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Mr. Julian T Chow, Ms. Florence Jaumotte, Mr. Seok G Park, and Ms. Yuanyan S Zhang
The recent strong, sustained appreciation of the U.S. dollar raises questions about possible financial spillover effects for emerging markets and developing countries. This report finds that, unlike past episodes, emerging markets’ vulnerability has improved along a number of dimensions, though some risks persist (as identified in this report).
Mr. Julian T Chow, Ms. Florence Jaumotte, Mr. Seok G Park, and Ms. Yuanyan S Zhang

, including the most systemic countries, are now long FX in debt instruments , a sharp improvement from the mid-1990s. As noted above, estimates of the currency composition of foreign assets and liabilities are subject to limitations. However, using the best information currently available, we calculate the net FX debt asset position, defined as the sum of FX debt assets and FX reserves, minus FX debt liabilities. While net debt assets include domestic currency debt held by nonresidents, net FX debt assets focuses only on foreign currency debt assets and liabilities. About

International Monetary Fund

debt instruments, a sharp improvement from the mid-1990s ( Figure 6 , panel 4). One key indicator to assess vulnerability to external crisis is the net FX debt asset position, defined as the sum of FX debt assets and FX reserves, minus FX debt liabilities. About half of EMs are now long FX, and another quarter have a short FX debt position lower than 20 percent of GDP. Systemic EMs (with the exception of Turkey) have also considerably improved their net FX debt asset position. Most of them have become long FX, and fuel exporters and some EMs in Emerging Asia have

International Monetary Fund
Many countries around the globe, particularly the systemic advanced economies, face the challenge of closing output gaps and raising potential output growth. Addressing these challenges requires a package of macroeconomic, financial and structural policies that will boost both aggregate demand and aggregate supply, while closing the shortfall between demand and supply. Each element of this package is important and one cannot substitute for the other: easy monetary policy will not raise potential output just as structural reforms will not close the output gap. This report studies the impact on emerging markets and nonsystemic advanced economies from monetary policy actions in systemic advanced economies, with a look also at knock-on effects from the decline in world oil prices.
Agustin Benetrix, Deepali Gautam, Luciana Juvenal, and Martin Schmitz

that direct investment is denominated in the currency of the host country. For FDI debt, whenever available, we used actual data from the IMF survey. Our synthetic data were obtained using the currency weights of portfolio debt assets. The sources of actual data for portfolio debt are the IMF Survey, CPIS Table 2 and ECB data. We expand the coverage using the estimation method by Lane and Shambaugh (2010a) which is based on combining the geography of portfolio debt assets positions from CPIS with the currency of denomination of host countries’ bonds issued in

Agustin Benetrix, Deepali Gautam, Luciana Juvenal, and Martin Schmitz
This paper provides a dataset on the currency composition of the international investment position for a group of 50 countries for the period 1990-2017. It improves available data based on estimates by incorporating actual data reported by statistical authorities and refining estimation methods. The paper illustrates current and new uses of these data, with particular focus on the evolution of currency exposures of cross-border positions.
Mr. Gian M Milesi-Ferretti and Mr. Philip R. Lane
The relationship between international payments and the real exchange rate—the “transfer problem”—is a classic question in international economics. We use new data on countries’ net external positions together with real exchange rate data to shed light on this question. We present a model yielding testable implications on the long-run co-movements of real exchange rates, external positions, relative GDP and terms of trade, and cross-country and time-series evidence on the subject. Countries with net external liabilities are found to have more depreciated real exchange rates, with the main channel of transmission working through the relative price of nontraded goods.
Mr. Gian M Milesi-Ferretti and Mr. Philip R. Lane

implicitly count errors and omissions as changes in the debt asset position of the country abroad Δ DEBTA. To improve this estimate, we make several adjustments designed to take into account the impact of valuation changes, misreporting of capital flows, and debt reduction or forgiveness agreements. These adjustments, as well as individual estimates of the various external assets and liabilities, are briefly explained below. Foreign direct investment assets ( FDIA ): estimated by cumulating US dollar flows, and adjusting past stocks for changes in relative capital

Mr. Gian M Milesi-Ferretti and Mr. Philip R. Lane

developing countries the approach we followed was to take the cumulative current account (with some adjustments, discussed further below) as an accurate initial value of the net foreign asset position, and to estimate the initial debt asset position of the country residually (see Appendix I ). An alternative methodology would have consisted in trying to infer the net foreign asset position of the country based on information on net income payments (for such an approach see, for example, Broner, Loayza and Lopez (1997) ). The estimated NFA would then have yielded

International Monetary Fund

flows have also pushed gross external debt to about 60 percent of GDP but this does not detract appreciably from robustness. While this raises vulnerability to exchange rate shocks ( Figure 5 , Table 5 ), this vulnerability is greatly diminished by the country’s net external debt asset position of about 25 percent of GDP. Only the public sector has net external debt liabilities, equivalent to some 3 percent of GDP. Figure 5. Israel: External Debt Sustainability: Bound Tests 1/ (External debt in percent of GDP) Sources: International Monetary Fund