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Europe > Norway

You are looking at 1 - 10 of 30 items for :

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Cover FinTech Notes
Cross-Border Payments with Retail Central Bank Digital Currencies: Design and Policy Considerations
Andre Reslow
,
Gabriel Soderberg
, and
Natsuki Tsuda
Many central banks are currently exploring the possibility of issuing retail central bank digital currency (CBDC). While the primary objective varies between jurisdictions, many central banks consider improved cross-border payments as a potential benefit and previous work has shown that CBDC can help overcome some of the frictions in cross-border payments. CBDC is a safe and liquid asset reducing the number of financial intermediaries and the settlement risk. Designing CBDC systems for cross-border payments is not fundamentally different from tailoring other payment systems. However, the roles and responsibilities might be slightly different in a CBDC system, and the central bank may play a more pivotal role given CBDC’s nature as public money as opposed to commercial bank money. This note draws lessons from ongoing experimentation and research to identify design and policy considerations when developing retail CBDC systems so it may be compatible for cross-border payments. The note focuses on retail CBDC—a CBDC primarily targeting households and non-financial firms—and leaves wholesale CBDC considerations for future work, although many of the discussions are applicable to wholesale CBDC and other forms of money as well.
Keywords:
central bank digital currencies; cross-border payments; fintech; foreign exchange; capital flow management; eNaira; cross-border payment; IMF Library; capital flow management measure; provider restriction; CBDC design consideration; Currencies; Anti-money laundering and combating the financing of terrorism (AML/CFT); Nonbank financial institutions; Global
Cover IMF Working Papers
Central Bank Exit Strategies Domestic Transmission and International Spillovers
Christopher J. Erceg
,
Marcin Kolasa
,
Jesper Lindé
,
Haroon Mumtaz
, and
Pawel Zabczyk
We study alternative approaches to the withdrawal of prolonged unconventional monetary stimulus (“exit strategies”) by central banks in large, advanced economies. We first show empirically that large-scale asset purchases affect the exchange rate and domestic and foreign term premiums more strongly than conventional short-term policy rate changes when normalizing by the effects on domestic GDP. We then build a two-country New Keynesian model that features segmented bond markets, cognitive discounting and strategic complementarities in price setting that is consistent with these findings. The model implies that quantitative easing (QE) is the only effective way to provide monetary stimulus when policy rates are persistently constrained by the effective lower bound, and that QE is likely to have larger domestic output effects than quantitative tightening (QT). We demonstrate that “exit strategies” by large advanced economies that rely heavily on QT can trigger sizeable inflation-output tradeoffs in foreign recipient economies through the exchange rate and term premium channels. We also show that these tradeoffs are likely to be stronger in emerging market economies, especially those with fixed exchange rates.
Keywords:
Monetary Policy; Quantitative Easing; International Spillovers; asset purchase; central bank exit strategies; inflation surge scenario; Policy conduct; appendix E. term premium; open economy; Central bank policy rate; Inflation; Unconventional monetary policies; Bonds; Exchange rate arrangements; Global
Cover IMF Staff Country Reports
Sweden: Selected Issues
International Monetary Fund. European Dept.
This Selected Issues paper analyzes inflation developments, drivers, and risks in Sweden. Inflation in Sweden started rising sharply from June 2022. Using dynamic simulations of an estimated Sweden-specific Phillips curve (PC), the team assess the role of external factors in driving recent inflation. Several factors that are poorly captured in the PC analysis, may account for the rise in unexplained inflation. Illustrative risk scenarios confirm a wide range of possible inflation paths on either direction. Renewed commodity price shocks and smaller-than-estimated slack could delay the return of inflation to target. Increasing inflation expectations, including because of renewed exchange rate pressures, would also feed into higher inflation. Core inflation could be sticker if the price setting becomes de-anchored or more backward looking. Growth in the gross domestic product deflator (as one measure of inflation) can be decomposed into three components—profits, labor costs, and taxes—to assess inflationary pressures in the economy.
