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Business and Economics > Finance: General

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Cover IMF Working Papers
Pension Reform and Stock Market Development
Shujaat Khan
,
Bo Li
, and
Yunhui Zhao
We highlight the strong connection between developing fully-funded, individually-owned, collectively-managed, mandatory/incentivized (FICMI) pension schemes and the development of domestic stock markets. We do so by building a stylized model and complementing the analysis with cross-country empirical analysis and case studies. We also highlight the challenges of individual impatience, network externalities, and coordination failure in long-term equity investments, which are crucial for stock market development and technological innovation. We find that FICMI pension schemes—when sufficiently wide in coverage and large in size—can serve as coordination devices to support long-term equity investments. Such investments will not only promote domestic stock market development and make it easier for firms to raise long-term equity capital, therefore supporting long-term economic growth, but also enhance financial inclusion and enable more households to benefit from the overall economic development, therefore contributing to inclusive growth. Moreover, we find that the introduction of FICMI pension schemes can impact household savings in two ways: first, FICMI pension can increase household savings through “forced/incentivized” savings channel, where households save too little without FICMI pension (such as in many EMDEs); and second, FICMI pension can decrease household savings and increase household consumption by reducing non-pension savings and decreasing precautionary savings, where households save too much without FICMI pension (such as in China). In both cases, FICMI pension schemes can help move the economy closer to the optimal level of household savings, and may also help improve the structure of such savings. Finally, we discuss the enabling conditions (such as a strong political commitment to the reform and a well-designed fiscal strategy for financing the transition) and policy design for FICMI pension schemes.
Keywords:
Pension Reforms; Stock Market Development; Equity Financing; Innovation' Financial Inclusion; Intertemporal Optimization; Public Pensions; Funded and Private Pensions; FICMI pension schemes; household saving; savings channel; IMF working paper No. 25/49; Pension spending; Pensions; Stock markets; Pension reform; Capital markets; East Asia
Cover Policy Papers
The Central Bank Transparency Code—Findings Of The Pilot Reviews
International Monetary Fund. Monetary and Capital Markets Department
This paper reports to the Executive Board on the outcomes of the Central Bank Transparency Code (CBT) pilot reviews. The pilot CBT reviews helped central banks evaluate their transparency practices and strengthen dialogue with external stakeholders. The CBT pilots provided valuable information on the resources required for the reviews going forward. Staff will continue to offer CBT reviews to the rest of the membership. The staff will report back to the Board in FY2026 on the progress of the CBT reviews and an update to the Code following five years of implementation.
Keywords:
CBT review; transparency practice; central bank Transparency Code; CBT Pilots; guidance note; Central bank transparency; Financial sector stability; Central bank autonomy; Financial Sector Assessment Program; Central bank accountability; Western Hemisphere; Global; Middle East and Central Asia
Cover IMF Staff Country Reports
Uruguay: Central Bank Transparency Code Review
International Monetary Fund. Monetary and Capital Markets Department
This paper highlights Uruguay’s Central Bank Transparency Code (CBT) Review. The Central Bank of Uruguay (BCU) is implementing transparency practices that are broadly aligned with the good practices for central banks. Improving communication with domestic and international stakeholders is a significant pillar of the medium-term strategic plan. The well-developed communication framework and architecture were assessed to be comprehensive in this IMF CBT review. While general information about its legal structure and mandate are disclosed, enhanced transparency about the scope and depth of institutional, personal, and financial autonomy could be improved. The annual report and website contain the core information, but some important elements require complete information or simpler translations from the legal language. Additional transparency in some areas of governance is needed to enhance institutional accountability. The BCU has developed a transparent and efficient system to safeguard the rights of financial consumers. The BCU has put in place a model system on consumer protection that inspires public confidence and trust.
