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Business and Economics > Banks and Banking

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Cover IMF Working Papers
Sandcastles and Financial Systems: A Sandpile Metaphor
Francesco Luna
and
Luisa Zanforlin
Social welfare costs from bank resolution, including contagion and moral hazard, are often thought to be minimized when supervisors can direct the merger of a failing bank with a sound, healthy one. However, social losses may become even larger if the absorbing institutions fail themselves. We ask whether social welfare losses are indeed lower when supervisors intervene rather than not. We use the sand pile/Abelian model as a metaphor to model financial losses which, as sand grains that fall onto a pile, eventually lead to a slide/failure. When capital in the system is insufficient to absorb the failing institution there will be welfare losses. Results suggest that, over the longer-term, social costs are lower when supervisors manage mergers. Additionally, financial networks that have a structure that minimizes social losses also minimize crises frequency. However, the bank employed resolution strategy will determine which financial network structures are associated with the minimum average loss per bankruptcy event.
Keywords:
Applied Abelian model; Banking; Financial Networks; Financial Economics; Banking Crisis; Bankrupcy; Bank Resolution; Selforganized Criticality; Bank Regulation and Supervision; welfare loss; resolution strategy; loss distribution; bank resolution regime supervisor; banks fail; shareholder bank; Distressed institutions; Commercial banks; Crisis resolution; Global
Cover IMF Working Papers
Managing Foreign Exchange Rate Risk: Capacity Development for Public Debt Managers in Emerging Market and Low-Income Countries
Thordur Jonasson
,
Sheheryar Malik
,
Kay Chung
, and
Michael G. Papaioannou
This paper presents some sound practices for foreign-currency risk management in developing countries and outlines instruments for managing sovereign debt portfolio currency exposures. Adoption of a debt management strategy with well-defined targets for foreign exchange risk is a critical element of public debt risk management. To this end, public debt managers often need to face with complex strategic and operational matters related to public debt hedging practices, including the use of derivatives. In this context, we highlight the main institutional challenges in the management of foreign exchange risk in sovereign debt portfolios and discuss the overall implementation of a foreign exchange risk-management strategy.
Keywords:
exchange rate risk risk management; debt portfolio; public debt manager; currency exposure; risk-management strategy; Government debt management; Debt management; Currencies; Exchange rate risk; Foreign currency debt; Asia and Pacific; Sub-Saharan Africa; Middle East; North Africa; Central Asia; Africa
Cover Policy Papers
Interim Review of The Resilience and Sustainability Trust and Review of Adequacy of Resources
International Monetary Fund. Strategy, Policy, & Review Department
,
International Monetary Fund. Finance Dept.
, and
International Monetary Fund. Legal Dept.
The Resilience and Sustainability Trust (RST) provides affordable longer-term financing to help eligible IMF members address longer-term structural challenges, thereby progressing toward strengthening their prospective balance of payments stability. This paper takes stock of the initial experience with the RST—focusing on progress and challenges so far—and proposes fine-tuning RST design with a view to strengthening implementation of the Trust’s objectives. The paper also provides an assessment of the adequacy of the Trust’s resources and finds that increased near-term fundraising will be needed to meet strong demand. The Trust’s reserves remain adequate in the baseline and under a range of risk scenarios.
Keywords:
Resilience; sustainability; financing; climate change; pandemics; policy; RSF arrangement; reform package; RST design; RST financing; RST fundraising target; Climate finance; Climate policy; Natural disasters; Global
Cover Gender Equality and Economic Development in Sub-Saharan Africa
Gender Equality and Economic Development in Sub-Saharan Africa
Lisa L Kolovich
and
Monique Newiak

