Selected Reference and Reading Materials compiled by Dan Villanueva


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Record ID

56     [ Page 63 of 68, No. 1 ]

Date

2010-09

Author

Berg, Andrew; Papageorgiou, Chris; Pattillo, Catherine A.; Spatafora, Nicola

Affiliation

International Monetary Fund

Title

The End of an Era? The Medium- and Long-term Effects of the Global Crisis on Growth in Low-Income Countries

Summary /
Abstract

This paper investigates the medium- and long-term growth effects of the global financial crises on Low-Income Countries (LICs). Using several methodological approaches, including impulse response function analysis, growth spells techniques and panel regressions, we show that external demand (ED) shocks are not historically associated with sharp declines in output growth. Given existing evidence that LICs were primarily impacted by such a shock in the global financial crisis, our analysis provides some optimism on the chances that LICs will avoid a protracted period of slow growth. However, we also show that there seem to be persistent output losses associated with ED shocks in the medium-run. In terms of policy implications, our analysis provides evidence that countries with lower deficits, lower debt, more flexible exchange rate regimes, and a higher stock of international reserves are more likely to dampen the effects of an ED shock on growth.

Keywords

Global financial crisis, external shocks, low-income countries, medium- and long-term growth, impulse response functions, growth spells, panel growth regressions

URL

http://www.imf.org/external/pubs/cat/longres.cfm?sk=24190.0

Remarks

In this empirical research paper, the authors split the total sample into LICs (Low Income Countries) and NLICs (Non-Low Income Countries). The latter subgroup includes the Philippines. Their main result is that countries with lower budget deficits, lower debt, more flexible exchange rate regimes, and higher international reserves are more likely to absorb the effects of an external demand shock on growth.



Record ID

55     [ Page 63 of 68, No. 2 ]

Date

2010-07

Author

Levine, Paul

Affiliation

University of Surrey

Title

Monetary policy in an uncertain world: Probability models and the design of robust monetary rules

Summary /
Abstract

The past forty years or so has seen a remarkable transformation in macro-models used by central banks, policymakers and forecasting bodies. This papers describes this transformation from reduced-form behavioural equations estimated separately, through to contemporary micro-founded dynamic stochastic general equilibrium (DSGE) models estimated by systems methods. In particular by treating DSGE models estimated by Bayesian-Maximum-Likelihood methods I argue that they can be considered as probability models in the sense described by Sims (2007) and be used for risk-assessment and policy design. This is true for any one model, but with a range of models on offer it is possible also to design interest rate rules that are simple and robust across the rival models and across the distribution of parameter estimates for each of these rivals as in Levine et al. (2008). After making models better in a number of important dimensions, a possible road ahead is to consider rival models as being distinguished by the model of expectations. This would avoid becoming `a prisoner of a single system' at least with respect to expectations formation where, as I argue, there is relatively less consensus on the appropriate modelling strategy. Third, current inflation targeting rule perform well in the sense they lower the welfare costs of uctuations across all model parameter combinations and
model variants.

Keywords

Structured uncertainty, DSGE models, Robustness, Bayesian estimation, Interest-rate rules

URL

http://d.repec.org/n?u=RePEc:npf:wpaper:10/72&r=mon

Remarks

Paul Levin, an acknowledged expert on this topic, surveys the evolution of macroeconomic modeling in the last three decades or so, culminating in the DSGE framework now used in many central banks, with Bayesian methods as the favorite estimating tools. An important result of his analysis is the general support for the proposition that robustness in the face of model uncertainty calls for a more cautious policy; that is a lower responses to current or expected inflation. Another is that forward-looking targeting rules perform badly in the sense they raise the welfare costs of fluctuations compared with optimal simple rules that only respond to current inflation. The source of this result is the well-known problem of indeterminacy--forward-looking rules certainly pin down expectations of future inflation, but fail to uniquely anchor the current price level resulting in an infinite number of equilibrium paths that will return the economy to its steady-state. An excellent survey of the state-of-the art.



Record ID

54     [ Page 63 of 68, No. 3 ]

Date

2010-06

Author

International Monetary Fund Staff

Affiliation

International Monetary Fund

Title

The Fund’s Mandate - The Future Financing Role - Reform Proposals

Summary /
Abstract

The global crisis has underscored the need for effective global financial safety nets to protect countries with sound policy frameworks from adverse outcomes. Complementing the traditional crisis resolution role of the IMF, which has been instrumental during the recent crisis and is expected to remain dominant going forward, further strengthening instruments to prevent crises and mitigate contagion in systemic events would contribute to the IMF’s mandate to secure global stability.

This paper proposes specific reforms of crisis prevention instruments, and separately presents further considerations for strengthening the IMF’s toolkit for dealing with systemic crises. The proposals, which have benefited from feedback from policymakers and other stakeholders, build on last year’s major overhaul of the IMF lending toolkit and the reform options considered earlier this year by the IMF Executive Board in the context of a broader review of the institution’s mandate.

