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IMF POLICY PAPER

2021 COMPREHENSIVE SURVEILLANCE REVIEW—BACKGROUND PAPER ON TRACTION

May 2021

IMF staff regularly produces papers proposing new IMF policies, exploring options for reform, or reviewing existing IMF policies and operations. The following documents have been released and are included in this package:

• The Staff Report, prepared by IMF staff and completed on March 19, 2021 for the Executive Board’s consideration on May 10, 2021.

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International Monetary Fund

Washington, D.C.

© 20[xx] International Monetary Fund

2021 Comprehensive Surveillance Review—Background Paper on Traction

March 19, 2021

EXECUTIVE SUMMARY

Traction is at the center of Fund surveillance, but measuring it is difficult. This paper presents traction as a multidimensional concept and discusses a comprehensive and complementary set of approaches to attempt to measure it based on the Fund’s value added to policy dialogue and formulation and public debate in member countries.

Five interrelated pillars were used to analyze traction. Surveys of Executive Directors and authorities assessed their views on the usefulness and quality of dialogue with the Fund in the context of surveillance. Sentiment analysis on authorities’ views in Article IV Staff Reports using deep learning techniques provided a cross-country and time-varying measure of authorities’ reception of Fund policy advice at the time of Article IV consultations. Implementation of Fund Article IV advice (hitherto the only measure of Fund traction considered in surveillance) was considered through the lens of a novel database based on Article IV Staff Reports. Uptake of Fund surveillance products by the broader public measured the extent to which surveillance generates public debate. Case studies of good traction covering elements of all the aforementioned approaches provided a comprehensive assessment of traction and highlighted key lessons learned.

The paper finds that authorities’ reception of Fund Article IV advice is typically high, with 75 percent agreement on average with Fund advice during Article IV consultations over the last two decades, while implementation was lower at 54 percent over 2014-2018. Regardless of the measure, traction differs across income groups and policy areas and is typically strongest for low income countries and in the areas of fiscal, structural and financial policy and weakest for advanced economies and for monetary and external sector policy. Traction improves during surveillance in countries undergoing financial sector stability assessments (FSSA) and receiving Fund capacity development (CD) support. In countries with Fund-supported programs, the reception of Article IV advice is higher during the program period compared to before or after. These findings highlight the importance of better integration of capacity and institutional building in improving traction in surveillance.

The paper also finds that external communication is an effective tool to influence ongoing national policy dialogues. Surveys to gauge readership of Fund products revealed that there is room to improve the readability of surveillance reports as well as candor and specificity of key messages and Fund advice. The analysis also showed that traction can be higher when surveillance is supported with extensive outreach, including through management visits. The case studies of good traction confirmed that the specificity and traction of Fund advice significantly improves with CD. They also revealed that engaging continuously with the authorities and assisting them on their country-specific challenges, be it through providing timely and robust analytical work and cross-country experience, and/or discussing alternative policy options and trade-offs with them, while recognizing their political economy constraints, are all key elements of good traction.

While a large part of the analysis was completed pre-COVID, a few points of emphasis for the analysis that emerged after the outbreak of COVID-19 include that: (i) the Fund’s insights into global and regional developments and prospects received greater reception according to EDs and authorities, (ii) while most mission chiefs of the case studies noted increasing or unchanged engagement despite a temporary suspension of Article IV consultations, they emphasized that challenges of virtual engagement were also pronounced, and (iii) the WEO, among flagships, and the Fund’s new policy tracker built in the midst of the COVID-19 crisis receive the most public attention.

Approved By

Ceyla Pazarbasioglu

Contents

• SURVEYS

• SENTIMENT ANALYSIS

• A. Constructing the Sentiment Index

• B. Analyzing the Sentiment Index

• IMPLEMENTATION OF ARTICLE IV POLICY ADVICE

• A. The Database

• B. Implementation Status

• C. Factors Behind Implementation

• THE ROLE OF COMMUNICATIONS IN INFLUENCING POLICY DIALOGUE

• A. Media Mentions Database

• B. Surveys of Non-Media Stakeholders and Media

• C. Website, Media and Data Readability

• D. Traction during COVID

• CASE STUDIES OF GOOD TRACTION

• A. Countries and Process

• B. Key Findings

• C. Traction post-COVID

• FIGURES

• 1. Insights from Responses of Surveys to Authorities and EDs

• 2. Average Sentiments Across Country Groups–Interquartile Range

• 3. Average Sentiments Across Sectors and Fund Engagement

• 4. Implementation by Country Group, Policy Areas, and Fund Engagement

• TABLES

• 1. Examples of Reasons for No or Partial Implementation

• 2. Implementation vs. Reception of Fund Advice