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Business and Economics > Banks and Banking

You are looking at 1 - 10 of 53 items for :

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Cover IMF Working Papers
TLTRO Spillovers Outside the Euro Area
Carolina Lopez-Quiles
and
Adil Mohommad
We examine spillovers from ECB’s TLTROs on European countries outside the euro area. Using individual banks’ balance sheet data, we find that TLTROs lowered funding and lending rates for foreign-owned subsidiaries, especially in emerging market economies. We also find an increase in profitability among foreign subsidiaries and no effects on solvency risk. The effects are sizable--every €1 billion in exposure to TLTROs via parent banks is associated with 0.2 bps reduction in deposit rates and 0.4 bps reduction in lending rates of foreign subsidiaries. This underscores the need to factor euro area monetary policies into policy settings outside the euro area.
Keywords:
Monetary policy; spillovers; TLTRO; CESEE; TLTRO operation; TLTRO exposure; spillovers from ECB's TLTROs; subsidiaries' share; ECB's Targeted Longer-Term Refinancing Operations; Deposit rates; Bank credit; Foreign banks; Business cycles; Europe
Cover IMF Working Papers
Too Low for Too Long: Could Extended Periods of Ultra Easy Monetary Policy Have Harmful Effects?
Mr. Etibar Jafarov
and
Enrico Minnella
Extended periods of ultra-easy monetary policy in advanced economies have rekindled debates about the zombification of weak companies and its impact on resource allocation, economic growth, inflation, and financial stability. Using both firm-level and macroeconomic data, we find that recessions are a critical factor in the rapid increase in the number of zombie firms. Expansionary monetary policy can help reduce zombification when interest rates are at the zero lower bound (ZBL), but a too-accommodative monetary policy for extended periods is associated with a higher probability of zombification. Small and medium enterprises are more likely to become zombie firms. This raises concerns about the sustainability of too-easy monetary policy implementation, especially in countries where growth is lackluster. Our findings imply a tradeoff between conducting a countercyclical monetary policy, which also helps contain the increase in the number of zombie firms in cyclical downturns, and using an expansionary monetary policy for long periods, which may lead to a combination of low interest rates, low growth, and high financial vulnerability. Such a tradeoff is not a concern currently when most countries are tightening their monetary policy stance, but policymakers should be mindful of it during future recessions.
Keywords:
Too Low for Too Long; Zombie Firms; Financial Stability; zombie firm; countercyclical monetary policy; monetary policy stance; sectoral zombie share; share of zombie; Economic recession; Output gap; Global financial crisis of 2008-2009; Monetary expansion; Unconventional monetary policies; Global
Cover Promoting Inclusive Growth in the Middle East and North Africa
Promoting Inclusive Growth in the Middle East and North Africa
Challenges and Opportunities in a Post-Pandemic World

Abstract

Despite some pre-pandemic gains in poverty reduction, literacy, and lifespans, many economies in the Middle East and North Africa (MENA) have struggled to ensure that the benefits of economic development and diversification accrue equitably to all segments of their populations. Among the main issues that remain unresolved are the high share of inactive youth (who are not engaged in employment, education, or training); large gaps in economic opportunities for women; fragmented social protection systems; and underdeveloped private sectors with tight regulation, absence of a level playing field, and limited access to credit that stifle the creation of new firms and growth, employment, and incomes. The COVID-19 pandemic not only risks wiping out some of the progress made in the region over the past decades, but could also exacerbate inequality in a durable way. There is evidence that the impact of the pandemic has been uneven across groups, with the recession having a disproportionate effect on the low-skilled, the young, women, and migrant workers in employment and incomes. With widespread inequality, high unemployment, and the expected entry of 27 million young people into the labor force over the next 10 years, countries across the MENA region need to evolve their economic models to boost job creation and make sure that the benefits of economic development are shared more widely among all their citizens. This book’s objective is to reassess the inclusive growth agenda in the MENA region in light of the rapidly changing pandemic-influenced world. It argues that countries need to embrace global trade and technological advances and evolving demographics at home as an opportunity to successfully implement policies that foster higher and more inclusive growth. It underscores that a return to the old social contract is neither desirable nor feasible. The book presents a comprehensive view of policies suited to the regional context that would boost job-rich and inclusive growth within a resilient macroeconomic policy framework. Its goal is to provide guidance to policymakers in the region to frame how best to promote inclusive growth, including in their engagement with all stakeholders.

