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Europe > Ireland

You are looking at 1 - 10 of 18 items for :

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Cover IMF Working Papers
Micro-Assessment of Macroprudential Borrower-Based Measures in Lithuania
Mantas Dirma
and
Jaunius Karmelavičius
Despite having introduced borrower-based measures (BBM), Lithuania's housing and mortgage markets were booming during the low-interest-rate period, casting doubt on the macroprudential toolkit's ability to contain excessive mortgage growth. This paper assesses the adequacy of BBMs’ parametrization in Lithuania. We do so by building a novel lifetime expected credit loss framework that is founded on actual loan-level default and household income data. We show that the BBM package effectively contains mortgage credit risk and that housing loans are more resilient to stress than in the preregulatory era. Our BBM limit calibration exercise reveals that (1) in the low-rate environment, income-based measures could have been tighter; and (2) borrowers taking out secondary mortgages rightly are and should be required to pledge a higher down payment.
Keywords:
macroprudential policy; borrower-based measures; LTV; mortgage credit risk; lifetime expected loss; probability of default.; calibration exercise; BBM package; modeling mortgage risk; Lithuania's housing market; Mortgages; Loans; Credit risk; Housing prices; Macroprudential policy instruments; Europe; Baltics; Global
Cover IMF Working Papers
The Economics of Sovereign Debt, Bailouts, and the Eurozone Crisis
Pierre-Olivier Gourinchas
,
Philippe Martin
, and
Todd Messer
Despite a formal ‘no-bailout clause,’ we estimate significant net present value transfers from the European Union to Cyprus, Greece, Ireland, Portugal, and Spain, ranging from roughly 0.5% (Ireland) to a whopping 43% (Greece) of 2010 output during the Eurozone crisis. We propose a model to analyze and understand bailouts in a monetary union, and the large observed differences across countries. We characterize bailout size and likelihood as a function of the economic fundamentals (economic activity, debt-to-gdp ratio, default costs). Our model embeds a ‘Southern view’ of the crisis (transfers did not help) and a ‘Northern view’ (transfers weaken fiscal discipline). While a stronger no-bailout commitment reduces risk-shifting, it may not be optimal from the perspective of the creditor country, even ex-ante, if it increases the risk of immediate insolvency for high debt countries. Hence, the model provides a potential justification for the often decried policy of ‘kicking the can down the road.’ Mapping the model to the estimated transfers, we find that the main purpose of the outsized Greek bailout was to prevent an exit from the eurozone and possible contagion. Bailouts to avoid sovereign default were comparatively modest.
Keywords:
Euro area; Monetary Union; Sovereign debt; bailouts; Eurozone crisis; bailout size; no-bailout clause; debt country; debtor country; Monetary unions; Loans; Collateral; Debt default; Global
Cover IMF Working Papers
The Right Tool for the Job? Mortgage Distress and Personal Insolvency during the European Debt Crisis
Mr. Wolfgang Bergthaler
,
Jose M Garrido
, and
Anjum Rosha
The European debt crisis in the early to mid 2010s brought to the fore the issue of household debt distress: in the countries affected, widespread over-indebdtedness resulted in serious financial and social challenges. The crisis was primarily a mortgage debt crisis, but in several cases, the legal response was based on the introduction of personal insolvency procedures. This paper examines the challenges in designing and implementing legal reforms in this area to promote a better understanding of the main considerations in resolving personal insolvency and distressed mortgage debt in the context of crises. Lessons from the European crisis may prove valuable when dealing with the aftermath of the COVID-19 pandemic and the war in Ukraine on household debt distress.