Abstract

Efforts to achieve gender equality will not only help sub-Saharan Africa revive its inclusive growth engine but also will ensure progress towards the Sustainable Development Goals and help address the main disruptive challenges of this century. This book explores the progress made in gender equality in the region, highlighting both the challenges and successes in areas such as legal reforms; education; health; gender-based violence; harmful practices, such as child marriage; and financial inclusion. It takes stock of initiatives towards integrating gender into core macroeconomic and structural reforms, such as through implementing gender budgeting and examines the role that fiscal and other policies can play in closing gender gaps when they are mindful of distributional impacts. Drawing from extensive research across different institutions, the book underscores the macroeconomic significance of gender equality, emphasizing its potential to drive GDP growth, enhance economic stability, reduce income inequality, and foster sustainable development. It lays out how gender gaps interact with emerging challenges, such as digitalization, and explores the impact of global megatrends, such as climate change, on gender inequality, offering strategies for inclusive policy responses—including in a context where women and girls are still carrying a disproportionate care burden that is often not captured in economic measurement. The book aims to serve as a roadmap for policymakers, stakeholders, and advocates seeking to harness the untapped potential of gender equality—for its own sake and for the region's inclusive, sustainable, and green development. It calls for concerted efforts to dismantle structural barriers, transform social norms, and prioritize gender-responsive policies to unlock the full economic potential of sub-Saharan Africa.

Keywords:
gender equality macroeconomics fiscal policies legal rights structural policies financial access sub-Saharan Africa gender analysis; child marriage; care work; female-to-male labor force participation ratio; completion rate; social media usage; Women; Gender inequality; Gender budgeting; Sub-Saharan Africa; Africa; Global; Middle East and Central Asia; Asia and Pacific
Cover IMF Working Papers
Mobile Internet, Collateral, and Banking
Angelo D’Andrea
,
Patrick Hitayezu
,
Kangni R Kpodar
,
Nicola Limodio
, and
Andrea F Presbitero
Combining administrative data on credit, internet penetration and a land reform in Rwanda, this paper shows that the complementarity between technology and law can overcome financial frictions. Leveraging quasi-experimental variation in 3G availability from lightning strikes and incidental coverage, we show that mobile connectivity steers borrowers from microfinance to commercial banks and improves loan terms. These effects are partly due to the role of 3G internet in facilitating the acquisition of land titles from the reform, used as a collateral for bank loans and mortgages. We quantify that the collateral's availability mediates 35% of the overall effect of mobile internet on credit and 80% for collateralized loans.
Keywords:
Banks; Credit; High-speed Internet; Mobile; Technological Change; internet penetration; loan term; collateral's availability; loan characteristic; credit market; Mobile internet; Bank credit; Loans; Commercial banks; Financial inclusion; Africa
Cover IMF Staff Country Reports
Rwanda: Selected Issues
International Monetary Fund. African Dept.
This Selected Issues paper revisits Rwanda’s options to create fiscal space to meet long-term development challenges. It examines strategies and options for a credible and comprehensive domestic revenue mobilization. The paper analyzes the driving factors of past reform successes and use an original dataset to highlight the benefits of implementing comprehensive tax reforms over selective reforms. The paper concludes that selective measures tend to yield protracted loss of revenue while measures implemented comprehensively lead to increases in revenue in the medium term. This stresses the need for an integrated approach to fiscal policy reform coordination to maximize long-term revenue benefits. For Rwanda, a comprehensive strategy for increasing tax revenues by adjusting rates, broadening the domestic tax base, improving tax compliance, and curbing tax evasion is the way forward. The strategy should shift higher tax burden from low-income households to higher income wealth cohorts with the view to advancing distributional fairness against growing inequality.
Keywords:
climate agenda; NDC financing; monetary policy transmission; financing option; implementation framework; Climate finance; Natural disasters; Central bank policy rate; Value-added tax; Global; Africa; Sub-Saharan Africa
Cover Global Financial Stability Report, October 2023
Global Financial Stability Report, October 2023
Financial and Climate Policies for a High-Interest-Rate Era
International Monetary Fund. Monetary and Capital Markets Department

Abstract

Chapter 1 assesses that risks to global growth are skewed to the downside, similar to the assessment in the April 2023 Global Financial Stability Report. Cracks in the financial system may turn into worrisome fault lines should a soft landing of the global economy hoped for by market participants does not materialize. Chapter 2 homes in on the global banking system, providing a fresh assessment of vulnerabilities in a higher-for-longer environment, using an enhanced global stress test and a set of newly developed market-based indicators. In response to the vulnerabilities that are uncovered, enhancements to supervisory practices and tightening of regulatory standards are proposed. Chapter 3 notes that a broad mix of policies is required to unlock the private capital necessary to cover climate mitigation investment needs in emerging market and developing economies.

