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Europe > Iceland

You are looking at 1 - 2 of 2 items for :

  • Type: Journal Issue x
  • Foreign exchange reserves x
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Cover IMF Working Papers
External Financing Risks: How Important is the Composition of the International Investment Position?
Mr. Luis M. Cubeddu
,
Mrs. Swarnali A Hannan
, and
Mr. Pau Rabanal
Building on the vast literature, this paper focuses on the role of the structure of the international investment position (IIP) in affecting countries’ external vulnerabilities. Using a sample of 73 advanced and emerging economies and new database on the IIP’s currency composition, we find that the size and structure of external liabilities and assets, especially with regards to currency denomination, matter in understanding balance-of-payments pressures. Specifically, and beyond the standard macroeconomic factors highlighted in other studies, higher levels of gross external debt increase the likelihood of an external crisis, while higher levels of foreign-currency-denominated external debt increase the likelihood of sudden stops. Foreign reserve assets play a mitigating role, although with diminishing returns, and the combination of flow and stock imbalances amplifies external risks, especially during periods of heightened global risk aversion. The results are especially strong for emerging economies, where the impact of flow and stock imbalances and foreign currency mismatches are larger and more robust across specifications.
Keywords:
international investment positions; current account; foreign reserves; sudden stops with large output loss; external crises.; WP; debt liability; foreign currency; debt liabilities increase; liability position; debt assets
Cover IMF Working Papers
Central Bank Financial Strength, Transparency, and Policy Credibility
Mr. Peter Stella
A central bank is financially strong if it possesses resources sufficient to attain its fundamental policy objective(s). Once endowed with those resources, relations between government and central bank should be designed so that significant changes in central bank financial strength do not occur unless necessitated by changes in policy objectives. The level of strength required depends on the array of policy objectives (for example, the exchange rate regime) as well as the constraints and risks presented by the operational environment. Attaining credibility is facilitated if the public can easily determine the financial strength of the bank, yet for a variety of reasons this is often difficult. Transparency requires institutional arrangements that ensure the central bank generates profit in most states of the world, is subject to strict ex post independent audit, and transfers regularly all profits, after provisions, to the treasury.
Keywords:
WP; central bank loss; monetary policy; foreign exchange; rate of inflation; Central bank losses; transparency; credibility; policy objective; profit determination; policy capability; Financial statements; Inflation; International reserves; Central bank legislation; Australia and New Zealand