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Law > Business and Financial

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Cover IMF Staff Country Reports
Chile: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Chile
International Monetary Fund. Western Hemisphere Dept.
The 2023 Article IV Consultation highlights that macroeconomic imbalances built during the pandemic have been largely resolved, supported by tighter macroeconomic policies deployed during late 2021–22 in Chile. Growth is expected to pick up to close to 2 percent in 2024 and 2–2.5 percent in the medium term. Inflation is projected to converge to the 3-percent target in 2024. Key external risks are the uncertainties around the potentially higher-for-longer interest rates in advanced economies, a growth slowdown in major trading partners, and the intensification of regional conflicts in the world. Policies have supported macroeconomic stability. In the context of disinflation acceleration, the Central Bank of Chile lowered the monetary policy rate by 400 basis points since July 2023. The headline fiscal balance is estimated to decline to about -2.5 percent of gross domestic product in 2023 due to weaker tax revenues amid an economic slowdown, lower copper prices, and other transitory factors. The 2024 budget envisions a moderate deficit reduction within a medium-term fiscal plan to a broadly balanced fiscal position by 2026. The ongoing implementation of the countercyclical capital buffer will strengthen financial resilience in periods of stress.
Keywords:
basket weight; CPI data; CPI calculation methodology; liability positions vis-à-vis nonresident; money market rate; Fiscal stance; Inflation; Income; Global; Caribbean
Cover Shocks and Capital Flows
Shocks and Capital Flows
Policy Responses in a Volatile World

Abstract

The high exposure of open economies to shocks makes them particularly vulnerable to volatile capital flows and advanced economy monetary policy spillovers. How should and do domestic policymakers respond? The traditional answer has been to use flexible exchange rates as a shock absorber. But flexible exchange rates may not offer full insulation when financial markets are imperfect. This book brings together recent empirical studies at the International Monetary Fund (IMF) on the effectiveness of different tools in responding to such shocks. The 18 chapters in this volume provide a rich background to the recently launched Integrated Policy Framework by the IMF. They comprise assessments of countries’ actual use of different tools, as well as in-depth evaluations of their effectiveness and side effects, covering macroprudential policies, monetary policy, foreign-exchange intervention, and capital flow management policies. Many of the studies involve new data and methods to tackle the inherently difficult problems in identifying and comparing the effects of policies under different circumstances. As a result, the volume offers the reader a comprehensive, in-depth coverage of the policy-oriented empirical research that has informed the development of a new way of thinking about open-economy macroeconomics at the IMF.

