Selected Reference and Reading Materials compiled by Dan Villanueva


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Record ID

539     [ Page 16 of 68, No. 1 ]

Date

2014-08

Author

Ray C. Fair

Affiliation

Cowles Foundation, Department of Economics, Yale University

Title

How Might a Central Bank Report Uncertainty?

Summary /
Abstract

An important question for central banks is how they should report the uncertainty of their forecasts. This paper discusses a way in which a central bank could report the uncertainty of its forecasts in a world in which it used a single macroeconometric model to make its forecasts and guide its policies. Suggestions are then made as to what might be feasible for a central bank to report given that it is unlikely to be willing to commit to a single model. A particular model is used as an illustration.

Keywords

Central bank; uncertainty; stochastic simulation

URL

http://www.economics-ejournal.org/economics/journalarticles/2014-27/version_1/count



Record ID

538     [ Page 16 of 68, No. 2 ]

Date

2014-07

Author

Irina Balteanu and Aitor Erce

Affiliation

Banco de España

Title

Banking crises and sovereign defaults in emerging markets: exploring the links

Summary /
Abstract

This paper provides a set of stylised facts on the mechanisms through which banking and sovereign distress feed into each other, using a large sample of emerging economies over three decades. We first define “twin crises” as events where banking crises and sovereign defaults combine, and further distinguish between those banking crises that end in sovereign debt crises, and vice-versa. We then assess what differentiates “single” episodes from “twin” ones. Using an event analysis methodology, we study the behaviour around crises of variables describing the balance sheet interconnection between the banking and public sectors, the characteristics of the banking sector, the state of public finances and the macroeconomic context. We find that there are systematic differences between “single” and “twin” crises across all these dimensions. Additionally, we find that “twin” crises are heterogeneous events: taking into account the proper time sequence of crises within “twin” episodes is important for understanding their drivers, transmission channels and economic consequences. Our results shed light on the mechanisms surrounding feedback loops of sovereign and banking stress.

Keywords

Banking crises, sovereign defaults, feedback loops, balance sheets

URL

http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/14/Fich/dt1414e.pdf



Record ID

537     [ Page 16 of 68, No. 3 ]

Date

2014-06

Author

IMF Policy Paper

Affiliation

IMF

Title

Update on the Fiscal Transparency Initiative

Summary /
Abstract

This paper provides an update on staff’s work on a new Fiscal Transparency Code (FTC) and experiences with the initial pilot Fiscal Transparency Evaluations (FTE), the ground work for which was laid in a 2012 paper “Fiscal Transparency, Accountability, and Risk.” Both are part of ongoing efforts by the Fiscal Affairs Department, in cooperation with other departments, to strengthen the Fund’s fiscal surveillance and capacity building.

The new FTC and FTE reflect the lessons of the recent crisis, incorporate developments in international standards, and build on feedback from consultations with stakeholders. The new FTC addresses the weaknesses of the existing FTC from 2007 and focuses on information needed for effective fiscal management and surveillance. Its 36 principles (i) concentrate on outputs rather than processes; (ii) differentiate between basic, good, and advanced practices to provide less developed countries with clear milestones toward international standards; (iii) stress the analysis and management of fiscal risks; and (iv) better complement other fiscal standards and diagnostics.

The FTC has a four-pillar structure: (i) Pillar I on fiscal reporting calls for fiscal statistics and accounts to provide relevant, comprehensive, timely, and reliable information on the government’s financial position and performance; (ii) Pillar II on fiscal forecasting and budgeting emphasizes the need for budget documentation to provide a clear statement of the government’s fiscal and policy objectives, and timely and credible forecasts for the evolution of public finances; (iii) Pillar III on fiscal risk analysis and management stresses the importance of comprehensive disclosure, analysis, and control of the key risks to the public finances; and (iv) Pillar IV on resource revenue management addresses transparency issues related to natural resource endowments and revenues. Work on the first three Pillars has been completed, with Pillar IV scheduled for completion later this year.

A Fiscal Transparency Manual (FTM) will provide detailed guidance on implementation of FTC principles and practices. Eight pilot FTEs have been conducted, of which four have been published so far. FTEs replace the traditional fiscal ROSCs and provide more rigorous and quantified analyses of the quality of published information and sources of fiscal vulnerability, an accessible summary of the strengths and weaknesses of country practices, and more targeted recommendations. FTEs also offer countries the option of a sequenced reform action plan and allow for modular assessments of individual pillars. Feedback from authorities, area departments, and stakeholders on FTEs has been very positive.

