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Middle East and Central Asia > Kyrgyz Republic

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Cover IMF Working Papers
Monetary Policy Frameworks and Communication in the Caucasus and Central Asia
Omer Faruk Akbal
,
Klakow Akepanidtaworn
,
Ezequiel Cabezon
,
Mariarosaria Comunale
,
Mrs. Marina Conesa Martinez
, and
Ms. Filiz D Unsal
Central banks in Caucasus and Central Asia (CCA) have been enhancing their monetary policy frameworks in the last decade, and are at different stages of the transition to a type of inflation targeting regimes. This paper documents their progress and the current state of their monetary policy framework, utilizing the IAPOC index developed by Unsal and others (2022) covering Independence and Accountability, Policy and Operational Strategy, and Communications, as well as drawing from central banks’ laws and websites. Additionally, an analysis of press releases from CCA central banks is conducted to evaluate their features, content, and tones. The findings highlight the need for further improvements in the areas of Independence and Accountability, as well as Communications, despite some recent advancements in the latter.
Keywords:
Caucasus and Central Asia; Monetary Policy Frameworks; Communication.; CCA inflation; central banks in Caucasus and Central Asia; IMF working paper No. 2023/251; IAPOC Index; CCA country; Monetary policy communication; Inflation targeting; Inflation; Market interest rates; Central Asia and the Caucasus
Cover IMF Working Papers
Taming Financial Dollarization: Determinants and Effective Policies – The Case of Uruguay
Mr. Mauricio Vargas
and
Jesus Sanchez
With some of the most significant levels of financial dollarization in the Western Hemisphere, Uruguay is characterized by extensive dollarization in both deposits and loans. While traditional factors like high inflation and substantial devaluations have been associated with such outcome, the enduring nature of dollarization in Uruguay also underscores the importance of structural elements. In formulating a holistic strategy to reduce dollarization, not only should there be an enhancement of the monetary policy framework aimed at maintaining low, stable inflation, but it should also consider the calibration of prudential policies such as currency-differentiated reserve requirements and foreign-currency credit repos.
Keywords:
Dollarization; Prudential Policies; Monetary Policy; Uruguay; Peru.; deposit dollarization; dollarization trend; credit repo; financial dollarization; dollarization level; Inflation; Reserve requirements; Exchange rates; Currencies; Global; South America; Caribbean; Western Hemisphere
Cover IMF Working Papers
Remittances and Social Safety Nets During COVID-19: Evidence From Georgia and the Kyrgyz Republic
Nordine Abidi
,
Mehdi Akhbari
,
Bashar Hlayhel
, and
Sahra Sakha
Remittance flows in emerging market and developing economies were surprisingly resilient during the COVID-19 crisis, providing much-needed income support for remittance-receiving households. However, households were impacted differently across income distributions. Using novel high-frequency household panel data for Georgia and the Kyrgyz Republic and a difference-in-differences approach, we find that as household income fell during the pandemic, remittance-receiving households were more affected than non-remittance-receiving households. Importantly, we find that the incomes of poor, remittance-receiving households in the Kyrgyz Republic were more adversely affected than their non-remittance-receiving counterparts. In contrast, in Georgia, affluent remittance-receiving households experienced more significant income declines than poor remittance-receiving households. This heterogeneous impact can largely be explained by variations in the effectiveness of social safety nets in the two countries. Our results have important policy implications. Although remittances remained resilient during the pandemic, they affected households differently. As such, policymakers should prioritize addressing gaps in social safety nets to support the most vulnerable.
Keywords:
COVID-19; Remittances; Central Asia; remittance-receiving household; household income; remittance flow; households in Georgia; remittance-sending country; remittance receiver; Income; Social assistance spending; Income distribution; North America; Middle East and Central Asia; Global
Cover IMF Working Papers
Reducing Dollarization in the Caucasus and Central Asia
Mr. Selim Cakir
,
Maria Atamanchuk
,
Mazin Al Riyami
,
Nia Sharashidze
, and
Nathalie Reyes
Declining but still high dollarization rates in the Caucasus and Central Asia (CCA) region affect macroeconomic stability, monetary policy transmission, and financial sector development. Although several studies have investigated the dynamics of dollarization in the CCA, the relative roles of macrofinancial policies and financial market development in the de-dollarization process have not yet been assessed empirically. This paper takes stock of de-dollarization efforts and explores the short-term drivers of financial de‐dollarization in the CCA region. It highlights that there remains significant scope to further reduce dollarization through continued progress in strengthening macroeconomic policy frameworks and in developing markets and institutions.
