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Business and Economics > Insurance

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Cover Staff Climate Notes
Climate Change and Select Financial Instruments: An Overview of Opportunities and Challenges for Sub-Saharan Africa
Anna Belianska
,
Nadja Bohme
,
Kailhao Cai
,
Yoro Diallo
,
Saanya Jain
,
Mr. Giovanni Melina
,
Ms. Pritha Mitra
,
Mr. Marcos Poplawski Ribeiro
, and
Solo Zerbo
Sub-Saharan Africa (SSA) is the region in the world most vulnerable to climate change despite its cumulatively emitting the least amount of greenhouse gases. Substantial financing is urgently needed across the economy—for governments, businesses, and households—to support climate change adaptation and mitigation, which are critical for advancing resilient and green economic development as well as meeting commitments under the Paris Agreement. Given the immensity of SSA’s other development needs, this financing must be in addition to existing commitments on development finance. There are many potential ways to raise financing to meet adaptation and mitigation needs, spanning from domestic revenue mobilization to various forms of international private financing. Against this backdrop, S SA policymakers and stakeholders are exploring sources of financing for climate action that countries may not have used substantially in the past. This Staff Climate Note presents some basic information on opportunities and challenges associated with these financing instruments.
Keywords:
Climate finance; sub-Saharan Africa; climate change; mitigation; adaptation; concessional finance; green bonds; blue bonds; sustainability bonds; debt for climate swaps; carbon credits; climate insurance; climate funds; forest conservation; green development; IMF staff Climate note; IMF staff Climate Note 2022/009; solo Zerbo; SSA policymaker; SSA government; crowding out SSA project; Climate policy; Greenhouse gas emissions; Insurance; Global; Africa
Cover IMF Working Papers
Unintended Effects From the Expansion of the Non-Contributory Health System in Peru
Mr. Jose L. Torres
Over the last two decades, the Peruvian government has made great efforts to improve access to health care by significantly augmenting the coverage of the non-contributory public health care system Seguro Integral de Salud (SIS). This expansion has a positive impact on welfare and public health indicators, as it limits the risk of catastrophic health-related costs for previously uninsured individuals and allows for the appropriate treatment of illnesses. However, it also entails some unintended consequences for informality, tax revenues, and GDP, since a few formal agents are paying for a service that the majority of (informal) agents receive for free. In this paper, we use a general equilibrium model calibrated for Peru to simulate the expansion of SIS to quantify the unintended effects. We find that overall welfare increases, but informality rises by 2.7 percent, while tax revenues and output decrease by roughly 0.1 percent. Given the extent of the expansion in eligibility, the economic relevance of these results seems negligible. However, this occurs because the expansion of coverage was mostly funded by reducing the spending per-insured person. In fact, we find larger costs if public spending is increased to improve the quality of service given universal coverage.
Keywords:
care system Seguro Integral de Salud; IMF working paper Western Hemisphere department; unintended effect; health shock; health risk; avg. health spending; non-contributory health system SIS; Self-employment; Health care; Health care spending; Insurance; South America; Caribbean
Cover IMF Working Papers
The Stabilizing Role of Net Foreign Asset Returns
Gustavo Adler
and
Mr. Daniel Garcia-Macia
With the rapid growth of countries' foreign asset and liability positions over the last two decades, financial returns on those positions ('NFA returns') have become material drivers of current accounts and net stock positions. This paper documents the relative importance of NFA return versus trade channels in driving NFA dynamics, for a sample of 52 economies over 1990-2015. While persistent trade imbalances have been a strong force leading to diverging NFA positions, NFA returns have played an important stabilizing role, mitigating NFA divergence. The stabilizing role of NFA returns primarily reflects the response of asset prices, rather than yield differentials or exchange rates. There is also evidence of heterogeneity in the speed of NFA adjustment, with emerging market economies adjusting more rapidly than advanced economies, and reserve-currency countries adjusting more slowly than others. The paper also documents the role of NFA returns as insurance against domestic and global income shocks, with a focus on reserve-currency countries.
Keywords:
WP; NFA return; net foreign assets; international investment position; valuation changes; return differential; NFA position; valuation change; NFA dynamics; Asset prices; Trade balance; Insurance; Income shocks; Exchange rates; Global
Cover IMF Working Papers
Bank Funding in Central, Eastern and South Eastern Europe Post Lehman: A “New Normal”?
Gregorio Impavido
,
Mr. Heinz Rudolph
, and
Mr. Luigi Ruggerone
CESEE banks are reducing foreign funding sources in response to reduced external imbalances, reduced ability to tap international savings, banking group own strategies, initiatives by some regulators, and consistently with uncertainties surrounding the future of the banking union project. In the medium term, the global regulatory agenda and the high foreign presence and stock of FX loans exert opposite forces on rebalancing trends. In the long-term, any funding “new normal” will be determined by the future design of the EU financial architecture. In the meantime, limiting leverage, the use of FX loans and promoting aggregate saving through macro policies and capital market reforms will increase resilience against shocks going forward.
Keywords:
WP; banking sector; financial market; vis-à-vis bank; exchange rate; real GDP; Global Regulatory Agenda; Eastern Europe; Bank Funding; Deleveraging; parent bank; BNP Paribas; market capitalization; banking group; CDS price; BIS bank; Crédit Agricole; banks vis-à-vis; DSK bank; bank capital; FX loan; Loans; Pension spending; Commercial banks; Insurance; Western Europe; Global; Europe; Asia and Pacific; Baltics
Cover IMF Staff Country Reports
Eastern Caribbean Currency Union: Selected Issues
International Monetary Fund
The Eastern Caribbean Currency Union (ECCU) countries’ economies are heavily dependent on the United States for foreign direct investment, mainly in the tourism sector. The Selected Issues paper discusses economic development and policies of the ECCU. About one-third of the stayover tourists to the ECCU countries are from the United States., the top tourist-source country. The flow of remittances is also an important channel of influence, reflecting the significant proportion of Caribbean migrants living in the United States.
Keywords:
ISCR; CR; ECCU economy; ECCU country; ECCB reserves; founder business personality; Ponzi scheme; Real exchange rates; Natural disasters; Insurance; Caribbean
Cover IMF Staff Country Reports
Botswana: Selected Issues
International Monetary Fund
This paper suggests that it is essential to save a substantial portion of mineral revenues now to ensure fiscal sustainability for a post-diamond period. Taking the non-mineral primary balance into account can help clarify desirable fiscal policies. Botswana’s real effective exchange rate is broadly in line with economic fundamentals and consistent with external sustainability, indicating no threat to external stability. Export performance and other indicators suggest a number of structural competitiveness obstacles that could explain the low labor productivity and poor export and export diversification outcomes.
Keywords:
ISCR; CR; revenue; mineral revenue; exchange rate; revenue projection; resource revenue; baseline revenue; interest rate; Non-renewable resources; Current account; Real effective exchange rates; Insurance; Real exchange rates; Africa; Global
Cover Country Insurance
Country Insurance
The Role of Domestic Policies
Mr. Paolo Mauro
,
Mr. Torbjorn I. Becker
,
Mr. Jonathan David Ostry
,
Mr. Romain Ranciere
, and
Mr. Olivier D Jeanne