Keywords:
inequality; inclusive growth; gender; job creation; private sector development; MENA; climate change; SOE; financial inclusion; future of work; MENA region; MENA country; IMF staff calculation; MENAP country; MENA policymaker; Labor markets; Middle East; North Africa; East Africa; Caribbean; Global
Cover IMF Working Papers
Monetary Policy and COVID-19
Michal Brzoza-Brzezina
,
Marcin Kolasa
, and
Krzysztof Makarski
We study the macroeconomic effects of the COVID-19 epidemic in a quantitative dynamic general equilibrium setup with nominal rigidities. We evaluate various containment policies and show that they allow to dramatically reduce the welfare cost of the disease. Then we investigate the role that monetary policy, in its capacity to manage aggregate demand, should play during the epidemic. According to our results, treating the observed output contraction as a standard recession leads to overly expansionary policy. Finally, we check how central banks should resolve the trade-off between stabilizing the economy and containing the epidemic. If no administrative restrictions are in place, the second motive prevails and, despite the deep recession, optimal monetary policy is in fact contractionary. Conversely, if sufficient containment measures are introduced, central bank interventions should be expansionary and help stabilize economic activity.
Keywords:
COVID-19; Epidemics; Containment measures; Monetary policy; containment policy; containment measure; optimal monetary policy; epidemic model; monetary policy stance; Consumption; Economic recession; Inflation
Cover IMF Working Papers
An Extended Quarterly Projection Model: Credit Cycle, Macrofinancial Linkages and Macroprudential Measures: The Case of the Philippines
Mr. Philippe D Karam
,
Mikhail Pranovich
, and
Mr. Jan Vlcek
We extend a modern practical Quarterly Projection Model to study credit cycle dynamics and risks, focusing on macrofinancial linkages and the role of macroprudential policy in achieving economic and financial stability. We tailor the model to the Philippines and evaluate the model’s properties along several dimensions. The model produces plausible dynamics and sensible forecasts. This along with its simplicity makes it useful for policy analysis. In particular, it should help policymakers understand the quantitative implications of responding to changes in domestic financial conditions, along with other shocks, through the joint use of macroprudential and monetary policies.
Keywords:
Philippines; Forecasting and Policy Analysis; Quarterly Projection Model; Monetary Policy; Macroprudential Policy; Credit Cycle; Leverage Ratio; credit cycle dynamics; policy analysis; projection model; model property; Quarterly Projection model; Credit; Macroprudential policy; Central bank policy rate; Credit gaps; Business cycles; Global
Cover IMF Staff Country Reports
Philippines: 2021 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Philippines
International Monetary Fund. Asia and Pacific Dept
The economy is recovering after a major, pandemic-induced economic downturn. The authorities have deployed a comprehensive set of policy responses that have helped to mitigate the socioeconomic impact and maintain financial stability. The economic recovery slowed in the first half of 2021 due to a second wave of COVID-19 infections. Vaccination has started and is poised to accelerate from midyear.
Keywords:
money market rate; government transaction; financial asset; headline inflation; CPI data; IMF capacity development assistance; inflation outlook; FSI website; COVID-19; Economic recovery; Fiscal stimulus; Liquidity requirements; Budget planning and preparation; Global
Cover IMF Working Papers
Financial Cycles – Early Warning Indicators of Banking Crises?
Ms. Sally Chen
and
Katsiaryna Svirydzenka
Can the upturns and downturns in financial variables serve as early warning indicators of banking crises? Using data from 59 advanced and emerging economies, we show that financial overheating can be detected in real time. Equity prices and output gap are the best leading indicators in advanced markets; in emerging markets, these are equity and property prices and credit gap. Moreover, aggregating this information flags financial crisis many years before the crisis. Lastly, we find that the length of financial cycles is of medium-term frequency, calling into question the longer frequency widely used in the estimation of countercyclical capital buffers.
Keywords:
equity price cycle; property price cycle; banking crisis; BIS-definition credit cycle; C. cycle property; Financial cycles; Banking crises; Credit; Land prices; Business cycles; Global
Cover World Economic Outlook, April 2021
World Economic Outlook, April 2021
Managing Divergent Recoveries
International Monetary Fund. Research Dept.

Abstract

The global economy is climbing out from the depths to which it had plummeted during the Great Lockdown in April. But with the COVID-19 pandemic continuing to spread, many countries have slowed reopening and some are reinstating partial lockdowns to protect susceptible populations. While recovery in China has been faster than expected, the global economy’s long ascent back to pre-pandemic levels of activity remains prone to setbacks.

Keywords:
productivity shock; headline inflation; retention policy; job retention; IMF staff calculation; reallocation policy; Emerging and frontier financial markets; COVID-19; Unemployment; Labor markets; Economic recession; Global; Middle East and Central Asia; Caribbean; Sub-Saharan Africa; South America
Cover IMF Working Papers
The Euro-Area Government Spending Multiplier at the Effective Lower Bound
Adalgiso Amendola
,
Mario di Serio
,
Matteo Fragetta
, and
Mr. Giovanni Melina
We build a factor-augmented interacted panel vector-autoregressive model of the Euro Area (EA) and estimate it with Bayesian methods to compute government spending multipliers. The multipliers are contingent on the overall monetary policy stance, captured by a shadow monetary policy rate. In the short run (one year), whether the fiscal shock occurs when the economy is at the effective lower bound (ELB) or in normal times does not seem to matter for the size of the multiplier. However, as the time horizon increases, multipliers diverge across the two regimes. In the medium run (three years), the average multiplier is about 1 in normal times and between 1.6 and 2.8 at the ELB, depending on the specification. The difference between the two multipliers is distributed largely away from zero. More generally, the multiplier is inversely correlated with the level of the shadow monetary policy rate. In addition, we verify that EA data lend support to the view that the multiplier is larger in periods of economic slack, and we show that the shadow rate and the state of the business cycle are autonomously correlated with its size. The econometric approach deals with several technical problems highlighted in the empirical macroeconomic literature, including the issues of fiscal foresight and limited information.
Keywords:
WP; government spending multiplier; shadow rate; Fiscal multiplier; Zero lower bound; Panel VAR; Factor models; Euro Area; government spending shock; multiplier policymaker; cumulated multiplier; one-year multiplier; ELB regime; potential GDP; Interest rate floor; Business cycles; Central bank policy rate; Fiscal multipliers; Global
Cover The Financial Sector
The Financial Sector
Redefining a Broader Sense of Purpose
International Monetary Fund. Communications Department

Abstract

IMF Managing Director Christine Lagarde delivered this address at Guildhall as part of the World Traders’ Tacitus Lecture series in London on February 28, 2019.

Keywords:
SPE; finance; investment product; investment; price; bank; financial system; private-sector investment; equity capital; paper money; return on equity; dot com bubble; Financial sector; Fintech; Sustainable growth; Women; Global; land price; concessional financing; Climate finance