Keywords:
IMF central bank transparency code; CBT review summary; Banco de la República Oriental del Uruguay; IMF mission; financial system report; staff team of the International Monetary Fund; Anti-money laundering and combating the financing of terrorism (AML/CFT); Financial statements; Financial sector stability; International reserves; Foreign exchange intervention; Global
Cover FinTech Notes
Digital Currencies and Energy Consumption
Mr. Itai Agur
,
Jose Deodoro
,
Xavier Lavayssière
,
Soledad Martinez Peria
,
Mr. Damiano Sandri
,
Hervé Tourpe
, and
Mr. German Villegas Bauer
Whether in crypto assets or in CBDCs, design choices can make an important difference to the energy consumption of digital currencies. This paper establishes the main components and technological options that determine the energy profile of digital currencies. It draws on academic and industry estimates to compare digital currencies to each other and to existing payment systems and derives implications for the design of environmentally friendly CBDCs. For distributed ledger technologies, the key factors affecting energy consumption are the ability to control participation and the consensus algorithm. While crypto assets like Bitcoin are wasteful in terms of resources, other designs could be more energy efficient than existing payment systems.
Keywords:
Payments; Energy efficiency; Environmental impact; Crypto assets; Bitcoin; Central Bank Digital Currency; CBDC; Distributed Ledger technology; DLT; CBDC user payment; energy consumption; FINTECH note; title page; user payment; Virtual currencies; Blockchain and DLT; Digital currencies; Central Bank digital currencies; Payment systems; Global
Cover IMF Working Papers
Sovereign Eurobond Liquidity and Yields
Mr. Daniel C Hardy
Market liquidity is of value to both investors and issuers of securities, and is therefore a crucial factor in asset pricing. For the important asset class of Eurobonds, significant feedback from liquidity to pricing is established, and it is shown that bid-ask spreads (a proxy for market liquidity) and yields are closely related to bond characteristics such as issue volume, time to maturity, the inclusion of collective action clauses, and the jurisdiction of issuance. Debt management offices can choose these characteristics in a way that has economically significant and persistent effects on both liquidity and pricing.
Keywords:
Eurobond yields; bid-ask spread; liquidity; debt management; instrument design; Log yield determinant; Eurobond liquidity; market liquidity; debt management office; summary statistics; Bonds; Credit ratings; Collective action clauses; Bond yields; Global
Cover IMF Staff Country Reports
Uruguay: Technical Assistance Report-Monetary and Financial Statistics Mission
International Monetary Fund. Statistics Dept.
At the request of the Central Bank of Uruguay (BCU), and with the support of the International Monetary Fund’s (IMF’s) Western Hemisphere Department (WHD), a monetary and financial statistics (MFS) technical assistance (TA) mission from the IMF’s Statistics Department (STA) visited Montevideo during February 3-14, 2020. The main objectives of the mission were to: (i) review available source data for other financial corporations (OFC); in particular, insurance corporations (IC), pension funds (PF), and credit administration companies (CAC); and (ii) compile standardized monetary statistics for OFC (report form SRF 4SR) in line with the 2016 Monetary and Financial Statistics Manual and Compilation Guide (MFSMCG). The officials met during the mission are listed in Appendix I.
Keywords:
IMF's Statistics Department; administration company; staff team of the International Monetary Fund; Statistics Department of the IMF; CAC assets; Nonbank financial institutions; Offshore financial centers; Financial statements; Financial soundness indicators; Collective action clauses; Global
Cover IMF Working Papers
Benchmark-Driven Investments in Emerging Market Bond Markets: Taking Stock
Mr. Serkan Arslanalp
,
Dimitris Drakopoulos
,
Rohit Goel
, and
Mr. Robin Koepke
This paper reviews the role of benchmark-driven investments in EM local bond markets. We provide an overview of how key EM bond benchmark indices are constructed, how they affect the behavior of investment funds, and what are the likely implications for capital flows and policy-making. Several methods are presented suggesting that the amount of assets benchmarked against widely followed EM local-currency bond indices have risen fivefold since the mid-2000s to around $300 billion. Our review suggests that the benefits of index membership may be tempered by portfolio outflow risks for some countries. This is because benchmark-driven investments may increase the importance of external factors at the expense of domestic factors, raising the risks of outflows unrelated to recipient country fundamentals. Some countries may be disproportionately exposed to these risks, reflecting the way the indices are constructed.