Keywords:
Dollarization; Foreign Currency; Foreign Exchange; FX; Monetary Policy; Central Asia; Caucasus; CCA.; deposit dollarization; De-dollarization policy; credit dollarization; dollarization to a shock; dollarization in the CCA region; Currencies; Credit; De-dollarization; Central Asia and the Caucasus; rates in the Caucasus and Central Asia; dollarization to issuance; Reserve requirements
Cover IMF Working Papers
Financial Development and Growth in the Caucasus and Central Asia
Mr. Tigran Poghosyan
This paper presents stylized facts on financial development in the CCA countries relative to their EM and LIC peers and assesses how financial development can boost growth in the CCA. Drawing on IMF’s multidimensional index of financial development, we find that CCA countries have made progress following the independence in early 1990s. However, the progress was uneven across the CCA, resulting in a divergence of financial development over time and mixed performance relative to EM and LIC peers. Financial institutions have progressed the most, while financial markets remain underdevelped in most CCA countries except Kazakhstan. In terms of sub-indicators of financial development, financial access has expanded markedly, while the depth of financial intermediation has remained largely shallow and efficiency of financial intermediation has fluctuated over time. Standard growth regressions suggest that CCA countries with relatively lower level of financial development have scope to boost annual growth rates between 0.5-2.5 percent by reaching the level of financial development of frontier CCA countries.
Keywords:
Caucasus and Central Asia; financial development; output growth; CCA country; financial markets market index; growth regression; LIC peer; growth in the Caucasus; Financial sector development; Stock markets; Financial statistics; Central Asia and the Caucasus; CCA economy; CCA LIC; CCA EM; financial institution index
Cover IMF Working Papers
Digital Money and Central Bank Operations
Mr. Charles M. Kahn
,
Mr. Manmohan Singh
, and
Jihad Alwazir
The rise of new and proposed monetary vehicles, including CBDC, stablecoins, payment service providers etc., are unprecedented. An important question for central banks is the extent to which these innovations upend the role of and implementation of monetary policy. The paper focuses on the interest rate channel and if digital money (especially CBDC) will change monetary policy and central bank operations. We argue that new policy instruments make sense only to the extent that there is limited substitutability between the various payment sectors. We analyze trends in currency-in-circulation, and how it may impact central bank’s seigniorage, monetary base, and transactional velocity of digital money if money demand declines. Liquidity outside the monetary base will also be important to understand.
Keywords:
Base money; CBDC; central banking operations; currency in circulation; digital money; mobile phone operators; seigniorage; central bank operations Charles Kahn; jihad Alwazir; lender-of-last-resort facilities; payments assets; phone company payments account; central bank profits; central bank regulation; Monetary base; Digital currencies; Central Bank digital currencies; Currencies; Commercial banks
Cover IMF Working Papers
Monetary Policy Frameworks: An Index and New Evidence
Ms. Filiz D Unsal
,
Mr. Chris Papageorgiou
, and
Hendre Garbers
We provide a multidimensional characterization of monetary policy frameworks across three pillars: Independence and Accountability, Policy and Operational Strategy, and Communications (IAPOC). We construct the IAPOC index by analyzing central banks’ laws and websites for 50 advanced economies, emerging markets, and low-income developing countries, from 2007 to 2018. Due to its scope and granularity, our index provides a holistic view of monetary policy frameworks which goes beyond existing measures of transparency or independence, as well as monetary policy or exchange rate regime classifications. Comparing the IAPOC index across countries and over time, we find that monetary policymaking is varied, fast-changing, and eclectic across the Policy and Operational Strategy and Communications pillars, especially in emerging markets and low-income developing countries.