Keywords:
Citi Sweden inflation surprise Index; EA inflation driver; inflation expectation; monetary policy transmission; inflation development; Inflation; Unconventional monetary policies; Currencies; Consumer price indexes; Nominal effective exchange rate; Global
Cover IMF Working Papers
Currencies of External Balance Sheets
Mr. Cian Allen
,
Deepali Gautam
, and
Luciana Juvenal
This paper assembles a comprehensive dataset of the currency composition of countries’ external balance sheets for 50 economies over the period 1990–2020. We document the following findings: (i) the US dollar and the euro still dominate global external balance sheets; (ii) there were striking changes in the currency composition across countries since the 1990s, with many emerging markets having moved from short to long positions in foreign currency, thus moving away from the so-called “original sin”; (iii) financial and tradeweighted exchange rates are weakly correlated, suggesting the commonly used trade indices do not adequately reflect the wealth effects of currency movements, and (iv) the large wealth transfers across countries during COVID-19 and the global financial crises increased global imbalances in the former, and reduced them in the latter.
Keywords:
currency composition; international investment position; foreign currency exposure; wealth effect; currency movement; currency exposure; debt liability; currency mismatch risk; pound sterling; Currencies; Exchange rates; Global financial crisis of 2008-2009; Financial statements; Global
Cover IMF Working Papers
Measurement and Use of Cash by Half the World’s Population
Mr. Tanai Khiaonarong
and
David Humphrey
The use of cash for payments is not well measured. We view the value of cash withdrawn from ATMs, or as a share of all payments, as a more accurate and timely measure of cash use compared to the standard measure of currency in circulation, or as a ratio to GDP. These two measures are compared for 14 advanced and emerging market economies. When aggregated, the trend in cash use for payments is currently falling for half the world’s population. Such a measure can help inform policy decisions regarding CBDC and regulatory decisions concerning access to and use of cash.
Keywords:
Cash; payments; access to cash; central bank digital currency; cash use; ATM cash; aggregate Currency value; value of cash; use of cash; Currencies; Monetary base; Purchasing power parity; Stocks; Payment systems
Cover IMF Working Papers
Revisiting the Monetary Transmission Mechanism Through an Industry-Level Differential Approach
Sangyup Choi
,
Tim Willems
, and
Seung Yong Yoo
We combine industry-level data on output and prices with monetary policy shock estimates for 105 countries to analyze how the effects of monetary policy vary with industry characteristics. Next to being interesting in their own right, our findings are informative on the importance of various transmission mechanisms (as they are thought to vary systematically with the included characteristics). Results suggest that monetary contractions reduce output by more in industries featuring assets that are more difficult to collateralize, consistent with the credit channel, followed by industries producing durables, as predicted by the interest rate channel. The credit channel is stronger during bad times as well as in countries with lower levels of financial development, in line with financial accelerator logic. We do not find support for the cost channel of monetary policy, nor for a channel running via exports. Our database (containing estimated monetary policy shocks for over 170 countries) may be of independent interest to researchers.
Keywords:
Monetary policy transmission; Industry growth; Financial frictions; Asymmetry in transmissions; balance sheet channel; channel of monetary policy; differential approach; IMF working papers; monetary policy stance; Financial statements; Central bank policy rate; Exchange rates; Monetary tightening; Export fluctuations; Global; credit channel; monetary policy shock; effects of monetary policy; x MPS; shock series; Credit; Financial sector development
Cover IMF Staff Country Reports
Norway: Financial Sector Assessment Program-Technical Note-Systemic Liquidity
International Monetary Fund. Monetary and Capital Markets Department
Norwegian banks and other financial institutions rely heavily on capital markets for liquidity and risk management. Liquidity conditions in the Norwegian financial sector are affected by central bank operations and the lending and funding activities of financial institutions, both domestically and abroad. Nearly 40 percent of the funding of Norwegian banks is obtained from market sources, using commercial paper, covered bonds, and senior unsecured bonds issued both domestically and abroad. Correspondingly, money markets, foreign exchange (FX) swap markets and bond markets are crucial to the credit intermediation process and a dislocation in these markets—the inability of financial institutions to roll over, or obtain new, funding—could have significant consequences for financial stability. Against this background, this note analyzes core funding markets for Norwegian banks and assesses Norges Bank’s capacity to manage systemic liquidity conditions and counteract liquidity shocks in normal times and in times of stress.
