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Business and Economics > Finance: General

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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 Working Papers
Digitalization and Resilience: Firm-level Evidence During the COVID-19 Pandemic
Nordine Abidi
,
Mehdi El Herradi
, and
Sahra Sakha
The COVID-19 pandemic has resulted in an unprecedented shock to firms with adverse consequences for existing productive capacities. At the same time, digitalization has increasingly been touted as a key pathway for mitigating economic losses from the pandemic, and we expect firms facing digital constraints to be less resilient to supply shocks. This paper uses firm-level data to investigate whether digitally-enabled firms have been able to mitigate economic losses arising from the pandemic better than digitally-constrained firms in the Middle East and Central Asia region using a difference-in-differences approach. Controlling for demand conditions, we find that digitally-enabled firms faced a lower decline in sales by about 4 percentage points during the pandemic compared to digitally-constrained firms, suggesting that digitalization acted as a hedge during the pandemic. Against this backdrop, our results suggest that policymakers need to close the digital gap and accelerate firms’ digital transformation. This will be essential for economies to bounce back from the pandemic, and build the foundations for future resilience.
Keywords:
COVID-19; digitalization; technology adoption; economic resilience; Middle East and Central Asia; digitally-enabled firm; digitally-constrained firm; firms in the Middle East; firm-level data; digital transformation; Digitalization; Financial inclusion; Foreign corporations; Asia and Pacific; Africa; Middle East; North Africa
Cover Regional Economic Outlook, April 2021, Middle East and Central Asia
Regional Economic Outlook, April 2021, Middle East and Central Asia
International Monetary Fund. Middle East and Central Asia Dept.

Abstract

A year into the coronavirus (COVID-19) pandemic, the race between vaccine and virus entered a new phase in the Middle East and Central Asia, and the path to recovery in 2021 is expected to be long and divergent. The outlook will vary significantly across countries, depending on the pandemic’s path, vaccine rollouts, underlying fragilities, exposure to tourism and contact-intensive sectors, and policy space and actions. 2021 will be the year of policies that continue saving lives and livelihoods and promote recovery, while balancing the need for debt sustainability and financial resilience. At the same time, policymakers must not lose sight of the transformational challenges to build forward better and accelerate the creation of more inclusive, resilient, sustainable, and green economies. Regional and international cooperation will be key complements to strong domestic policies.

Keywords:
COVID-19; pandemic; recovery; financial crisis; public health; lockdown; social distancing; IMF staff calculation; net bank financing; financing risk; financing constraint; policy space constraint; Oil; Emerging and frontier financial markets; Government debt planning; Oil prices; Middle East and Central Asia; Global; Central Asia and the Caucasus; Middle East; North Africa
Cover Regional Economic Outlook, October 2020, Middle East and Central Asia
Regional Economic Outlook, October 2020, Middle East and Central Asia
International Monetary Fund. Middle East and Central Asia Dept.

Abstract

Countries in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region and those in the Caucasus and Central Asia (CCA) responded to the COVID-19 pandemic with swift and stringent measures to mitigate its spread and impact but continue to face an uncertain and difficult environment. Oil exporters were particularly hard hit by a “double-whammy” of the economic impact of lockdowns and the resulting sharp decline in oil demand and prices. Containing the health crisis, cushioning income losses, and expanding social spending remain immediate priorities. However, governments must also begin to lay the groundwork for recovery and rebuilding stronger, including by addressing legacies from the crisis and strengthening inclusion.

