages. Additionally, it reveals an outsized impact of federal announcements on UK financial markets and argues that this will place a premium on Bank of England (BoE) communications in a context where the BoE may diverge. Monetary transmission in the UK during the current cycle has mostly worked as expected and has been similar to the experiences in other advanced economies. The paper identifies identify monetary policy surprises through changes in high-frequency market indicators within a narrow window around monetary policy announcement. The results indicate that Federal Open Market Committee spillovers do have a sizable effect on monetary transmission in the UK.
Keywords:
UK construction; UK workforce; spending scenario; Fed Policy spillover; MPC decision; visa regime; Housing; Education spending; Inflation; Global
Cover Таможенные вопросы
Таможенные вопросы
Укрепление таможенной службы в меняющемся мире
Augusto A Perez Azcarraga
,
Tadatsugu Matsudaira
,
Gilles Montagnat-Rentier
,
Janos Nagy
, and
R. James Clark

Abstract

Перед таможенными службами во всем мире встают новые задачи: растущий объем международной торговли, революция в новых технологиях и фундаментальные изменения в бизнес-моделях. Преимущества хорошо функционирующей таможенной администрации очевидны, равно как и необходимость развития эффективных, действенных, справедливых и современных таможенных администраций. Книга «Таможенные вопросы» анализирует многочисленные изменения и проблемы, с которыми сталкиваются таможенные администрации, и предлагают пути их решения. Предлагая разноплановый взгляд на основные аспекты таможенного администрирования, книга служит руководством для директивных органов и должностных лиц таможенных служб при оценке текущего состояния их таможенных систем в целях разработки, совершенствования или продвижения своих планов действий по модернизации таможенной службы.

Keywords:
таможня; соблюдение обязательств по уплате налогов; принудительное взыскание налогов; уклонение от уплаты налогов; обеспечение безопасности границ; торговля; модернизация налоговой службы; государственная служба; государственные финансы; налог на добавленную стоимость