Title Page
INTERNATIONAL MONETARY FUND
Monetary and Capital Markets Department
Asset Purchases and Direct Financing
Guiding Principles for Emerging Markets and Developing Economies during COVID-19 and Beyond
Prepared by Tobias Adrian, Christopher Erceg, Simon Gray, and Ratna Sahay
DP/2021/023
Title Page
Monetary and Capital Markets Department
Asset Purchases and Direct Financing
Guiding Principles for Emerging Markets and Developing Economies during COVID-19 and Beyond
Prepared by Tobias Adrian, Christopher Erceg, Simon Gray, and Ratna Sahay
INTERNATIONAL MONETARY FUND
Copyright Page
Copyright ©2021 International Monetary Fund
Cataloging-in-Publication Data
IMF Library
Names: Adrian, Tobias, 1971- | Erceg, Christopher J. | Gray, Simon (Simon Torburn), 1957- | Sahay, Ratna. | International Monetary Fund. Monetary and Capital Markets Department, issuing body. | International Monetary Fund, publisher.
Title: Asset purchases and direct financing : guiding principles for emerging markets and developing economies during COVID-19 and beyond / prepared by Tobias Adrian, Christopher Erceg, Simon Gray, and Ratna Sahay.
Other titles: Guiding principles for emerging markets and developing economies during COVID-19 and beyond | International Monetary Fund. Monetary and Capital Markets Department (Series); DP/2021/023.
Description: Washington, DC : International Monetary Fund, 2021. | Departmental paper series; DP/2021/023 | Includes bibliographical references. Identifiers: ISBN 9781513594101 (paper)
Subjects: LCSH: Banks and banking, Central—Developing economies. | Monetary policy—Developing countries. | COVID-19 Pandemic, 2020-—Economic aspects—Developing countries.
Classification: LCC HG3550.A37 2021
The Departmental Paper Series presents research by IMF staff on issues of broad regional or cross-country interest. The views expressed in this paper are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Contents
Executive Summary
1. Introduction
2. Fiscal Dominance
Limiting Adjustment of Policy Rates (and Other Instruments)
Direct Financing
Forced Remittances
3. Asset Purchases and Monetary Policy Independence: Some General Principles
4. Objectives of Asset Purchases
Improving Market Functioning
Monetary Easing Through LSAPs
Easing Government Financing Pressures
5. Minimizing Risks to Price Stability from Asset Purchase Programs
6. Primary Purchases and Overdrafts
Overdraft Finance
7. Conclusions
Annexes
Annex 1. Fiscal Dominance over Central Bank Financial Resources
Annex 2. Central Bank Overdraft Facilities
References
Figures
Figure 1. Central Bank Asset Purchases
Figure 2. Central Bank Asset Purchases, March 2020 to March 2021