Keywords:
ISCR; CR; spot market; commercial paper; cross holdings; FX swap market; liquidity support; government bond; central bank; U.S. dollar; secondary market; mortgage loan; government bond market; market development; Liquidity; Covered bonds; Currency swaps; Sovereign bonds; Collateral; Global
Cover IMF Staff Country Reports
Norway: 2015 Article IV Consultation - Press Release; Staff Report; Informational Annex; and Statement by the Executive Director for Norway
International Monetary Fund. European Dept.
This 2015 Article IV Consultation highlights that the Norwegian economy performed well in 2014 despite the sharp fall in oil prices toward the end of the year. Mainland GDP grew at 2.2 percent, with weaker investment demand being offset by stronger government consumption. Unemployment stayed at a low level in 2014, but has recently edged up to 4.5 percent in June 2015 according to the labor force survey. The near-term outlook has weakened owing to lower oil prices. Mainland GDP growth is projected to slow to 1.3 percent in 2015 with weaker private investment and consumption. Looking further ahead, the medium and longer term present challenges of managing a transition away from the oil-dependent growth model.
Keywords:
ISCR; CR; government; price; debt; holding; liability positions vis-à-vis nonresident; SDR percent; asset price growth; inflation expectation; oil price; Oil prices; Housing prices; Inflation; Exchange rates; Global
Cover IMF Working Papers
Interest Rate Rules, Endogenous Cycles, and Chaotic Dynamics in Open Economies
Luis-Felipe Zanna
and
Mr. Marco Airaudo
We present an extensive analysis of the consequences for global equilibrium determinacy in flexible-price open economies of implementing active interest rate rules, i.e., monetary rules where the nominal interest rate responds more than proportionally to inflation. We show that conditions under which these rules generate aggregate instability by inducing liquidity traps, endogenous cycles, and chaotic dynamics depend on specific characteristics of open economies. In particular, rules that respond to expected future inflation are more prone to induce endogenous cyclical and chaotic dynamics the more open the economy to trade.
Keywords:
WP; interest rate; Small Open Economy; Interest Rate Rules; Taylor Rules; Multiple Equilibria; Chaos; Cycles and Endogenous Fluctuations; liquidity trap; exchange rate pass-through; closed economy; interest rate rule; money balance; marginal utility; Inflation; Exchange rate pass-through; Consumption; Real exchange rates; Import prices; Global
Cover IMF Working Papers
When and Why Worry About Real Exchange Rate Appreciation? The Missing Link Between Dutch Disease and Growth
International Monetary Fund
We review the literature on Dutch disease, and document that shocks that trigger foreign exchange inflows (such as natural resource booms, surges in foreign aid, remittances, or capital inflows) appreciate the real exchange rate, generate factor reallocation, and reduce manufacturing output and net exports. We also observe that real exchange rate misalignment due to overvaluation and higher volatility of the real exchange rate lower growth. Regarding the effect of undervaluation of the exchange rate on economic growth, the evidence is mixed and inconclusive. However, there is no evidence in the literature that Dutch disease reduces overall economic growth. Policy responses should aim at adequately managing the boom and the risks associated with it.
Keywords:
WP; natural resource; DD effect; exchange rate appreciation; open economy; DD shock; real exchange rate; Dutch disease; growth; exchange rate overvaluation; exchange rate volatility; learning by doing; exchange rate intervention; DD phenomenon; undervalued exchange rate; Dutch disease effects; overvalued exchange rate; DD model; Real exchange rates; Natural resources; Exchange rates; Asia and Pacific; Caribbean; Sub-Saharan Africa