Keywords:
WP; investment; investor; JPMorgan; Capital flows; portfolio choice; push and pull; benchmarks; J.P. Morgan emerging market bond Index; benchmark index; benchmark-driven investment; J.P. Morgan government bond index-emerging markets; investor base; surprise Index; Emerging and frontier financial markets; Securities markets; Bonds; Mutual funds; Global
Cover IMF Working Papers
Do Multi-Sector Bond Funds Pose Risks to Emerging Markets?
Fabio Cortes
and
Luca Sanfilippo
Emerging economies in the post-crisis period increasingly saw portfolio debt inflows from a type of large international investment fund: Multi-Sector Bond Funds (MSBFs). These investors have lacked adequate representation in the literature. This paper constructs a new detailed database from micro-level MSBF emerging market (EM) holdings from 2009:Q4–2018:Q2. Exploiting this data, the paper assesses the risks they pose to the financial stability of specific emerging bond markets. The data shows that MSBFs are highly concentrated–both in their positions and their decision-making. The empirical results further suggest that MSBFs exhibit opportunistic behavior (and more so than other investment funds). In periods of high risk aversion, large MSBF portfolio reallocations out of EMs can be associated with underperformance of the same markets, signaling the importance of monitoring their footprint and better understanding their asset allocation decisions.
Keywords:
WP; fixed income; hard currency; EM asset market; family of funds; EM assets; EM portfolio debt inflow; global bond; Investment funds; mutual funds; emerging markets; portfolio debt flows; contagion; allocation decision; Bonds; Currencies; Emerging and frontier financial markets; Securities markets; Global
Cover IMF Working Papers
Dampening Global Financial Shocks: Can Macroprudential Regulation Help (More than Capital Controls)?
Katharina Bergant
,
Mr. Francesco Grigoli
,
Mr. Niels-Jakob H Hansen
, and
Mr. Damiano Sandri
We show that macroprudential regulation can considerably dampen the impact of global financial shocks on emerging markets. More specifically, a tighter level of regulation reduces the sensitivity of GDP growth to VIX movements and capital flow shocks. A broad set of macroprudential tools contribute to this result, including measures targeting bank capital and liquidity, foreign currency mismatches, and risky forms of credit. We also find that tighter macroprudential regulation allows monetary policy to respond more countercyclically to global financial shocks. This could be an important channel through which macroprudential regulation enhances macroeconomic stability. These findings on the benefits of macroprudential regulation are particularly notable since we do not find evidence that stricter capital controls provide similar gains.
Keywords:
WP; capital control; real GDP; net capital; output gap; ln VIX; trend GDP; GDP growth; monetary policy shock; policy rate; Capital controls; Central bank policy rate; Emerging and frontier financial markets; Capital outflows; Capital flows; Global; Macroprudential policies; monetary policy; net outflow; dampening effect; monetary policy response
Cover IMF Working Papers
A Survey of Research on Retail Central Bank Digital Currency
Mr. John Kiff
,
Jihad Alwazir
,
Sonja Davidovic
,
Aquiles Farias
,
Mr. Ashraf Khan
,
Mr. Tanai Khiaonarong
,
Majid Malaika
,
Mr. Hunter K Monroe
,
Nobu Sugimoto
,
Hervé Tourpe
, and
Peter Zhou
This paper examines key considerations around central bank digital currency (CBDC) for use by the general public, based on a comprehensive review of recent research, central bank experiments, and ongoing discussions among stakeholders. It looks at the reasons why central banks are exploring retail CBDC issuance, policy and design considerations; legal, governance and regulatory perspectives; plus cybersecurity and other risk considerations. This paper makes a contribution to the CBDC literature by suggesting a structured framework to organize discussions on whether or not to issue CBDC, with an operational focus and a project management perspective.
Keywords:
WP; CBDC issuance; CBDC arrangement; CBDC holding; cyber-security payment; monetary policy; money; central bank digital currencies; legal tender; payment system; cyber security; user CBDC holding; Currencies; Payment systems; Digital currencies; Legal support in revenue administration; Global; Eastern Europe; Pacific Islands; Caribbean; policy risk; CBDC pilot; CBDC payment system; CBDC transaction; cash currency management function; platform implementation decision; CBDC platform