Keywords:
Monetary Policy; Monetary Policy Regime; Exchange Rate Regime; Central Banks; Central Bank Independence; Central Bank Transparency; IAPOC index; B. II; strengthening of Independence; regime classification; novel Policy; transparency indices; Monetary policy frameworks; Exchange rate arrangements; Inflation targeting; Exchange rate flexibility; Central bank autonomy; Africa; Global
Cover IMF Working Papers
The Impact of International Migration on Inclusive Growth: A Review
Zsoka Koczan
,
Magali Pinat
, and
Mr. Dmitriy L Rozhkov
International migration is an important channel of material improvement for individuals and their offspring. The movement of people across country borders, especially from less developed to richer countries, has a substantial impact in several dimensions. First, it affects the migrants themselves by allowing them to achieve higher income as a result of their higher productivity in the destination country. It also increases the expected income for their offspring. Second, it affects the destination country through the impact on labor markets, productivity, innovation, demographic structure, fiscal balance, and criminality. Third, it can have a significant impact on the countries of origin. It may lead to loss of human capital, but it also creates a flow of remittances and increases international connections in the form of trade, FDI, and technological transfers. This paper surveys our understanding of how migration affects growth and inequality through the impact on migrants themselves as well as on the destination and origin countries.
Keywords:
International Migration; Inequality; Economic growth; complementarity effect; consequences of migration; E. country case; origin country; wage effect; Migration; Remittances; Labor markets; Wages; Income; Global; Eastern Europe; costs of emigration; impact of migration; wage effect of migration
Cover IMF Working Papers
Macroprudential Policies, Economic Growth, and Banking Crises
Mohamed Belkhir
,
Samy Ben Naceur
,
Bertrand Candelon
, and
Jean-Charles Wijnandts
Using a sample that covers more than 100 countries over the 2000-2017 period, we assess the impact of macroprudential policies on financial stability. In particular, we examine whether the activation of macroprudential policies is conducive to a lower incidence of systemic banking crises. Our empirical setup is designed to account for the potential direct and indirect effects that macroprudential policies can have on banking crises. We find that while macro-prudential policies exert a direct stabilizing effect, they also have an indirect destabilizing effect, which works through the depressing of economic growth. A Generalized Impulse Response Function analysis of a dynamic system composed of the probability of a banking crisis and economic growth reveals, however, that macroprudential policies have a positive net effect on financial stability (lower likelihood of systemic banking crises).
Keywords:
WP; policy; policy tightening; Macroprudential Policies; Banking crises; Economic Growth; prudential policy; macroprudential policy; crisis probability; macropru-dential policy; crisis index; tools lead; countercyclical policy tool; banking crisis database; policy instrument; policy tool; macropudential policy; Macroprudential policy; Systemic crises; Emerging and frontier financial markets; Global; aggregate mpi
Cover Departmental Papers
Building Resilient Banking Sectors in the Caucasus and Central Asia
Miss Mercedes Vera Martin
,
Mr. Tarak Jardak
,
Mr. Robert Tchaidze
,
Mr. Juan P Trevino
, and
Mrs. Helen W Wagner
External shocks since 2014—lower oil prices and slower growth in key trading partners—have put financial sectors, mainly banks, in the eight Caucasus and Central Asia (CCA) countries under increased stress.  Even before the shocks, CCA banking sectors were not at full strength. Asset quality was generally weak, due in part to shortcomings in regulation, supervision, and governance. The economies were highly dollarized. Business practices were affected by lack of competition and, in most countries, connected lending, which undermined banking sector health. Shortcomings in financial regulation and supervision allowed the unsound banking practices to remain unaddressed. The external shocks exacerbated in these underlying vulnerabilities. Strains in CCA banking sectors intensified as liquidity tightened, asset quality deteriorated, and banks became undercapitalized. These challenges have required public intervention in some cases.
Keywords:
DPPP; DP; bank; banking sector; central bank; nonperforming loan; bank management; CCA country; nonviable bank; diversification strategy; bank nationalization; problem bank; public funds; bank corporate governance; Nonperforming loans; Bank resolution framework; Credit; Commercial banks; Loans; Global; Central Asia and the Caucasus