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Mr. Nathan Porter, Mr. Camilo E Tovar Mora, Mr. Juan P Trevino, Johannes Eugster, and Theofanis Papamichalis

payments position. Specifically, the shock can trigger reserve losses that force an economy to fail to repay its debt service payments on all its external obligations. Contagion and cascading effects occur if other creditor economies suffer large enough reserve losses due to the original non-payment on their loans, forcing them to also default on their interest payments to others. By modelling the dynamics of an economy’s balance of payments, the framework endogenously determines the propagation of the shock, with the level of international reserve losses becoming a

International Monetary Fund. Monetary and Capital Markets Department

stress event occurs, how does the size and composition of the IIP relate to the impact on output, the current account, and the exchange rate? How do external stress events impact creditor economies? To address these questions, the analysis focuses on a sample of 73 advanced and emerging market and developing economies during 1991–2018. The chapter seeks to disentangle the role of certain IIP components in explaining external stress episodes, including (1) gross and net external assets and liabilities, (2) equity and debt instruments, (3) the currency denomination

International Monetary Fund. European Dept.
This Selected Issues paper assesses the youth unemployment problem in advanced European economies, especially the euro area. Youth unemployment rates increased sharply in the euro area after the crisis. Much of these increases can be explained by output dynamics and the greater sensitivity of youth unemployment to economic activity compared with adult unemployment. Labor market institutions also play an important role, especially the tax wedge, minimum wages, and spending on active labor market policies. The paper highlights that policies to address youth unemployment should be comprehensive and country specific, focusing on reviving growth and implementing structural reforms.
International Monetary Fund. Research Dept.

continued to grow during the period 2006–13 ( Figure 4.12 ), with little discernible change in pace after 2006, the year in which flow imbalances peaked. Moreover, they became, if anything, more concentrated on the debtor side, with the share of the top 5 economies rising from 55 percent of world output in 2006 to 60 percent in 2013. The trend of international financial integration has not been reversed, as might have been expected following the global financial crisis ( Figure 4.13 ). Table 4.2 . Largest Debtor and Creditor Economies (Net Foreign Assets and

International Monetary Fund. Research Dept.

insufficient to contain financial stability risks. The financial sector reform agenda in advanced Europe should be completed, including with respect to reforms dealing with large and systemically important banks and those to enhance cross-border resolution mechanisms. Structural reforms are key to meeting medium-term challenges to growth. Greater labor and product market flexibility in debtor economies and higher infrastructure and private investment in creditor economies would raise productivity, employment, and growth and would also support greater rebalancing in the

International Monetary Fund. Research Dept.

(SITCs 0, 1, 2, 4, and 68). Economies are categorized into one of these groups when their main source of export earnings exceeds 50 percent of total exports on average between 2006 and 2010. The financial criteria focus on net creditor economies, net debtor economies , and heavily indebted poor countries (HIPCs). Economies are categorized as net debtors when their current account balance accumulations from 1972 (or earliest data available) to 2010 are negative. Net debtor economies are further differentiated on the basis of two additional financial criteria

International Monetary Fund. European Dept.

External Rebalancing in the Euro Area: Developments and Policies 1 Since the crisis, the euro area current account has moved from rough balance into a clear surplus. The rebalancing underlying this shift has been highly asymmetric, with some debtor economies (Cyprus, Greece, Ireland, Italy, Latvia, Portugal, and Spain) seeing large improvements in their current accounts (sometimes into surplus), while many creditor economies (Austria, Belgium, Finland, Germany, Luxembourg, and the Netherlands) have largely maintained their surpluses. In this context, the