Abstract

This paper focuses on what countries can do on their own—that is, on the role of domestic policies—with respect to country insurance. Member countries are routinely faced with a range of shocks that can contribute to higher volatility in aggregate output and, in extreme cases, to economic crises. The presence of such risks underlies a potential demand for mechanisms to soften the blow from adverse economic shocks. For all countries, the first line of defense against adverse shocks is the pursuit of sound policies. In light of the large costs experienced by emerging markets and developing countries as a result of past debt crises, fiscal policies should seek to improve sustainability, taking into account that sustainable debt levels seem to be lower in emerging and developing countries than in advanced countries. Although much can be accomplished by individual countries through sound policies, risk management, and self-insurance through reserves, collective insurance arrangements are likely to continue playing a key role in cushioning countries from the impact of shocks.

Keywords:
OP; cost; emerging market country; commodity price futures; banking crisis dummy; crisis; terms of trade shock; lending boom date; Sudden stops; Emerging and frontier financial markets; Reserve positions; Foreign direct investment; Bonds; Global; Asia and Pacific; Africa; output event; catastrophe bond; Insurance; Caribbean
Cover IMF Staff Country Reports
Switzerland: 2006 Article IV Consultation: Staff Report; Public Information Notice on the Executive Board Discussion; and Statement by the Executive Director for Switzerland
International Monetary Fund
Switzerland showed commendable economic growth with low inflation and increasing employment. Executive Directors commended the prudent macroeconomic management, sound monetary and fiscal policy frameworks, structural reforms, and flexible labor markets. They noted that the monetary policy framework continues to serve Switzerland well, underpinned by effective practices of the Swiss National Bank (SNB). They agreed that the Swiss financial system appears to be healthy and dynamic, and appreciated the regulatory and supervisory framework, and the vigilance in monitoring financial sector risks.
Keywords:
ISCR; CR; monetary policy; deficit; expenditure growth; IMF staff projection; authority; fiscal policy framework; government activity; exchange rate; inflation expectation; spending pressure; state regulation; Income; Financial statements; Insurance; Global
Cover IMF Staff Papers
IMF Staff Papers, Volume 52, Special Issue, IMF Conference in Honor of Michael Mussa
International Monetary Fund. Research Dept.
This paper focuses on expectations for the American economy focused on the likelihood of secular stagnation, which continued to be debated throughout the post-war period. Concerns rose during the late 1960s and early 1970s about rapid population growth smothering the potential for economic growth in developing countries were contradicted when, during the mid- and late-1970s, fertility rates began to decline rapidly. In policy-oriented institutions (and in most businesses and individual decision making), policymaking decisions are often guided by projections and forward-looking indicators. The case of Michael Mussa has been one of great anticipation, and of great accomplishment, and all the early optimistic forecasts about him have turned out to be correct. Within the sphere of economics, undoubtedly the most famous and widely used forecast—one, incidentally, that thus far has often been incorrect—is that based on the Malthusian doctrine of the relationship between resources and population.
Keywords:
SP; exchange rate; country; post-World War II debate; Virginia economist George Tucker; definition of Economics; voodoo economics; hike worth; Organization for Economic Cooperation and Development country; Moral hazard; Exchange rate arrangements; Insurance; Currencies; Financial integration; Global; Southeast Asia; Sub-Saharan Africa; Western Europe; Caribbean; IMF conference; graduate class; Asset prices
Cover IMF Working Papers
Insurance Value of International Reserves: An Option Pricing Approach
Mr. Jaewoo Lee
A quantitative framework is developed to bring forward the insurance motive of holding international reserves. The insurance value of reserves is quantified as the market price of an equivalent option that provides the same insurance coverage as the reserves. This quantitative framework is applied to calculating the cost of a regional insurance arrangement (e.g., an Asian Monetary Fund) and to analyzing one leg of an optimal reserve-holding decision.
Keywords:
WP; coverage ratio; put option; option price; interest rate; Reserves; insurance; option; underlying asset; insurance value; reserve coverage ratio rise; market value; coverage ratio decrease; reserve holding; Asset valuation; Asset prices; International reserves; Options; Asia and Pacific; Global