The Board is asked to approve the first three pillars of the new FTC and the replacement of the fiscal ROSC with the FTE. On this basis, the Fund will undertake up to five FTEs in FY 2015, finalize the fourth pillar of the FTC, and finalize the FTM.

Keywords

Fiscal Transparency

URL

http://www.imf.org/external/np/pp/eng/2014/061614.pdf



Record ID

536     [ Page 16 of 68, No. 4 ]

Date

2014-08

Author

Atish R. Ghosh, Mahvash Saeed Qureshi, and Charalambos G. Tsangarides

Affiliation

Research Department, IMF

Title

Friedman Redux: External Adjustment and Exchange Rate Flexibility

Summary /
Abstract

Milton Friedman argued that flexible exchange rates would facilitate external adjustment. Recent studies find surprisingly little robust evidence that they do. We argue that this is because they use composite (or aggregate) exchange rate regime classifications, which often mask very heterogeneous bilateral relationships between countries. Constructing a novel dataset of bilateral exchange rate regimes that differentiates by the degree of exchange rate flexibility, as well as by direct and indirect exchange rate relationships, for 181 countries over 1980–2011, we find a significant and empirically robust relationship between exchange rate flexibility and the speed of external adjustment. Our results are supported by several “natural experiments” of exogenous changes in bilateral exchange rate regimes.

Keywords

External dynamics, exchange rate regimes, global imbalances

URL

http://www.imf.org/external/pubs/ft/wp/2014/wp14146.pdf



Record ID

534     [ Page 16 of 68, No. 5 ]

Date

2014-06

Author

Hashem Pesaran and Ron Smith

Affiliation

University of Cambridge

Title

Tests of Policy Ineffectiveness in Macroeconometrics

Summary /
Abstract

This paper proposes tests of policy ineffectiveness in the context of macroeconometric rational expectations models. It is assumed that there is a policy intervention that takes the form of changes in the parameters of a policy rule, and that there are sufficient observations before and after the intervention. The test is based on the difference between the realisations of the outcome variable of interest and counterfactuals based on no policy intervention, using only the pre-intervention parameter estimates, and in consequence the Lucas Critique does not apply. The paper develops tests of policy ineffectiveness for a full structural model, with and without exogenous, policy or non-policy, variables. Asymptotic distributions of the proposed tests are derived both when the post intervention sample is fixed as the pre-intervention sample expands, and when both samples rise jointly but at different rates. The performance of the test is illustrated by a simulated policy analysis of a three equation New Keynesian Model, which shows that the test size is correct but the power may be low unless the model includes exogenous variables, or if the policy intervention changes the steady states, such as the inflation target.

Keywords

Counterfactuals, policy analysis, policy ine¤ectiveness test, macroeconomics

URL

http://www.econ.cam.ac.uk/research/repec/cam/pdf/cwpe1415.pdf



Record ID

533     [ Page 16 of 68, No. 6 ]

Date

2014-04

Author

Jaromir Benes, Michael Kumhof, and Douglas Laxton

Affiliation

Research Department, IMF

Title

Financial Crises in DSGE Models: A Prototype Model

Summary /
Abstract

This paper presents the theoretical structure of MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of financial cycles. A companion paper studies the simulation properties of MAPMOD.

Keywords

Financial crisis; Credit expansion; Bank credit; Credit risk; Banks;Loa ns; Macroprudential Policy; Monetary policy; Economic models; lending boom, credit crunch, financial crisis, financialy cycle, asset price bubble, macroprudential policy

URL

http://www.imf.org/external/pubs/ft/wp/2014/wp1457.pdf



Record ID

532     [ Page 16 of 68, No. 7 ]

Date

2014-06

Author

Prachi Mishra, Kenji Moriyama, Papa M'B. P. N'Diaye, and Lam Nguyen

Affiliation

Money and Capital Markets and Strategy and Policy Review Departments, IMF

Title

Impact of Fed Tapering Announcements on Emerging Markets

Summary /
Abstract

This paper analyzes market reactions to the 2013–14 Fed announcements relating to tapering of asset purchases and their relationship to macroeconomic fundamentals and country economic and financial structures. The study uses daily data on exchange rates, government bond yields, and stock prices for 21 emerging markets. It finds evidence of markets differentiating across countries around volatile episodes. Countries with stronger macroeconomic fundamentals, deeper financial markets, and a tighter macroprudential policy stance in the run-up to the tapering announcements experienced smaller currency depreciations and smaller increases in government bond yields. At the same time, there was less differentiation in the behavior of stock prices based on fundamentals.