Keywords

Fund role; Concessional aid; Flexible Credit Line; Precautionary Credit Line; Fund general resources; Access policy; Crisis prevention; Executive Board decisions

URL

http://www.imf.org/external/pp/longres.aspx?id=4471

Remarks

The discussion in this policy paper is relevant to the newly established AMRO of the ASEAN+3. Even a country with fundamentally sound economic policies and balance sheets, but with a high degree of integration into international capital markets, still faces a risk that capital account pressures could transform into a self-fulfilling run on its currency. Hence, there is a role for insurance provided by foreign exchange liquidity. Many ASEAN+3 members have self-insured by building up large international reserves positions, or have sought contingent lines of credit, including the CMIM.



Record ID

53     [ Page 63 of 68, No. 4 ]

Date

2010-09

Author

Kumhof, Michael ; Laxton, Douglas ; Leigh, Daniel

Affiliation

International Monetary Fund

Title

To Starve or not to Starve the Beast?

Summary /
Abstract

For thirty years prominent voices have advocated a policy of starving the beast cutting taxes to force government spending cuts. This paper analyzes the macroeconomic and welfare consequences of this policy using a two-country general equilibrium model. Under several strong assumptions the policy, if fully implemented, produces domestic output and welfare gains accompanied by losses elsewhere. But negative effects can easily arise in the presence of longer policy implementation lags, utility-enhancing government spending, and productive government capital. Overall, the analysis finds no support for the idea that starving the beast is a foolproof way towards higher output and welfare.

Keywords

Starve-the-beast, tax cuts, spending cuts, budget deficits, government debt, non- Ricardian behavior, welfare analysis

URL

http://www.imf.org/external/pubs/cat/longres.cfm?sk=24178.0

Remarks

This is an objective, optimizing analysis of the currently popular, political argument for cutting taxes to force spending cuts. The authors conclude that under plausible assumptions, this policy could lead to negative output and welfare. Authors use a two-country model of the U.S. and the rest-of-the world (ROW). The likely negative output and welfare losses apply to both the U.S. and ROW.



Record ID

52     [ Page 63 of 68, No. 5 ]

Date

2010-08-16

Author

Adams, Charles

Affiliation

Asian Development Bank Institute

Title

The Role of the State in Managing and Forestalling Systemic Financial Crises: Some Issues and Perspectives

Summary /
Abstract

This paper reviews recent state interventions in financial crises and draws lessons for crisis management. A number of areas are identified where crisis management could be strengthened, including with regard to the tools and instruments used to involve the private sector in crisis resolution (with a view to reducing the recent enhanced role of official bailouts and the associated moral hazard), to allow for the orderly resolution of systemically important financial firms (to make these firms "safe to fail"), and with regard to achieving better integration with ex ante macroprudential surveillance. The paper proposes the establishment of high level systemic risk councils (SRCs) in each country with responsibility for overseeing systemic risk in both tranquil times and crisis periods and coordinating the activities of key government ministries, agencies, and the central bank.

Keywords

global financial crisis; state intervention; macroprudential surveiilance; crisis resolution; prevention

URL

http://d.repec.org/n?u=RePEc:ris:adbiwp:0242&r=ban

Remarks

The author's proposed SRC's functions are included in the comprehensive U.S. Financial Stability Oversight Council (FSOC), whose powers are wider. While the suggested SRC is silent on its composition, the American FSOC includes as its Chairman the U.S. Treasury secretary and the chairman of the U.S. Federal Reserve, along with eight other members, including the Comptroller of the Currency and chairmen of FDIC, SEC and CFTC.



Record ID

51     [ Page 63 of 68, No. 6 ]

Date

2010-08

Author

ElGanainy, Asmaa A ; Weber, Anke

Affiliation

International Monetary Fund

Title

Estimates of the Output Gap in Armenia with Applications to Monetary and Fiscal Policy

Summary /
Abstract

This paper employs several econometric techniques to estimate the Armenian output gap. The findings indicate that the output gap is significantly positive in 2007 and 2008 and decreased dramatically in 2009. The paper uses these results to estimate a New Keynesian Phillips curve for Armenia, suggesting a significant role of the output gap and inflation expectations in determining current inflation. Finally, the underlying fiscal stance over the period 2000-09 is assessed by estimating the cyclically-adjusted fiscal balance. Most of Armenia's fiscal deficit is found to be structural. Fiscal policy, while providing counter-cyclical support in 2009, has been largely pro-cyclical in the past.

Keywords

Armenia, potential output, Bayesian Analysis, New Keynesian Phillips Curve, Cyclically-Adjusted Balance, Fiscal Stance, Fiscal Impulse, Automatic Stabilizers

URL

http://www.imf.org/external/pubs/cat/longres.cfm?sk=24166.0

Remarks

Since Armenia, like the Philippines, is a small, open economy, the modern econometric methods used in this paper may be worth trying using Philippine data.