Keywords:
soft landing; downside risks; emerging market economies; bank supervision; global stress test; climate finance; IMF Resilience and Sustainability Trust
Cover IMF Working Papers
Quarterly Projection Model for the National Bank of Rwanda
Mr. Jan Vlcek
and
Mikhail Pranovich
National Bank of Rwanda (BNR) modernized monetary policy and transited to the price-based policy framework in January 2019. The Forecasting and Policy Analysis System (FPAS) is the cornerstone for the new forward-looking framework, which mobilizes and organizes resources and sets processes for regular forecasting rounds. The core of this system is a structural macroeconomic model for macroeconomic analysis and projections to support the BNR staff’s policy recommendations to the monetary policy committee. This paper documents the quarterly projection model (QPM) at the core of the FPAS at the BNR. The model is an extension of the canonical structure in Berg et al (2006) to reflect specifics of the interest-rate-based policy framework with a managed exchange rate, the effect of agricultural sector and harvests on prices, and the role of fiscal policies and aid flows.
Keywords:
Rwanda; Forecasting and Policy Analysis; Quarterly Projection Model; Monetary Policy; Managed Exchange Rate; Fiscal Impulse; Aid; WP; food price inflation; central bank; floating exchange rate; money market; nominal exchange rate depreciation; headline inflation; depreciation target; depreciation rate; demand shock; transmission mechanism; energy price inflation; inflation deviation; food inflation; real world oil price gap; price gap; Inflation; Food prices; Agricultural production; Exchange rates; Central bank policy rate; Global
Cover Departmental Papers
Stress Testing in Sub-Saharan Africa: Practices, Communications, and Capacity Development
Mindaugas Leika
,
Hector Perez-Saiz
,
Ms. Olga Ilinichna Stankova
, and
Torsten Wezel
The paper finds that supervisory stress tests are conducted in more than half of sub-Saharan African countries, particularly in western and southern Africa, and that the number of individual stress tests has grown exponentially since the early 2010s. By contrast, few central banks publish assessments of macro-financial linkages; the focus leans more toward discussing trends and weaknesses within the financial sector than on outside risks that may negatively affect its performance.
Keywords:
DPPP; DP; risk; financial risk; bank; market; process; liquidity risk; market risk; interest rate; macro-financial risk assessment; risk analysis; Stress testing; Financial sector stability; Communications in revenue administration; Credit risk; Commercial banks; Africa; Sub-Saharan Africa; Global; stress test result; risk weight; IMF TA; banking sector risk; bank supervisor; concentration risk; banking risk; macro-financial risk analysis; asset concentration risk; risk driver
Cover IMF Working Papers
Monetary Policy Is Not Always Systematic and Data-Driven: Evidence from the Yield Curve
Mr. Ales Bulir
and
Mr. Jan Vlcek
Does monetary policy react systematically to macroeconomic innovations? In a sample of 16 countries – operating under various monetary regimes – we find that monetary policy decisions, as expressed in yield curve movements, do react to macroeconomic innovations and these reactions reflect the monetary policy regime. While we find evidence of the primacy of the price stability objective in the inflation targeting countries, links to inflation and the output gap are generally weaker and less systematic in money-targeting and multiple-objective countries.
Keywords:
WP; rate; interest rate; Nelson-Siegel yield curve model; inflation expectation; yield curve movement; Monetary transmission; yield curve; rule-based monetary policy; inflation-targeting country; monetary policy innovation; monetary policy decision; inflation stabilization; Inflation; Exchange rates; Inflation targeting; Central bank policy rate; Sub-Saharan Africa; Africa; Global