Keywords:
consumer insolvency; household debt; mortgage debt; consumer debt; household debt distress; mortgage debt crisis; B. mortgage debt distress; mortgage distress; Solvency; Mortgages; Corporate insolvency; Debt sustainability; Debt settlement; Europe
Cover IMF Working Papers
Derivative Margin Calls: A New Driver of MMF Flows
Maddalena Ghio
,
Linda Rousova
,
Dilyara Salakhova
, and
German Villegas Bauer
During the March 2020 market turmoil, euro area money-market funds (MMFs) experienced significant outflows, reaching almost 8% of assets under management. This paper investigates whether the volatility in MMF flows was driven by investors’ liquidity needs related to derivative margin payments. We combine three highly granular unique data sources (EMIR data for derivatives, SHSS data for investor holdings of MMFs and Refinitiv Lipper data for daily MMF flows) to construct a daily fund-level panel dataset spanning from February to April 2020. We estimate the effects of variation margin paid and received by the largest holders of EURdenominated MMFs on flows of these MMFs. The main findings suggest that variation margin payments faced by some investors holding MMFs were an important driver of the flows of EUR-denominated MMFs domiciled in euro area.
Keywords:
liquidity risk; money market funds; big data; interconnectedness; non-bank financial intermediaries.; EUR-denominated MMFs; derivative margin calls; MMF flow; variation margin payment; VM flow; Stocks; Liquidity; Mutual funds; Nonbank financial institutions; Pension spending; Global; IMF working paper research Department; derivatives reform; margin payment; Derivative markets
Cover IMF Working Papers
Public versus Private Cost of Capital with State-Contingent Terminal Value
Luciano Greco
and
Mariano Moszoro
The economic debate underlines the reasons why discount rates of infrastructure projects should be similar, regardless the public or private source of financing, during the forecast period when flows are risky but predictable. In contrast, we show that the incompleteness of contracts between governments and private firms beyond the forecast period (i.e., when flows of net social benefits are state-contingent) entails expected terminal values that are systematically larger under government rather than private financing. This effect provides a new rationale for applying a lower discount rate in the assessment of projects under public financing as compared to private financing.
Keywords:
Social discount rate; public utilities; private financing of infrastructures; public-private partnerships; discount rates of infrastructure project; A. public financing; financing of infrastructure; private firm; cost of capital; Discount rates; Infrastructure; Public sector; Public investment spending
Cover IMF Working Papers
Differential Effects of Macroprudential Policy
Nina Biljanovska
and
Sophia Chen
We explore the differential effects of lender-based macroprudential policies on new mortgage borrowing for households of different income using a comprehensive dataset that links macroprudential policy actions with household survey data for European Union countries. The main results suggest that higher-income households on average experience a larger reduction in mortgage loan size than lower-income households when regulation targeting total lenders’ assets tightens. In contrast, lower-income households on average experience a larger reduction in mortgage loan size than higher-income households when regulation targeting lenders’ capital requirements tightens. We also provide evidence of the different channels through which the differential effects operate.
Keywords:
Household borrowing; macroprudential policy; income distribution; differential effect; higher-income household; capital requirements; household income; capital requirement; Income; Mortgages; Loans; Macroprudential policy instruments; Global
Cover IMF Working Papers
Willingness to Pay for Clean Air: Evidence from the UK
Giorgio Maarraoui
,
Walid Marrouch
,
Faten Saliba
, and
Ada Wossink
This paper uses life satisfaction data to help the design of climate mitigation policies in the United Kingdom. We assess the effects of the exposure to ambient pollutants on long-term life satisfaction and short-term mental health in the UK. We estimate augmented Cobb-Douglas utility functions using pooled and random effects ordinal logit models. Results show that increases in NO2, PM10 and PM2.5 significantly decrease the odds of longterm happiness and short-term mental health in the UK. The willingness to pay for clean air is also significant and increases with level of education. These measurements derived can be used as benchmarks for pollution abatement subsidies or pollution taxes and can help in projecting a more comprehensive assessment of costs and benefits.
