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Business and Economics > Banks and Banking

You are looking at 1 - 10 of 106 items for :

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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
Natural Gas in Europe: The Potential Impact of Disruptions to Supply
Gabriel Di Bella
,
Mr. Mark J Flanagan
,
Karim Foda
,
Svitlana Maslova
,
Alex Pienkowski
,
Martin Stuermer
, and
Mr. Frederik G Toscani
This paper analyzes the implications of disruptions in Russian gas for Europe’s balances and economic output. Alternative sources could replace up to 70 percent of Russian gas, allowing Europe to avoid shortages during a temporary disruption of around 6 months. However, a longer full shut-off of Russian gas to the whole of Europe would likely interact with infrastructure bottlenecks to produce very high prices and significant shortages in some countries, with parts of Central and Eastern Europe most vulnerable. With natural gas an important input in production, the capacity of the economy would shrink. Our findings suggest that in the short term, the most vulnerable countries in Central and Eastern Europe — Hungary, Slovak Republic and Czechia — face a risk of shortages of as much as 40 percent of gas consumption and of gross domestic product shrinking by up to 6 percent. The effects on Austria, Germany and Italy would also be significant, but would depend on the exact nature of remaining bottlenecks at the time of the shutoff and consequently the ability of the market to adjust. Many other countries are unlikely to face such constraints and the impact on GDP would be moderate—possibly under 1 percent. Immediate policy priorities center on actions to mitigate impacts, including to eliminate constraints to a more integrated gas market via easing infrastructure bottlenecks, to accelerate efforts in defining and agreeing solidarity contributions, and to promote stronger pricing pass through and other measures to generate greater energy savings. National responses and RePowerEU contains many important measures to help address these challenges, but immediate coordinated action is called for, with specific opportunities in each of these areas.
Keywords:
Energy supply; natural gas; production output; EU gas import capacity; infrastructure bottleneck; supply shut-off; LNG market; output effect; Natural gas sector; Imports; Consumption; Supply shocks; Operational risk; Europe; Global; Central and Eastern Europe; energy shut-off; natural gas in Europe
Cover IMF Working Papers
The Economic Impacts on Germany of a Potential Russian Gas Shutoff
Ting Lan
,
Galen Sher
, and
Jing Zhou
We analyze the potential impacts on the German economy of a complete and permanent shutoff of the remaining Russian natural gas supplies to Europe, accounting for the curtailment of flows through Nord Stream 1 that has already taken place. We find that such a scenario could lead to gas shortages of 9 percent of national consumption in the second half of 2022, 10 percent in 2023 and 4 percent in 2024, which would be worse in the winter months, and would likely fall on firms, given legal protections on households. We combine the effects of less gas on production with the consequent effects of reduced supply of intermediate goods and services to downstream firms, and with reduced economic activity due to rising uncertainty. Together, these three channels reduce German GDP relative to baseline levels by about 1.5 percent in 2022, 2.7 percent in 2023 and 0.4 percent in 2024, with no gains in subsequent years from deferred economic activity. The associated rise in wholesale gas prices could increase inflation by about 2 percentage points on average in 2022 and 2023. Our simulations suggest that the economic impacts can be reduced significantly by having households voluntarily share a small part of the burden, and by rationing gas supplies more to more gas-intensive and downstream firms. We also suggest other ways to enhance German energy security.
Keywords:
Energy supply; energy security; natural gas; embargo; rationing; fragmentation; GDP impact; gas shortage scenario; energy inflation Passthrough; impacts of gas shortage; gas supplies; Consumption; Inflation; Fuel prices; Energy pricing; Operational risk; Europe; Asia and Pacific; gas consumption; production function; gas usage requirement; gas shock; Energy prices
Cover Global Financial Stability Report, April 2022
Global Financial Stability Report, April 2022
Shockwaves from the War in Ukraine Test the Financial System’s Resilience
International Monetary Fund. Monetary and Capital Markets Department

Abstract

Chapter 1 looks at the implications of the war in Ukraine on the financial system. Commodity prices pose challenging trade-offs for central banks. Many emerging and frontier markets are facing especially difficult conditions. In China, financial vulnerabilities remain elevated amid ongoing stress in the property sector and new COVID-19 outbreaks. Central banks should act decisively to prevent inflation from becoming entrenched without jeopardizing the recovery. Policymakers will need to confront the structural issues brought to the fore by the war, including the trade-off between energy security and climate transition. Chapter 2 discusses the sovereign-bank nexus in emerging markets. Bank holdings of domestic sovereign bonds have surged in emerging markets during the pandemic. With public debt at historically high levels and the sovereign credit outlook deteriorating, there is a risk of a negative feedback loop that could threaten macro-financial stability. Chapter 3 examines the challenges to financial stability posed by the rapid rise of risky business segments in fintech. Policies that target both fintech firms and incumbent banks proportionately are needed.

