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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]
  • Quantitative Easing and Long-Term Yields in Small Open Economies
    • Abstract: We compare the effectiveness of Federal Reserve's asset purchase programs in lowering longtermyields with that of similar programs implemented by the Bank of England, the SwedishRiksbank, and the Swiss National Bank's reserve expansion program. We decomposegovernment bond yields into (i) an expectations component, (ii) a global, and (iii) a countryspecific term premium to analyze two-day changes in 10-year yields around announcementdates. We find that, in contrast to the Federal Reserve's asset purchases, the programsimplemented in these smaller economies have not been able to affect the global term premiumand, furthermore, they have had limited, but significant, effect in lowering long-term yields.
      PubDate: 29 Sep 2017 09:00:00 EST
  • Uncertainty, Financial Frictions and Nominal Rigidities: A Quantitative
    • Abstract: Are uncertainty shocks a major source of business cycle fluctuations' This paper studies theeffect of a mean preserving shock to the variance of aggregate total factor productivity(macro uncertainty) and to the dispersion of entrepreneurs' idiosyncratic productivity (microuncertainty) in a financial accelerator DSGE model with sticky prices. It explores thedifferent mechanisms through which uncertainty shocks are propagated and amplified. Thetime series properties of macro and micro uncertainty are estimated using U.S. aggregate andfirm-level data, respectively. While surprise increases in micro uncertainty have a largerimpact on output than macro uncertainty, these account for a small (non-trivial) share ofoutput volatility.
      PubDate: 29 Sep 2017 09:00:00 EST
  • Interconnectedness of Global Systemically-Important Banks and Insurers
    • Abstract: Interconnectedness among global systemically important banks (GSIBs) and global systemically important insurers (GSIIs) has important financial stability implications. This paper examines connectedness among United States, European and Asian GSIBs and GSIIs, using publicly-available daily equity returns and intra-day volatility data from October 2007 to August 2016. Results reveal strong regional clusters of return and volatility connectedness amongst GSIBs and GSIIs. Compared to Asia, selected GSIBs and GSIIs headquartered in the United States and Europe appear to be main sources of market-based connectedness. Total system connectedness—i.e., among all GSIBs and GSIIs—tends to rise during financial stress, which is corroborated by a balance sheet oriented systemic risk measure. Lastly, the paper demonstrates significant influence of economic policy uncertainty and U.S. long-term interest rates on total connectedness among systemically important institutions, and the important role of bank profitability and asset quality in driving bank-specific return connectedness.
      PubDate: 29 Sep 2017 09:00:00 EST
  • Settling the Inflation Targeting Debate: Lights from a Meta-Regression
    • Abstract: Inflation targeting (IT) has gained much traction over the past two decades, becoming a framework of reference for the conduct of monetary policy. However, the debate about its very merits and macroeconomic consequences remains inconclusive. This paper digs deeper into the issue through a meta-regression analysis (MRA) of the existing literature, making it the first application of a MRA to the macroeconomic effects of IT adoption. Building on 8,059 estimated coefficients from a very broad sample of 113 studies, the paper finds that the empirical literature suffers from two types of publication bias. First, authors, editors and reviewers prefer results featuring beneficial effects of IT adoption on inflation volatility, real GDP growth and fiscal performances; second, they promote results with estimated coefficients that are significantly different from zero. However, after filtering out the publication biases, we still find meaningful (genuine) effects of IT in reducing inflation and real GDP growth volatility, but no significant genuine effects on inflation volatility and the level of real GDP growth. Interestingly, the results indicate that the impact of IT varies systematically across studies, depending on the sample structure and composition, the time coverage, the estimation techniques, country-specific factors, IT implementation parameters, and publication characteristics.
      PubDate: 29 Sep 2017 09:00:00 EST
  • Did the Exchange Rate Floor Prevent Deflation in the Czech Republic'
    • Abstract: To fight deflationary pressures at the zero lower bound, in November 2013, the Czech National Bank (CNB) introduced a one-sided floor on the exchange rate, as an additional monetary policy instrument. This paper investigates the impact of the FX floor on inflation in the Czech Republic, by comparing actual inflation with counterfactuals in the absence of the exchange rate floor. Three different empirical strategies are implemented: an event study, difference-in-difference regressions and a synthetic control method. The empirical results provide evidence that the exchange rate floor was effective in fighting deflationary pressures and prevented inflation from going into negative territory. The magnitude of the effect ranges between 0.5 to 1.5 percentage points. The results are robust to different econometric specifications.
