Annex. 2014 TSR Recommendations
Further Integrating Risk and Spillover Analysis:
Continue integration of bilateral and multilateral surveillance. Bridge remaining gaps through REOs and cluster reports. Strengthen ISD implementation, with more systematic analysis of outward spillovers and spillbacks in systemic countries; greater quantification of the impact of spillovers on recipient countries, drawing on global risk scenarios; and discussion of policy implications.
Strengthen external sector assessment. Gradually replace CGER with EBA for a broader set of countries, subject to data availability. Undertake a comprehensive assessment of the external position using a broader set of indicators than just the exchange rate. In countries where the EBA methodology is applied, discuss the contribution of domestic policies to external imbalances, and use these results in relevant policy discussions.
Deepening Risk and Spillover Analysis:
Integrated analysis of risks and spillovers to understand how vulnerable a country is to shocks and how they will be transmitted. Revive and modernize the balance sheet analyses; develop a GFF; and extend external debt sustainability analyses to cover external flows.
Mainstream macro-financial surveillance. This could be achieved through better tools and new practices, as well as a shift in the profile of Fund economists.
Address data gaps. Implement the G-20 Data Gap Initiative.
More Tailored Policy Advice:
Strengthen surveillance of macroprudential policies as a complement to other macroeconomic policies in advanced countries and integrated emerging markets.
Continue accounting for growth and sustainability implications in fiscal advice. Undertake institutional analysis to strengthen the basis for structural fiscal balances; present fiscal advice in terms of a clear and well-justified anchor.
Be selective in advising on structural policies. Recognize all macro-critical structural issues and their implications on an economy; follow principles to determine where to provide advice: macro-criticality, and Fund expertise or interest from ‘critical mass’ of the membership (e.g., financial deepening and labor market issues); in other areas, leverage advice from other international organizations.
Value-Added Policy Advice:
Provide more cohesive policy advice in Article IVs either by discussing the policy mix explicitly or structuring Article IVs reports around economic goals or themes to better capture policy interactions.
Better leverage expert analysis and advice. Concerted efforts to draw on cross-country policy experiences; strengthen TA integration in surveillance; enhance collaboration with other organizations in specific areas.
Two-way Candid and Clear Communication:
Strengthen the policy dialogue. Expand “follow-up“ on past policy advice beyond implementation to include a reporting on changes in Fund advice; monitor the quality of engagement and policy dialogue through targeted periodic surveys.
Ensure clear and candid surveillance messages, particularly on spillovers from systemic economies; integrate key messages from the Spillover Report and the Pilot ESR into the WEO and GFSR; synthesize key Fund policy messages in the GPA; undertake more targeted communications with relevant stakeholders on the underlying analysis.
Establish a clearer understanding of how to gauge “evenhandedness of surveillance” by using equal risk-adjusted ‘inputs’ to bilateral surveillance (in keeping with the Fund’s principle of uniformity of treatment), where ‘inputs’ are calibrated to country circumstances based on domestic and cross-country risks.”
Establish a mechanism for country authorities to report concerns, and deal with identified issues transparently.
Appoint an expert group to explore how to strengthen the Fund’s role in global cooperation, including the adequacy of its mandate for ensuring global economic and financial stability.
Spillovers can arise from exogenous shocks or a country’s policies.
There could also be instances where tail risks materialized and had outward spillovers without necessarily any spillback effects.
The staff background paper on Risks and Spillovers lays out the Fund’s toolkit for spillover analysis, includes DSGE models that incorporate financial linkages to varying degrees, global VARs and balance sheet models, and presents the conclusions of an academic seminar in April 2014, which found the Fund’s models to be cutting edge.
More than five years after the collapse of Lehman Brothers, the Fund still lacks even aggregated information on global systemically important banks (GSIBs), and access to aggregated cross-border banking data is restricted.
See Mark Allen, Christoph Rosenberg, Christian Keller, Brad Setser, and Nouriel Roubini, A Balance Sheet Approach to Financial Crises, IMF Working Paper WP/02/210.
The ongoing Review of the FSAP will provide suggestions to strengthen tools and change practices.
A fiscal anchor could be specified either in terms of levels (e.g., fiscal balance, debt stock) or changes (e.g., a recommended amount of adjustment).
The staff background study on Scope of Surveillance in Low-Income Countries also makes a case for the Fund to provide advice on the taxation of natural resource revenues.
The ISD already requires that macroeconomically relevant structural aspects of monetary, fiscal and financial sector policies always be subject of bilateral surveillance.
There is a well established framework for collaboration between the Fund and the World Bank. As laid out in the 1989 IMF-World Bank Concordat and the 2007 Joint Management Action Plan on Bank-Fund Collaboration, this collaboration follows a lead-agency model. The model provides that the Fund has the primary responsibility to provide short-term macroeconomic analysis and related policy advice, while the Bank has the primary responsibility to advise on development strategies, sectoral policies, public expenditure priorities, and poverty reduction. In addition, there are areas of shared responsibility, for example, in public financial management.