Keywords:
Air Pollution; Happiness; Policy Valuation; Climate Change; Environmental Policies; Pollution Taxes; Pollution Abatement Subsidies; life satisfaction data; dataset description; air pollutant; pollutants' correlation; household data; ordinal Logit; Income; Europe; Global
Cover IMF Working Papers
Commercial Real Estate in Crisis: Evidence from Transaction-Level Data
Mr. Adrian Alter
,
Elizabeth M. Mahoney
, and
Cristian Badarinza
During the past two decades, the commercial real estate (CRE) market has been impacted by major disruptions, including the global financial crisis and the Covid-19 pandemic. Using granular data from the U.S., we document how these crises have unfolded and elaborate on the role of heterogeneity and underlying shocks. Both a set of reduced-form approaches and a structural framework suggest a prominent role for demand-side local factors in the short run, along with significant shifts in preferences during crisis episodes. However, valuations become more closely linked to macro-financial factors over the long term. A one-standard deviation tightening in financial conditions is associated with a drop of about 3% in CRE prices in the following quarter, with a stronger impact on the retail sector and milder effects in states where household indebtedness is lower.
Keywords:
Non-residential Real Estate; Financial Conditions; Liquidity; Big Data; level data; CRE price; household indebtedness; CRE market; CRE transaction; COVID-19; Real estate prices; Global financial crisis of 2008-2009; Global; Middle East and Central Asia
Cover IMF How To Notes
How to Make the Management of Public Finances Climate-Sensitive—“Green PFM”
Ozlem Aydin Sakrak
,
Bryn Battersby
,
Mr. Fabien Gonguet
,
Mr. Claude P Wendling
,
Jacques Charaoui
,
Murray Petrie
, and
Suphachol Suphachalasai
This How to Note develops the “green public financial management (PFM)” framework briefly outlined in an earlier Staff Climate Note (2021/002, published in August 2021). It illustrates, how climate change and environmental concerns can be mainstreamed into government’s institutional arrangements in place to facilitate the implementation of fiscal policies. It provides numerous country examples covering possible entry points for green PFM – phases in the budget cycle (strategic planning and fiscal framework, budget preparation, budget execution and accounting, control, and audit), legal framework or issues that cut across the budget cycle, such as fiscal transparency or coordination with State Owned Enterprises or with subnational governments. This How to Note also summarizes practical guidance for implementation of a green PFM strategy, underscoring the need for a tailored approach adapted to country specificities and for a strong stewardship role of the Ministry of Finance.
Keywords:
Public financial management; green budgeting; green public financial management; mainstreaming; climate change adaptation; climate change mitigation; public finances; PFM function; view of Green PFM; PFM practice; PFM reform; Climate change; Budget planning and preparation; Climate policy; Global
Cover IMF How To Notes
How to Evaluate Tax Expenditures
Sebastian Beer
,
Ms. Dora Benedek
,
Brian Erard
, and
Jan Loeprick
Governments use tax expenditures (TEs) to provide financial support or benefits to taxpayers. The budgetary impact of TEs can be similar to that of direct outlays: after the support is provided, less money is available to fund other government priorities. Systematic evaluations are needed to guide informed decision-mak¬ing and to avoid a situation where the narrative on the benefits of TEs is primarily driven by profiting stakeholders. By TE “evaluation,” this note refers to a process that seeks to systematically inform policymak¬ers on the desirability of introducing or maintaining specific tax benefits by gathering and analyzing avail¬able quantitative and qualitative information on their effects. Evaluation processes can be tailored to different levels of data availability and analytical capacity. An evaluation should focus on the policy objective of a TE and whether it effectively and efficiently contrib¬utes to that policy objective. Although important lessons can be learned from coun¬try practices in implementing increasingly ambitious evaluation processes, there is no single best-practice approach to replicate.
Keywords:
tax expenditures; cost-benefit assessment; public policy evaluation; sample evaluation; publication order; publication service; title page; post evaluation; Tax incentives; Compliance costs; Value-added tax; Global; East Asia