      PubDate: 20 Sep 2017 09:00:00 EST
  • Indexing Structural Distortion: Sectoral Productivity, Structural Change
           and Growth
    • Abstract: This paper proposes a new index of sectoral labor distortion using employment and valueaddedshares. We show that this index is highly correlated with growth both crosssectionallyand over time. We also use it to compare the degree of distortion amongcountries and identify sectors where the potential payoffs in terms of growth from reformscould be large. The regression analysis in the paper shows that education and variousstructural reforms have potential to improve the efficiency of sectoral labor allocation.
      PubDate: 19 Sep 2017 09:00:00 EST
  • Policy Mix and the US Trade Balance
    • Abstract: The strong US policy response to the 2008-09 financial crisis raised concerns about its impact(spillovers) on other countries, with great focus on the monetary stimulus but little attention tofiscal policy, despite their combined deployment. Using a sign-restricted structural VARapproach, we study the trade spillovers of the post-crisis policy mix, by assessing the joint impactof monetary and fiscal policy. We find that aggregate trade effects, as reflected in the tradebalance, varied across time, reflecting the different timing of fiscal and monetary stimuli, withoverall positive spillovers in the immediate aftermath of the crisis. At the same time, reflecting thedifferent transmission mechanisms of monetary policy, we find that the effects differed greatlybetween trading partners with fixed and flexible exchange rates. In general, our results highlight (i)the importance of studying fiscal and monetary policy spillovers jointly in order to avoidattenuation bias from omitted variables; and (ii) that trading partners’ exchange rate regimes are offirst order importance in determining the impact of policy spillovers.
      PubDate: 19 Sep 2017 09:00:00 EST
  • Banking on Women Leaders: A Case for More'
    • Abstract: Using a new dataset, we measure the large gap between the representation of men and women in leadership positions in banks and bank supervision agencies worldwide. Women occupied less than 2 percent of bank CEOs positions, and less than 20 percent of the board seats in more than 80 percent of the observations across banks over time. Contrary to common perceptions, many low- and middle-income countries have a higher share of women in bank boards and banking supervision agency boards compared to advanced economies. Econometric analysis suggests that, controlling for relevant bank and country-specific factors, the presence of women as well as a higher share of women on bank boards is associated with greater bank stability, as represented by higher z-scores and lower nonperforming loan ratios. We also examine the share of women on boards of banking supervision agencies by compiling a new dataset. We find that it is associated with greater bank stability. Further research is needed to identify specific mechanisms through which these stability benefits are achieved, and to understand the conditions that have facilitated entry of women into leadership roles in banks and supervision agencies.
      PubDate: 07 Sep 2017 09:00:00 EST
  • Understanding Correspondent Banking Trends: A Monitoring Framework
    • Abstract: The withdrawal of correspondent banking relationships (CBRs) remains a concern for the international community because, in affected jurisdictions, the decline could have potential adverse consequences on international trade, growth, financial inclusion, and the stability and integrity of the financial system. Building on existing initiatives and IMF technical assistance, this paper discusses a framework that can be readily used by central banks and supervisory authorities to effectively monitor the developments of CBRs in their jurisdiction. The working paper explains the monitoring framework and includes the necessary reporting templates and an analytical tool for the collection of data and analysis of CBRs.
      PubDate: 04 Oct 2017 09:00:00 EST
  • Lessons from the Old Masters on Assessing Equity and Efficiency: A Primer
           for Fiscal Policymakers
    • Abstract: How can a society’s well-being be measured to include not only average incomes but alsotheir distribution' How can the effects of policies be assessed by considering both equity andefficiency' This primer outlines the seminal contributions of influential economists of thepast, including Arthur Okun, who developed a simple method to elicit people’s preferencesregarding redistribution, and Anthony Atkinson, who showed how equity and efficiency canbe measured simultaneously and summarized in a single, intuitive index expressed inmonetary units (such as dollars). These methods are applied to recent data to gauge howcountries fare when both mean incomes and their distribution are considered together, and toa hypothetical tax-and-transfer scheme assessed through a general equilibrium model forhousehold-level data.
      PubDate: 03 Oct 2017 09:00:00 EST
School of Mathematical and Computer Sciences
Heriot-Watt University
Edinburgh, EH14 4AS, UK
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