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Signe Krogstrup and Cédric Tille
The literature on the drivers of capital flows stresses the prominent role of global financial factors. Recent empirical work, however, highlights how this role varies across countries and time, and this heterogeneity is not well understood. We revisit this question by focusing on financial intermediaries’ funding flows in different currencies. A concise portfolio model shows that the sign and magnitude of the response of foreign currency funding flows to global risk factors depend on the financial intermediary’s pre-existing currency exposure. An analysis of a rich dataset of European banks’ aggregate balance sheets lends support to the model predictions, especially in countries outside the euro area.

flows are associated with changes in current account balances? What is the role of official flows for external adjustment? What is the role played by fiscal policy in the external adjustment process? How does the exchange rate regime interact with the cross-border transmission of shocks through the financial account? The microeconomics of external adjustment: what is the role of ERPT, firm entry, and the J-curve for trade balances? What are the microeconomic determinants of expenditure switching? Please send submissions in Adobe PDF format to: SNBIMF2016@IMF

International Monetary Fund

to include multiple regions to better understand the cross-border transmission of shocks and the effects of IPF tools. Staff will also brief the Executive Board by 2021Q4 on progress made on analytical work on capital flow-related issues as part of a broader, medium-term oriented research agenda, and as continuation of the IPF empirical work to further support staff’s policy advice on capital flow issues. As part of this agenda, empirical work is continuing on the use and effects of CFMs (see proposed action in Annex I). Specifically, staff will examine

Mr. Stijn Claessens and Juan A. Marchetti

financial crisis has been a mix of national and internationally coordinated policies aimed at reducing the risk of cross-border transmission of shocks and at dampening the effects of those shocks. These efforts include improving the way regulators deal with troubled global institutions—whether restoring them to health or guiding their unwinding process. New international standards for banks, such as those requiring higher levels of capital and better liquidity management (the recent, so-called Basel III accord among key regulators), have been agreed. Colleges of

International Monetary Fund
The actions in this document aim at • Bringing the Fund’s framework for advice on capital flow policies up to date with recent research and lessons from experience. • Enhancing and coordinating a Fund-wide research • Ramping up the monitoring and analysis of capital flows. • Strengthening multilateral cooperation on policy issues affecting capital flows.
International Monetary Fund. Independent Evaluation Office

given the amount of resources they can devote to this research and that they focus on models and tools built for their particular country context. Nevertheless, the IMF should be able to deepen its contribution by focusing its research resources on areas of comparative advantage, such as tools for assessing cross-border transmission of shocks and stress testing tools based on publicly available market data, which may be helpful to sharpen the focus of Article IV consultations. Over the past couple of years, the IMF has been working hard to gain expertise in emerging

International Monetary Fund. Strategy, Policy, & Review Department

maintain the effective operation of the international monetary system. Box 1. Spillovers: Key Concepts Linkages refer to the links between sectors within an individual economy or across countries, which can act as transmission channels for shocks. Spillovers refer to the cross-border transmission of shocks. These can be global or affect one or more countries and occur through a variety of channels. Spillovers can arise from exogenous shocks or, importantly, a country’s actual or potential policies. The analysis of inward spillovers involves evaluating the

International Monetary Fund
This paper reviews the Fund’s liquidity position. The review covers the Fund’s financial activities for the period September 11, 2009 through March 31, 2010, and also discusses recent developments likely to influence the Fund’s liquidity position. Against this backdrop, it examines the outlook for liquidity using the one-year Forward Commitment Capacity (FCC), the primary measure of the Fund’s liquidity, which is calculated taking into account supplementary resources made available under borrowing arrangements, including note purchase agreements.