Keywords:
Capital flows; monetary policy; exchange rate policy; foreign exchange intervention; macroprudential policy; capital controls; FX debt; account restrictiveness; exchange rate intervention; IT regime; Exchange rates; Macroprudential policy instruments; Global; Asia and Pacific; Caribbean; Central America; Europe
Cover Policy Papers
Review of the Flexible Credit Line, The Short Term Liquidity Line and the Precautionary and Liquidity Line, and Proposals for Reform
International Monetary Fund. Strategy, Policy, & Review Department
The Fund’s precautionary toolkit rests on the simple proposition that facilitating crisis prevention is far less costly than crisis resolution. Its value increases with systemic risk. Serial shocks to the global trading and financial systems pose significant and persistent headwinds for well-integrated emerging markets. An adequately funded global financial safety net (GFSN) with a suite of precautionary tools allows qualifying members to respond to balance of payments (BoP) shocks, reducing the incidence of crises and limiting contagion. The Fund is the only layer of the GFSN available to all members; other layers vary in their availability and externalities. In this context, the overarching objective of this review of the Flexible Credit Line (FCL), Short-term Liquidity Line (SLL), and Precautionary and Liquidity Line (PLL) is to ensure that the precautionary facilities toolkit (henceforth “the toolkit”) is fit for purpose for the challenges ahead.
Keywords:
Flexible Credit Line (FCL); Short-term Liquidity Line (SLL); Precautionary and Liquidity Line (PLL); Global Financial Safety Net (GFSN); PLL qualification assessment; FCL arrangement; SLL reform package; qualification assessment; FCL user; SLL access; SLL instrument; SLL Arrangements; Balance of payments need; Anti-money laundering and combating the financing of terrorism (AML/CFT); Liquidity; Debt sustainability; Global; Western Hemisphere
Cover IMF Staff Country Reports
Chile: 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Chile
International Monetary Fund. Western Hemisphere Dept.
This 2016 Article IV Consultation highlights that GDP growth in Chile has been weak, with activity slowing in October. However, conditions are in place for the economy to recover. After expanding by a moderate 1.7 percent in 2016, growth is forecast to increase to 2 percent in 2017. Faster growth in main regional partners and more stable copper prices are expected to lift exports and investment. The recovery is, however, projected to be gradual, held back by slow wage and job growth and still low business confidence. The financial sector appears healthy. Banks’ profitability is declining, but capital buffers are adequate and nonperforming loan rates are low.
Keywords:
ISCR; CR; expectations survey; expectation; monetary policy rate; November survey; staff appraisal; liability positions vis-à-vis nonresident; Pension spending; Credit; Global
Cover IMF Working Papers
The Development of Local Capital Markets: Rationale and Challenges
Mr. Luc Laeven
Capital markets can improve risk sharing and the efficiency with which capital is allocated to the real economy, boosting economic growth and welfare. However, despite these potential benefits, not all countries have well developed capital markets. Moreover, government-led initiatives to develop local capital markets have had mixed success. This paper reviews the literature on the benefits and costs of developing local capital markets, and describes the challenges faced in the development of such markets. The paper concludes with a set of policy recommendations emerging from this literature.
Keywords:
WP; capital market; bond market; market; market development; local capital markets; stock markets; bond markets; capital market development; economic development; financial markets; fully fledged physical capital capital market; investor right; market conduct; physical capital; market size; Securities markets; Capital markets; Financial market infrastructure; Securities regulation; Global
Cover IMF Staff Country Reports
Chile: Staff Report for the 2014 Article IV Consultation
International Monetary Fund. Western Hemisphere Dept.
KEY ISSUES Politics: President Bachelet won the Presidential election on a platform to foster inclusive growth and reduce inequality. Her government took office in March 2014 and is launching an ambitious policy agenda that includes important reforms in several areas, including taxation, education, productivity, and energy. Outlook and risks: Chile’s global environment is shifting, with a dimmer outlook for its main export, copper, and normalization of global monetary conditions. Growth has slowed markedly, resulting in a modest output gap. The peso has depreciated, feeding into inflation. Staff projects growth to bottom out in 2014 and then gradually recover. Key risks relate to a large and lasting drop in copper prices and global financial volatility. Policy mix: The freely floating peso is working as a shock absorber and will support the economic recovery. The policy mix with broadly neutral fiscal and accommodative monetary policy is appropriate. Room for further monetary easing has narrowed but space remains if domestic demand flounders, so long as inflation expectations remain well anchored. On fiscal, given the strong public finances, automatic stabilizers should be allowed to operate unimpeded and there is space for stimuli in the event of a major downturn. The commitment to close the structural fiscal deficit by 2018 is appropriate and should be phased in a way that avoids undue drag on the recovery. Should risks materialize, the freely floating currency is the first line of defense. Growth and equity reforms: Achieving strong growth while reducing inequality will require structural reforms. The authorities’ agenda focuses on the right areas but many details remain work in progress. Clarity on the details, timetables, and prioritization will reduce uncertainty and the risk of delays. Financial stability: Risks to financial stability appear contained, but it will be important to push through with regulatory reforms underway, including initiatives currently in Congress. Further effort will be needed to close regulatory gaps, in particular bank capital requirements, relative to international benchmarks.
Keywords:
ISCR; CR; rate; economy; GDP; liability positions vis-à-vis nonresident; monetary policy rate; Chilean authorities; evaluation system; expansionary monetary policy stance; structural surplus; Metal prices; Exports; Global
Cover IMF Working Papers
Building Blocks for Effective Macroprudential Policies in Latin America: Institutional Considerations
Patrick A. Imam
,
Erlend Nier
, and
Mr. Luis Ignacio Jácome
An increasing number of countries - including in Latin America - are reforming their financial stability frameworks in the aftermath of the financial crisis, in order to establish a stronger macroprudential policy function. This paper analyzes existing arrangements for financial stability in Latin America and examines key issues to consider when designing the institutional foundations for effective macroprudential policies. The paper focuses primarily on eight Latin American countries, where the institutional arrangements for monetary and financial policies can be classified in two distinct groups: the "Pacific" model that includes Chile, Colombia, Peru, Costa Rica, and Mexico, and the "Atlantic" model, comprising Argentina, Brazil, and Uruguay.
Keywords:
WP; financial system; issues regulation; a number of crises country; monetary policy; section III; Macrorpudential policy; financial stability; systemic crises; central banks; banking supervision; supervisory agency; deposit guarantee; response policy; Financial sector stability; Macroprudential policy; Systemic risk; Global
Cover IMF Staff Position Notes
Global Financial Regulatory Reform: Implications for Latin America and the Caribbean (LAC)
Mr. Robert Rennhack
The Latin America and Caribbean (LAC) region has weathered the global financial crisis reasonably well so far, although tighter global financial conditions began to take their toll on trade, capital flows and economic growth in late 2008. This resilience reflects the reforms put in place by many countries over the past decade to strengthen financial supervision and adopt sound macroeconomic policies. Building on this progress, the region’s financial sector reform agenda now aims at further improvements, including steps aiming to improve compliance with the Basel Core Principles of Banking Supervision and to broaden and deepen domestic financial markets.
Keywords:
SPN; financial activity; capital market; balance sheet; lender of last resort; banking system; currency swap; commercial paper; reverse repo; bank-risk indicator; mortgage lender; parent bank; bank affiliate; repurchase agreement; bank mortgage lender; preferred shares; Credit; Capital adequacy requirements; Liquidity; Global; Caribbean; Central America
Cover Accountability Arrangements for Financial Sector Regulators
Accountability Arrangements for Financial Sector Regulators
Ms. Eva H. G. Hüpkes
,
Mr. Michael W Taylor
, and
Mr. Marc G Quintyn

Abstract

Policymakers are often reluctant to grant independence to the agencies that regulate and supervise the financial sector because of the fear that these agencies, with their wide-ranging responsibilities and powers, could become a law unto themselves. This pamphlet describes mechanisms for making regulatory agencies accountable not only to the government but also to the industry they supervise and the public at large, with examples from a range of countries.

Keywords:
EI; RSA; independence; RSAS' mandate; committee; RSA independence
Cover Dispositifs de responsabilisation pour les régulateurs du secteur financier
Dispositifs de responsabilisation pour les régulateurs du secteur financier
Ms. Eva H. G. Hüpkes
,
Mr. Michael W Taylor
, and
Mr. Marc G Quintyn

Abstract

Les décideurs rechignent souvent à accorder l’indépendance aux agences qui réglementent et supervisent le secteur financier, car ils craignent que ces agences, avec leurs responsabilités et leurs pouvoirs étendus, puissent imposer leur loi. Cette brochure décrit les mécanismes permettant de garantir que ces agences soient redevables non seulement envers l'État, mais également envers le secteur qu'elles supervisent et envers le grand public, et propose des exemples de divers pays.

Keywords:
EI; RSA; independence; RSAS' mandate; committee; RSA independence