Keywords

Monetary policy; United States; Unconventional monetary policy instruments; Announcements; Emerging markets; Financial markets; Bond yields; Stock prices; Emerging markets, tapering, Fed policy announcements, vulnerability.

URL

http://www.imf.org/external/pubs/ft/wp/2014/wp14109.pdf



Record ID

531     [ Page 16 of 68, No. 8 ]

Date

2014-05

Author

Jean-Louis Combes, Xavier Debrun, Alexandru Minea, and Rene Tapsoba

Affiliation

African and Fiscal Affairs Departments, IMF

Title

Inflation Targeting and Fiscal Rules: Do Interactions and Sequencing Matter?

Summary /
Abstract

The paper examines the joint impact of inflation targeting (IT) and fiscal rules (FR) on fiscal behavior and inflation in a broad panel of advanced and developing economies over the period 1990-2009. The main contribution of the paper is to show that, as suggested by the theoretical literature, interactions between FR and IT matter a great deal for policy outcomes. Specifically, the combination of FR and IT appears to deliver more disciplined macroeconomic policies than each of these institutions in isolation. In addition, the sequencing of the monetary and fiscal reforms plays a role: adopting FR before IT delivers stronger results than the reverse sequence.

Keywords

Inflation targeting; Fiscal rules; Fiscal policy; Macroprudential Policy; Monetary policy; Economic models; Inflation targeting, Fiscal rules, Institutional reform sequencing.

URL

http://www.imf.org/external/pubs/ft/wp/2014/wp1489.pdf



Record ID

530     [ Page 16 of 68, No. 9 ]

Date

2014-06

Author

F. Gulcin Ozkan and D. Filiz Unsal

Affiliation

Strategy, Policy, and Review Department

Title

On the use of Monetary and Macroprudential Policies for Small Open Economies

Summary /
Abstract

We explore optimal monetary and macroprudential policy rules for a small open economy. Delegating 'lean against the wind' squarely to macroprudential policy provides a more robust policy mix to shock uncertainty--(i) if macroprudential measures exist, there are no significant welfare gains from monetary policy reacting to credit growth under a financial shock; and (ii) monetary responses to financial markets could generate bigger welfare losses than macroprudential responses under different shocks. The source of outstanding liabilities also plays a role in the choice of policy instrument--macroprudential policies are particularly effective for emerging markets where foreign borrowing is sizeable.

Keywords

Macroprudential Policy; Monetary policy; Small open economies; Emerging markets; Entrepreneurship; External borrowing; Financial stability; Econometric models;Financial instability; monetary policy; macroprudential measures; emerging markets

URL

http://www.imf.org/external/pubs/ft/wp/2014/wp14112.pdf



Record ID

529     [ Page 16 of 68, No. 10 ]

Date

2014-02

Author

Juan Pablo Medina Guzman and Jorge Roldos

Affiliation

IMF Institute for Capacity Development

Title

Monetary and Macroprudential Policies to Manage Capital Flows

Summary /
Abstract

We study interactions between monetary and macroprudential policies in a model with nominal and financial frictions. The latter derive from a financial sector that provides credit and liquidity services that lead to a financial accelerator-cum-fire-sales amplification mechanism. In response to fluctuations in world interest rates, inflation targeting dominates standard Taylor rules, but leads to increased volatility in credit and asset prices. The use of a countercyclical macroprudential instrument in addition to the policy rate improves welfare and has important implications for the conduct of monetary policy. “Leaning against the wind” or augmenting a standard Taylor rule with an argument on credit growth may not be an effective policy response.

Keywords

Monetary policy; Macroprudential Policy; Capital flows; Business cycles; Financial sector; Economic models; Capital Inflows, Monetary Policy, Macroprudential Policy, Welfare Analysis

URL

http://www.imf.org/external/pubs/ft/wp/2014/wp1430.pdf



Total records: 676 | Select no. of records per page: 10 | 20 | 30 | 50 | 100 | Show all | Search
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