Keywords:
public health; reopening; rebuilding; oil revenue; OPEC+; REO; oil exporter; MCD country; oil importer; IMF staff calculation; MCD firm; MCD region
Cover IMF Working Papers
SME Financial Inclusion for Sustained Growth in the Middle East and Central Asia
Mishel Ghassibe
,
Maximiliano Appendino
, and
Samir Elsadek Mahmoudi
This paper offers empirical evidence that greater financial inclusion of small and medium enterprises (SMEs) can promote higher economic growth and employment, especially in the Middle East and Central Asia regions. First, we show that countries with higher SME financial inclusion exhibit more effective monetary policy transmission and tax collection. Second, we find substantial employment and labor productivity growth gains at the firm level from access to credit, gains that are higher for SMEs. We also obtain evidence of a substantial positive impact on SME employment and labor productivity growth from improved credit bureau coverage and insolvency regimes. Finally, cross-country aggregate evidence confirms the employment and growth gains from SME financial inclusion, which appear larger in the Middle East and Central Asia than in other regions.
Keywords:
WP; SME financial inclusion; Small and Medium Sized Enterprises; Financial Inclusion; Economic Growth; monetary policy transmission; growth gain; output gap; SME Financial inclusion index; labor productivity gain; SME employment; employment growth; Small and medium enterprises; Labor productivity; Productivity; Employment; Middle East and Central Asia
Cover IMF Staff Country Reports
Lebanon: Financial System Stability Assessment
International Monetary Fund. Monetary and Capital Markets Department
This paper discusses findings of the assessment of Lebanon’s financial system. Lebanon has maintained financial stability for the last quarter century during repeated shocks and challenges. Over time, macroeconomic and financial vulnerabilities have accumulated. Although central bank policies have helped to maintain confidence, fiscal adjustment is needed to reduce risks to financial stability. The banking system has thus far proven resilient to domestic shocks and regional turmoil, but the materialization of severe shocks could expose vulnerabilities. Significant progress has been made to further strengthen Lebanon’s financial integrity framework, with some scope for improvement remaining.
Keywords:
ISCR; CR; interest rate; foreign currency; financial system; bank ownership; bank requests liquidity; bank resolution option; banking sector; bank solvency sensitivity; liquidity position; securities portfolio; bank resolution regime; bank assets; capital planning; stimulus program; bank financing; financial services user; Financial sector stability; Loans; Anti-money laundering and combating the financing of terrorism (AML/CFT); Commercial banks; Global; Middle East; North Africa; East Africa
Cover IMF Staff Country Reports
Lebanon: 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Lebanon
International Monetary Fund. Middle East and Central Asia Dept.
This 2016 Article IV Consultation highlights that Lebanon’s economic growth remains subdued. Following a sharp drop in 2011, growth edged upward briefly to 2–3 percent, but has now slowed again. The IMF staff estimates that GDP increased by 1 percent in 2015, and a similar growth rate in 2016 is projected. Lebanon’s traditional growth drivers—tourism, real estate, and construction—have received a significant blow and a strong rebound is unlikely based on current trends. In the absence of a turnaround in confidence, or a resolution of the Syrian conflict, growth is unlikely to return to potential (4 percent) soon.
Keywords:
ISCR; CR; Lebanon; government; Lebanese pound; refugee; support refugee; refugee inflow; policymaking framework; borrowing cost; outlook from negative; foreign exchange inflow; bank secrecy; IMF staff estimate; authorities' interest; Lebanon's response; Oil prices; Global; Middle East and Central Asia; Middle East; West Africa; Europe
Cover IMF Research Bulletin
IMF Research Bulletin, June 2016
International Monetary Fund. Research Dept.
In the June 2016 issue of IMF Research Bulletin, Eugenio Cerutti interviews Lars E.O. Svensson. Lars, a professor at the Stockholm School of Economics, was a Visiting Scholar at the IMF. In the interview, he discusses monetary policy, financial stability, and life at the IMF. The Bulletin also features a listing of recent Working Papers, Staff Discussion Notes, and key IMF publications. The table of contents from the latest issue of IMF Economic Review is also included.
Keywords:
IRB; IMF title; readings from IMF; open economy macroeconomics; journal website; Zurich conference; Financial sector stability; Inflation targeting; Macroprudential policy; Central bank policy rate; Exchange rate adjustments; Global; Caribbean; Europe
Cover IMF Working Papers
Macroprudential Policy and Financial Stability in the Arab Region
Mr. Ananthakrishnan Prasad
,
Heba Abdel Monem
, and
Pilar Garcia Martinez
Several characteristics of the structure of the Arab economies, their economic policy framework, and their banking systems make macroprudential policy a particular relevant tool. For most oil exporters, heavy reliance on the extractive sector for generating fiscal revenues and export earnings translates into increased vulnerabilities to oil price shocks. In the case of oil importers, relatively small external and fiscal buffers make them highly vulnerable to shocks. This paper discusses the experience of Arab countries in implementing macroprudential policies and contains recommendations to strengthen their macroprudential framework.
Keywords:
WP; capital market; banking sector; legal reserve; price index; liquidity window; market cap; private sector; Macroprudential policy; systemic risk; credit; financial stability; a number of central banks; supervisory function; countries central banks; liquidity level; monetary policy independence; liquidity regulation; capital market authority; FX loan; Financial sector stability; Macroprudential policy instruments; Global
Cover IMF Staff Country Reports
Lebanon: Staff Report for the 2015 Article IV Consultation
International Monetary Fund. Middle East and Central Asia Dept.
The Syrian crisis and the associated inflow of refugees continue to dominate Lebanon’s short-term outlook, compounding long-standing policy weaknesses and vulnerabilities. Political paralysis has set in, with virtually no progress on the structural front. Growth has remained modest and insufficient to make a dent in rising poverty and unemployment. A welcome improvement in the primary fiscal position in 2014 was largely due to temporary factors, and will not be sustained absent adjustment efforts—implying that, without additional effort, Lebanon’s already-sizable public debt burden will only worsen. Financial conditions have nonetheless remained stable, as deposit inflows continue to fund the economy and sizeable buffers support the credibility of the exchange rate peg.
Keywords:
ISCR; CR; currency peg; refugee crisis; crisis; U.S. dollar peg; Lebanon's outlook; electricity sector reform; foreign currency; Lebanon's public finances; Fiscal consolidation; Financial Sector Assessment Program; Commercial banks; Global