Abstract

1. IMF tools to assess external positions in a multilaterally-consistent fashion have evolved over time. Initial assessments, based on the Consultative Group on Exchange Rate Issues (CGER) framework, focused on the exchange rates of key advanced economies, although these evolved to include a broader range of measures of a country’s external position and wider country coverage. The existing External Balance Assessment (EBA) framework was launched in 2012, with current account and real exchange rate (REER) models that are used as numerical inputs into the external sector assessment conducted by IMF staff. The key innovation of the EBA framework consisted of expanding the set of policy variables, and defining the concept of current account “norms” as current account levels that correspond to policies at their desired levels. The EBA models also helped highlight the role of policy distortions, and introduced an internal collaborative exercise to arrive at multilaterally consistent staff assessments.