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Europe > Ireland

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Cover Policy Papers
The Fund's Lending Framework and Sovereign Debt-Further Considerations
International Monetary Fund
In discussing the June 2014 paper, Executive Directors broadly supported staff’s proposal to introduce more flexibility into the Fund’s exceptional access framework to reduce unnecessary costs for the member, its creditors, and the overall system. Directors’ views varied on staff’s proposal to eliminate the systemic exemption introduced in 2010. Many Directors favored removing the exemption but some others preferred to retain it and requested staff to consult further with relevant stakeholders on possible approaches to managing contagion. This paper offers specific proposals on how the Fund’s policy framework could be changed, presents staff’s analysis on the specific issue of managing contagion, and addresses some implementation issues. No Board decision is proposed at this stage. The paper is consistent with the Executive Board’s May 2013 endorsement of a work program focused on strengthening market-based approaches to resolving sovereign debt crises.
Keywords:
PP; fund's lending framework; lending; further consideration; annex; framework; financing commitment; Market access criterion; debt restructuring; prospects lie; Debt restructuring; Debt sustainability; Spillovers; Global
Cover IMF Working Papers
Euro Area Sovereign Risk During the Crisis
Ms. Edda Zoli
and
Ms. Silvia Sgherri
While the use of public resources is critical to cushion the impact of the financial crisis on the euro-area economy, it is key that the entailed fiscal costs not be seen by markets as undermining fiscal sustainability. From this perspective, to what extent do movements in euro area sovereign spreads reflect country-specific solvency concerns? In line with previous studies, the paper suggests that euro area sovereign risk premium differentials tend to comove over time and are mainly driven by a common time-varying factor, mimicking global risk repricing. Since October 2008, however, there is evidence that markets have become progressively more concerned about the potential fiscal implications of national financial sectors' frailty and future debt dynamics. The liquidity of sovereign bond markets still seems to play a significant (albeit fairly limited) role in explaining changes in euro area spreads.
Keywords:
WP; financial market; sovereign bond; bond market
Cover IMF Working Papers
Optimal Monetary and Fiscal Policy with Limited Asset Market Participation
Sven Jari Stehn
This paper characterises the jointly optimal monetary and fiscal stabilisation policy in a new Keynesian model that allows for consumers who lacking access to asset markets consume their disposable income each period. With full asset market participation, the optimal policy relies entirely on the interest rate to stabilise cost-push shocks and government expenditure is not changed. When asset market participation is limited, there is a case for fiscal stabilisation policy. Active use of public spending raises aggregate welfare because it enables a more balanced distribution of the stabilisation burden across asset-holding and non-asset-holding consumers. The optimal response of government expenditure is sensitive to the financing scheme and whether the policymaker has access to a targeted transfer that can directly redistribute resources between consumers.
Keywords:
WP; government spending; monetary policy
Cover IMF Working Papers
Asset Market Participation, Monetary Policy Rules, and the Great Inflation
Florin Bilbiie
and
Mr. Roland Straub
This paper argues that limited asset market participation is crucial in explaining U.S. macroeconomic performance and monetary policy before the 1980s, and their changes thereafter. We develop an otherwise standard sticky-price dynamic stochastic general equilibrium model, which implies that at low asset-market participation rates, the interest rate elasticity of output (the slope of the IS curve) becomes positive - that is, "non-Keynesian." Remarkably, in that case, a passive monetary policy rule ensures equilibrium determinacy and maximizes welfare. Consequently, we argue that the policy of the Federal Reserve System in the pre-Volcker era, often associated with a passive monetary policy rule, was closer to optimal than conventional wisdom suggests and may thus have remained unchanged at a fundamental level thereafter. We provide institutional and empirical evidence for our hypothesis, in the latter case using Bayesian estimation techniques, and show that our model is able to explain most features of the "Great Inflation."
Keywords:
WP; monetary policy; interest rate; aggregate demand; Great Inflation; Limited Asset Market Participation; Passive Monetary Policy; asset market participation; asset holder; Fed policy; monetary policy rule; Phillips curve; nominal interest rate; era estimate; Securities markets; Inflation; Consumption; Hyperinflation; Real interest rates
Cover IMF Working Papers
The Microstructure of Government Securities Markets
Mr. Peter Dattels
This paper applies the “market microstructure” literature to the specific features of government securities markets and draws implications for the strategy to develop government securities markets. It argues for an active role of the authorities in fostering the development of efficient market structures.
Keywords:
WP; dealer market; central bank; debt management; government securities market; auction-agency market; order flow; price discovery; discount house; market participant; OTC dealer market; functioning dealer market; market development; equilibrium price; competing dealer market structure; dealer broker; Government securities; Brokers and dealers; Securities markets; Securities; Treasury bills and bonds
Cover IMF Staff Papers
IMF Staff papers: Volume 12 No. 1
International Monetary Fund. Research Dept.
This paper focuses on various aspects of the Euro-dollar market. The market in Euro-dollars is a wide and complicated one spread over six continents and bound together by a network of cable, telex, and telephone communication. The paperwork in the market tends to confirm rather than to initiate transactions. The financial standing of the banks in the market is such that transactions are based on names and do not involve collateral and guarantees. Some Euro-dollar funds are used to finance commercial loans and other domestic transactions, either in the form of dollars or in local currency purchased with dollars. There has been a large amount of such transactions in Germany, Italy, and Japan, and smaller amounts in many other countries, including Switzerland. The role of Euro-dollars as a money market instrument has some important implications. A substantial part of the Euro-dollar pool circulates and recirculates endlessly among banks. The rapid development of the Euro-dollar market, the facilities offered by a new money market instrument, and the increased, although gentlemanly, competition among banks on both the domestic and international scene, have been accompanied by a certain amount of exuberance.
Keywords:
SP; CFA country; Euro-dollar market; dollar; loan; term loan; Euro-dollar deposit; deficit country; Income and capital gains taxes; Income tax systems; Loans; Consumption taxes; Europe; Western Europe; West Africa; Central America