Record ID

50     [ Page 63 of 68, No. 7 ]

Date

2010-08

Author

Rahul Anand and Eswar Prasad

Affiliation

International Monetary Fund and Cornell University

Title

Optimal Price Indices for Targeting Inflation under Incomplete Markets

Summary /
Abstract

In models with complete markets, targeting core inflation enables monetary policy to maximize welfare by replicating the flexible price equilibrium. In this paper, we develop a two-sector two-good closed economy new Keynesian model to study the optimal choice of price index in markets with financial frictions. Financial frictions that limit credit-constrained consumers’ access to financial markets make demand insensitive to interest rate fluctuations. The demand of credit-constrained consumers is determined by their real wage, which depends on prices in the flexible price sector. Thus, prices in the flexible price sector influence aggregate demand and, for monetary policy to have its desired effect, the central bank has to stabilize price movements in the flexible price sector. Also, in the presence of financial frictions, stabilizing core inflation is no longer equivalent to stabilizing output fluctuations. Our analysis suggests that in the presence of financial frictions a welfare-maximizing central bank should adopt flexible headline inflation targeting – a target based on headline rather than core inflation, and with some weight on the output gap. We discuss why these results are particularly relevant for emerging markets, where the share of food expenditures in total consumption expenditures is high and a large proportion of consumers are credit-constrained.

Keywords

inflation targeting, monetary policy framework, core inflation, headline inflation, financial frictions, liquidity constraints

URL

http://d.repec.org/n?u=RePEc:iza:izadps:dp5137&r=mac

Remarks

This provides an analytical rationale for BSP's use of headline (not core) inflation in the IT framework.



Record ID

49     [ Page 63 of 68, No. 8 ]

Date

2010-07

Author

Pietro Catte, Pietro Cova, Patrizio Pagano and Ignazio Visco

Affiliation

Bank of Italy

Title

The role of macroeconomic policies in the global crisis

Summary /
Abstract

This paper argues that the lack of timely and decisive policy action to correct domestic and external imbalances contributed crucially to the build-up of financial excesses that led to the financial crisis and the Great Recession. We focus on 2002-07 and perform a number of counterfactual simulations to investigate two central elements of the story, namely: (a) an over-expansionary US monetary policy and the absence of effective macro-prudential supervision, which permitted a prolonged expansion of debt-financed consumer spending; (b) the decision of China and other emerging countries to pursue an export-led growth strategy supported by pegging their currencies to the US dollar, resulting in a huge build-up of their official reserves, in conjunction with sluggish domestic demand in surplus advanced economies characterized by low potential output growth. The results of the simulations lend support to the view that if substantial, globally coordinated demand rebalancing had been undertaken in a timely manner, the macroeconomic and financial imbalances would not have accumulated to the extent that they did and the financial turmoil might have had less drastic global consequences.

Keywords

global imbalances, financial crisis, monetary policy, macroprudential regulation, structural reforms

URL

http://d.repec.org/n?u=RePEc:bdi:opques:qef_69_10&r=fdg

Remarks

This paper provides a background support for O. Blanchard's call for global coordination of macroeconomic and financial policies to prevent another severe global crisis from happening again in the future.



Record ID

12     [ Page 63 of 68, No. 9 ]

Date

2010-08-01

Author

Michael Patra and Muneesh Kapur

Affiliation

IMF

Title

A Monetary Policy Model Without Money for India

Summary /
Abstract

A New Keynesian model estimated for India yields valuable insights. Aggregate demand reacts to interest rate changes with a lag of at least three quarters, with inflation taking seven quarters to respond. Inflation is inertial and persistent when it sets in, irrespective of the source. Exchange rate pass-through to domestic inflation is low. Inflation turns out to be the dominant focus of monetary policy, accompanied by a strong commitment to the stabilization of output. Recent policy actions have raised the effective policy rate, but the estimated neutral policy rate suggests some further tightening to normalize the policy stance.

Source: IMF Working Paper No. 10/183

URL

http://www.imf.org/external/pubs/cat/longres.cfm?sk=24128.0

Remarks

There is a web link below where you can find a working paper authored by two economists in the Office of the ED for India, authorized by Arvind Virmani. Very informative and nicely written.



Record ID

13     [ Page 63 of 68, No. 10 ]

Date

2010-08-01

Author

André Meie

Affiliation

IMF

Title

Still Minding the Gap - Inflation Dynamics during Episodes of Persistent Large Output Gaps

Summary /
Abstract

This paper studies inflation dynamics during 25 historical episodes in advanced economies where output remained well below potential for an extended period. We find that such episodes generally brought about significant disinflation, underpinned by weak labor markets, slowing wage growth, and, in many cases, falling oil prices. Indeed, inflation declined by about the same fraction of the initial inflation rate across episodes. That said, disinflation has tended to taper off at very low positive inflation rates, arguably reflecting downward nominal rigidities and well-anchored inflation expectations. Temporary inflation increases during episodes were, in turn, systematically related to currency depreciation or higher oil prices. Overall, the historical patterns suggest little upside inflation risk in advanced economies facing the prospect of persistent large output gaps.

Source: IMF Working Paper No. 10/189

URL

http://www.imf.org/external/pubs/cat/longres.cfm?sk=24144.0



Total records: 676 | Select no. of records per page: 10 | 20 | 30 | 50 | 100 | Show all | Search
Select a Page:   << Previous  1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 Next >>



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