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Journal Cover IMF Working Papers
  [2 followers]  Follow
   Full-text available via subscription Subscription journal
   ISSN (Print) 1018-5941
   Published by International Monetary Fund Homepage  [11 journals]
  • Mining Spillovers in Chile
    • Abstract: Chile’s small open economy with significant mismatch between the production and consumptionbaskets may be represented by three stylized sectors, a commodity sector, a non-commoditytradable sector, and a non-tradable sector. This paper estimates the effect of copper price shockson mining, manufacturing, and construction—each embodying a sector type. The empiricalfindings are for positive spillovers from mining to the other two sectors. However, the estimatedsize of the spillovers seems modest, which raises the question of the potential for mining to bebetter integrated with the rest of the economy.
      PubDate: 31 Jul 2017 09:00:00 EST
  • Leaning Against Windy Bank Lending
    • Abstract: Using an estimated dynamic stochastic general equilibrium model with banking, this paper first provides evidence that monetary policy reacted to bank loan growth in the US during the Great Moderation. It then shows that the optimized simple interest-rate rule features no response to the growth of bank credit. However, the welfare loss associated to the empirical responsiveness is small. The sources of business cycle fluctuations are crucial in determining whether a “leaning-against-the-wind” policy is optimal or not. In fact, the predominant role of supply shocks in the model gives rise to a trade-off between inflation and financial stabilization.
      PubDate: 31 Jul 2017 09:00:00 EST
  • Calculating Trade in Value Added
    • Abstract: This paper sets out the key concepts necessary to calculate trade in value added using input-output tables. We explain the basic structure of an input-output table and the matrix algebra behind the computation of trade in value added statistics. Specifically, we compute measures of domestic value-added, foreign value added, and forward and backward linkages, as well as measures of both a country’s participation and position in global value chains. We work in detail with an example of a global input-output table for 3 countries each with 4 sectors, provided by the Eora Multi-Region Input-Output (MRIO) database. The aim is to provide an introduction to the analysis of global value chains for use in policy work. An accompanying suite of Matlab codes are provided that can be used with the full set of Eora MRIO tables.
      PubDate: 31 Jul 2017 09:00:00 EST
  • Uphill Capital Flows and the International Monetary System
    • Abstract: Uphill capital flows constitute a key transmission channel through which reserve accumulation can distort the stability of the international monetary system. This paper examines and quantifies the importance of this transmission channel by examining how foreign official purchases of U.S. Treasuries influences the U.S. yield curve at different maturities. Our findings suggest that a percentage point increase in foreign official holdings relative to outstanding marketable securities reduces the term premium by 2.0–2.4 basis points at maturities of 2–3 years. These estimates are then used to gauge the role of a global policy in reducing excess reserve accumulation'e.g., a composite global reserve asset or through global liquidity facilities. Findings show that a policy that reduces the demand for Treasuries by $100 billion would increase yields by 1.5–1.8 basis points.
      PubDate: 26 Jul 2017 09:00:00 EST
  • Central Bank Balance Sheet Policies and Spillovers to Emerging Markets
    • Abstract: We develop a theoretical model that shows that in the near future, the monetary policies of some key central banks in advanced economies (AEs) will have two dimensions—changes in short-term policy rates and balance sheet adjustments. This will affect emerging market economies (EMs), especially those with a pegged exchange rate, as these EMs primarily use a single monetary policy tool, i.e., the short-term policy rate. We show that changes in policy rates and balance sheet adjustments in AEs may differ in their respective financial spillovers to pegged EMs. Thus, it will be difficult for EMs to mitigate different types of spillovers with a single monetary policy tool. In that context, we use the model to show how EMs might use additional tools—capital controls and/or macro-prudential policy—to complement their monetary policy and financial stability toolkit. We also discuss how balance sheet adjustments that affect long-term interest rates may percolate to influence short-term interest rates via financial plumbing.
      PubDate: 25 Jul 2017 09:00:00 EST
  • Government Financial Assets and Debt Sustainability
    • Abstract: Do government financial assets help improve public debt sustainability' To answer this question, we assemble a comprehensive dataset on government assets using multiple sources and covering 110 advanced and emerging market economies since the late 1980s. We then use this rich database to estimate the impact of assets on two key dimensions of debt sustainability: borrowing costs and the probability of debt distress. Government financial assets significantly reduce sovereign spreads and the probability of debt crises in emerging economies but not in advanced economies, and the effect varies with asset characteristics, notably liquidity. Government finacial assets also help discriminate countries across the distribution of sovereign spreads, thus signaling information about emerging economies’ creditworthiness.
      PubDate: 25 Jul 2017 09:00:00 EST
  • Back to the Future: The Nature of Regulatory Capital Requirements
    • Abstract: This paper compares the current regulatory capital requirements under the Dodd-Frank Act (DFA) and the 10-percent leverage ratio, as proposed by the U.S. Treasury and the U.S. House of Representatives' Financial CHOICE Act (FCA). We find that the majority of U.S. banks would not qualify for an "off-ramp"option—where regulatory relief is offered to FCA qualifying banks (QBOs)—unless considerable amounts of capital are added, and that large banks are much closer to the proposed leverage threshold and, therefore, are more likely to stand to gain from regulatory relief. The paper identifies an important moral hazard problem that arises due to the QBO optionality, where banks are likely to increase the riskiness of their asset portfolio and qualify for the FCA “off-ramp” relief with unintended effects on financial stability.
      PubDate: 04 Aug 2017 09:00:00 EST
  • The Nonlinear Interaction Between Monetary Policy and Financial Stress
    • Abstract: This paper analyzes the nonlinear relationship between monetary policy and financial stress and itseffects on the transmission of shocks to output. Results from a Bayesian Threshold VectorAutoregression (TVAR) model show that the effects of monetary policy shocks on output growthare stronger during normal times than during times of financial stress. Monetary policy shocks areeffective to ease stressed financial conditions, but have limited ability to fully contain the buildupof vulnerabilities. These results have important policy implications for central banks’countercyclical policies under different financial conditions and for “lean against the wind”policies to address financial vulnerabilities.
      PubDate: 04 Aug 2017 09:00:00 EST
  • Corporate Investment and the Real Exchange Rate
    • Abstract: We examine the relationship between real exchange rate depreciations and indicators of firm performance using data for a sample of more than 30,000 firms from 66 (advanced and emerging market) countries over the 2000-2011 period. We show that depreciations boost profits, investment, and sales of firms that are more financially-constrained and have higher labor shares. These findings are consistent with the view that depreciations boost internal financing opportunities by reducing real wages, thereby spurring investment. We show that these effects on firm performance are enduring, including in the market valuation of firms.
      PubDate: 04 Aug 2017 09:00:00 EST
  • Structural Reforms and External Rebalancing
    • Abstract: Empirical research on structural reforms has focused primarily on their impact on growth and productivity. Yet an often-invoked rationale for structural reforms is their impact on external adjustment. This paper finds little evidence that structural reforms improve the current account in the short run, but they can increase the responsiveness and resilience of the economy to external shocks. In particular, elasticities of exports with respect to the real effective exchange rate increase with some structural indicators, suggesting that structural reforms facilitate the reallocation of resources to the tradable sector in response to a negative external shock. The paper concludes that structural reforms, while not having an immediate positive impact on the current account balance, can be an important complement to traditional macroeconomic adjustment.
      PubDate: 04 Aug 2017 09:00:00 EST
School of Mathematical and Computer Sciences
Heriot-Watt University
Edinburgh, EH14 4AS, UK
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Fax: +00 44 (0)131 4513327
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