Keywords:
war in Ukraine; inflation; financial stability; debt; sovereign-bank nexus; fintech; trade market; inflation pressure; monetary policy stance; policy priority; risks of fragmentation; hard currency yield; Emerging and frontier financial markets; Blockchain and DLT; Fintech; Virtual currencies; Global; Europe; Central and Eastern Europe; Caribbean; Eastern Europe
Cover IMF Staff Country Reports
Uruguay: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
Selected Issues
Keywords:
export diversification option; inflation stickiness; commodity export price increase; world inflation; algorithm recommendation; D. machine learning algorithm; central bank institution; Exports; Inflation; Commodity prices; Comparative advantage; Fiscal rules; Global; Caribbean
Cover IMF Working Papers
Predicting Macroeconomic and Macrofinancial Stress in Low-Income Countries
Hans Weisfeld
,
Mr. Irineu E de Carvalho Filho
,
Mr. Fabio Comelli
,
Rahul Giri
,
Klaus-Peter Hellwig
,
Chengyu Huang
,
Fei Liu
,
Mrs. Sandra V Lizarazo Ruiz
,
Alexis Meyer-Cirkel
, and
Mr. Andrea F Presbitero
In recent years, Fund staff has prepared cross-country analyses of macroeconomic vulnerabilities in low-income countries, focusing on the risk of sharp declines in economic growth and of debt distress. We discuss routes to broadening this focus by adding several macroeconomic and macrofinancial vulnerability concepts. The associated early warning systems draw on advances in predictive modeling.
Keywords:
Early warning systems; crisis prediction; machine learning; low-income countries; inflation crisis; stress episode; crisis concept; crisis probability; missed crisis; LIC inflation trend; Inflation; Banking crises; Commodity prices; Global
Cover IMF Working Papers
Public Debt and r - g at Risk
Weicheng Lian
,
Mr. Andrea F Presbitero
, and
Ursula Wiriadinata
As interest rate-growth differentials (r-g) turned negative in many countries, governments consider pursuing fiscal expansion and the potential risks involved. Using a large sample of advanced and emerging economies, our analysis suggests that high public debts can lead to adverse future r-g dynamics. Specifically, countries with higher initial public debt experience (i) a shorter duration of negative r-g episodes and a higher probability of reversal, (ii) higher average r-g, and (iii) a more right-skewed r-g distribution, that implies higher down-side risks. Furthermore, high-debt countries experience larger increases in interest rates in response to (iv) an unexpected decline in domestic output and (v) an increase of global volatility. Results are stronger when public debts are denominated in foreign currencies.
Keywords:
WP; interest rate-growth differential; debt country; interest-rate response; interest rates environment; U.S. dollar; Public debt; Interest rate-growth differential; Shocks; Fiscal policy; Foreign currency debt; FX share group; public debt-to-GDP; Long term interest rates; Currencies; Global
Cover IMF Staff Country Reports
Bolivia: 2018 Article IV Consultation-Press Release and Staff Report
International Monetary Fund. Western Hemisphere Dept.
After years of impressive growth and poverty reduction, Bolivia is facing a more challenging period. Accommodative fiscal and monetary policies combined with lower gas and minerals prices have contributed to continued large twin deficits, foreign reserve losses, and a sharp increase in public debt. External competitiveness has been negatively affected by the appreciating US dollar, high wage growth, and domestic policies that have hindered private sector investment. A definitive change in the policy stance is warranted to restore external balance, minimize a further buildup in vulnerabilities, and promote broad based growth.
Keywords:
ISCR; CR; fiscal policy; commodity; exchange rate; U.S. dollar; central bank; exchange regime; accommodative fiscal policy; boom period; Public investment and public-private partnerships (PPP); Credit; Commodity prices; Public sector; Global
Cover IMF Working Papers
Commodity Price Movements and Banking Crises
Mr. Markus Eberhardt
and
Mr. Andrea F Presbitero
We develop an empirical model to predict banking crises in a sample of 60 low-income countries (LICs) over the 1981-2015 period. Given the recent emergence of financial sector stress associated with low commodity prices in several LICs, we assign price movements in primary commodities a key role in our model. Accounting for changes in commodity prices significantly increases the predictive power of the model. The commodity price effect is economically substantial and robust to the inclusion of a wide array of potential drivers of banking crises. We confirm that net capital inflows increase the likelihood of a crisis; however, in contrast to recent findings for advanced and emerging economies, credit growth and capital flow surges play no significant role in predicting banking crises in LICs.
Keywords:
WP; banking crisis; commodity price; volatility measure; commodity exporter; crisis dummy; crisis event; exchange rate; Growth margin; Commodity prices; Early warning system; Low-income countries; commodity price growth; commodity price growth margin; commodity price behavior; commodity price volatility measure; aggregate commodity price movement; Banking crises; Capital inflows; Commodity price fluctuations; Global
Cover Regional Economic Outlook, April 2018, Western Hemisphere Department
Regional Economic Outlook, April 2018, Western Hemisphere Department
Seizing the Momentum
International Monetary Fund. Western Hemisphere Dept.

Abstract

The world economy and global trade are experiencing a broad-based cyclical upswing. Since October 2017, global growth outcomes and the outlook for 2018–19 have improved across all regions, reinforced by the expected positive near-term spillovers from tax policy changes in the United States. Accommodative global financial conditions, despite some tightening and market volatility in early February 2018, have been providing support to economic recovery. Higher commodity prices are contributing to an improved outlook for commodity exporters. The US and Canadian economies posted solid gains in 2017 and are expected to grow above potential in the near term. Despite the improved near-term outlook, however, medium-term prospects are tilted downwards. Growth prospects for advanced economies are subdued and many emerging market and developing economies are projected to grow in per capita terms more slowly than advanced economies, raising concerns about income convergence. While risks appear broadly balanced in the near term, they skew to the downside over the medium term, including a possible sharp tightening of financial conditions, waning popular support for global economic integration, growing trade tensions and risks of a shift toward protectionist policies, and geopolitical strains.

Keywords:
REO; country abbreviation; commodity exporter; commodity; tourism dependent; IMF staff calculation; commodity price; Fiscal consolidation; Inflation; Income inequality; Caribbean; Global; Central America; South America; Western Hemisphere; inflation expectation; nominal GDP; central bank credibility; headline inflation