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Business and Economics > Investments: Futures

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Cover IMF How To Notes
How to Implement Strategic Foresight (and Why)
Mr. Alberto Behar and Sandile Hlatshwayo
This note explains the value of strategic foresight and provides implementation advice based on the IMF’s experience with scenario planning and policy gaming. Section II provides an overview of strategic foresight and some of its tools. Scenario planning and policy gaming have been the Fund’s main foresight techniques so far, though other tools have been complementary. Accordingly, section III focuses on the scenario planning by illustrating applications before detailing the methods we have been using, while section IV describes policy gaming including the matrix policy gaming approach with which we have experimented so far. Section V summarizes the key points. In so doing, the note extends an invitation to those in the economics and finance fields (e.g., researchers, policymakers) to incorporate strategic foresight in their analysis and decision making.
Keywords:
risk-preparedness framework; Policy game; data IMF Library; guidance note; scenario planning; Futures; Stress testing; Emerging and frontier financial markets; COVID-19; Global
Cover IMF Working Papers
Monetary Policy Surprises and Inflation Expectation Dispersion
Bertrand Gruss, Mrs. Sandra V Lizarazo Ruiz, and Mr. Francesco Grigoli
Anchoring of inflation expectations is of paramount importance for central banks’ ability to deliver stable inflation and minimize price dispersion. Relying on daily interest rates and inflation forecasts from major financial institutions in the United States, we calculate monetary policy surprises of individual analysts as the unexpected changes in the federal funds rate before the meetings of the Federal Reserve Board. We then assess the effect of monetary policy surprises on the dispersion of inflation expectations, a proxy for the extent of anchoring, which is based on the same analysts’ inflation projections submit-ted after the Fed meetings. With an identification strategy that hinges on a tight window around the Fed meetings, we find that monetary policy surprises lead to an increase in the dispersion of inflation expectations up to nine months after the policy meeting. We rationalize these results with a partial equilibrium model that features rational expectations and sticky information. When we allow the degree of information rigidity to depend on the realization of firm-specific shocks, the theoretical results are qualitatively consistent and quantitatively close to the empirical evidence.
Keywords:
Anchoring; disagreement; dispersion; information rigidity; in?ation expectations; sticky information.; WP; inflation expectation; expectation dispersion; monetary policy surprise; price level; inflation dispersion; inflation expectation formation mechanism; inflation expectations; sticky information; expectation decrease; expectation disagreement; inflation release; standard deviation; Inflation; Inflation targeting; Central bank policy rate; Futures; Global
Cover IMF Working Papers
Anatomy of Sudden Yen Appreciations
Mr. Fei Han and Mr. Niklas J Westelius
The yen is an important barometer for the Japanese economy. Depreciations are typically associated with favorable economic developments such as increased corporate profits, rising equity prices, and upward pressure on domestic consumer prices. On the other hand, large and sharp appreciations run the risk of lowering actual and expected inflation, squeezing corporate profits, generating a negative wealth effect through depressed equity prices, and reducing confidence in the Bank of Japan’s efforts to reflate the domestic economy and achieve the inflation target. This paper takes a closer look at underlying drivers of rapid yen appreciations, highlighting the key role of carry-trade and the zero lower bound as important amplifiers.
Keywords:
WP; carry trade; yen; yen appreciation; appreciation; carry trade reversal; safe haven effects; exchange rate appreciations; Japan; carry trade position; carry trade activity; interest rate differential; Exchange rates; Currencies; Vector autoregression; Futures; Zero lower bound; Global
Cover IMF Staff Country Reports
The People's Republic of China: Financial Sector Assessment Program; Systemic Oversight of Financial Market Infrastructures - Technical Note
International Monetary Fund. Monetary and Capital Markets Department
This Technical Note analyzes financial stability issues related to financial market infrastructures (FMIs) in China. Since the previous Financial Sector Assessment Program, the supervision and oversight of FMIs has strengthened through the adoption of the CPSS–IOSCO (Committee on Payment and Settlement Systems/International Organization of Securities Commissions) Principles for FMIs (PFMI). The public adoption of the PFMI by the authorities in 2013 and the establishment of an interagency platform to assess FMIs are commendable. Full implementation of the principles by FMIs is the next step and is expected to enhance the resilience and stability of the FMIs.
Keywords:
ISCR; CR; PBC law; PBC payment system participant; central bank; PBC's Accounting Department; credit risk; private sector liquidity; liquidity provider; oversight of the PBC; PBC's regulation; FMIs in China; CSRC's supervision; derivatives OTC derivative; oversight FMIs; chairman of the board; PFM information systems; Principles for Financial Market Infrastructures; Payment systems; Futures; Legal support in revenue administration; Global
Cover IMF Working Papers
The Relative Effectiveness of Spot and Derivatives Based Intervention: The Case of Brazil
Milan Nedeljkovic and Christian Saborowski
This paper studies the relative effectiveness of foreign exchange intervention in spot and derivatives markets. We make use of Brazilian data where spot and non-deliverable futures based intervention have been used in tandem for more than a decade. The analysis finds evidence in favor of a significant link between both modes of intervention and the first two moments of the real/dollar exchange rate. As predicted by theory for the case of negligible convertibility risk, the impact of spot market intervention in our baseline sample is strikingly similar to that achieved through futures based intervention worth an equivalent amount in notional principal.
Keywords:
WP; futures intervention; futures contract; intervention; dollar; FX Intervention; Derivatives; Exchange rates; spot intervention; intervention variable; FX futures; long-dollar futures intervention; dollar position; forward market; futures intervention need; Futures; Currency swaps; Exchange rate adjustments; Global
Cover IMF Staff Country Reports
Brazil: Selected Issues
International Monetary Fund. Western Hemisphere Dept.
This paper assesses the importance of financial market developments for the business cycle in Brazil. The results underscore the importance of macro-financial linkages and highlight risks to the recovery going forward. Although some of the rise in credit growth in Brazil can be attributed to financial deepening and rising income levels, it may have implications for economic activity going forward. Cross-country evidence suggests that periods of easy financial conditions can amplify economic fluctuations and possibly lead to adverse economic outcomes. To explore the nexus between the financial cycle and business cycle, cycles are estimated using a variety of commonly-used statistical methods and with a small, semi-structural model of the Brazilian economy. An advantage of using the model-based approach is that financial and business cycles can be jointly estimated, allowing information from all key economic relationships to be used in a consistent way. Financial sector developments are found to be an important source of macroeconomic fluctuations. Financial accelerator models highlight the role of credit and asset prices in shaping the business cycle.
Keywords:
ISCR; CR; futures intervention; credit; central bank; income; consumption growth; interest income; inflation expectation; growth model; state debt; Pension spending; Futures; Exchange rates; Inflation; Aging; Global; Central America; Africa; Europe