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You are looking at 1 - 10 of 30 items for :

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Cover IMF Working Papers
Monetary Policy Transmission and Financial Stability in a LIC: The Case of Bangladesh
Mr. Sohrab Rafiq
This paper explores how monetary policy affects the real economy and its efficacy in promoting financial stability in a large low income country. This paper shows that monetary policy modestly impacts real economic activity and inflation via the bank lending and financial accelerator channels. Second, money market and treasury rates signal changes in the policy stance, while altering banks’ intermediation cost curves due to shifting risk premia. At the same time, evidence points to monetary policy inducing an overshooting in asset prices. These findings suggest that financial stability could be undermined if the calibration of monetary policy is based solely on output and inflation without accounting for the stage of the financial cycle. Finally, the paper discusses policy measures that would enhance the transmission of monetary policy and promote financial stability in Bangladesh.
Keywords:
WP; monetary policy; financial risk; prices; liquidity; credit; development; reaction function; a number of narrow money; channel of monetary policy transmission; broad money stock variable; monetary policy transmission; stock variable; monetary policy innovation; financial market factor; monetary policy shock; financial market friction; market securities; call money; Monetary base; Bank credit; Asset prices; Inflation; Global
Cover IMF Working Papers
Determinants of Emerging Market Sovereign Bond Spreads: Fundamentals vs Financial Stress
Iva Petrova, Mr. Michael G. Papaioannou, and Mr. Dimitri Bellas
This paper analyses the determimants of emerging market sovereign bond spreads by examining the short and long-run effects of fundamental (macroeconomic) and temporary (financial market) factors on these spreads. During the current global financial and economic crisis, sovereign bond spreads widened dramatically for both developed and emerging market economies. This deterioration has widely been attributed to rapidly growing public debts and balance sheet risks. Our results indicate that in the long run, fundamentals are significant determinants of emerging market sovereign bond spreads, while in the short run, financial volatility is a more important determinant of sperads than fundamentals indicators.
Keywords:
WP; short-term debt; government bond
Cover IMF Working Papers
Determinants of Emerging Market Sovereign Bond Spreads: Fundamentals vs Financial Stress
Iva Petrova, Mr. Michael G. Papaioannou, and Mr. Dimitri Bellas

sovereign bond spreads. This paper sheds light on this topic by investigating the short- and long-run effects of fundamental (macroeconomic) and temporary (financial market) factors on sovereign bond spreads. Many studies have examined the relationship between sovereign bond spreads and various macroeconomic indicators and variables. These studies examine whether debt and fiscal variables, reserves, GDP growth, and interest rates of various maturities play an important role in explaining sovereign bond spreads (see, for example, Baldacci, Gupta, and Mati 2008

Keywords:
WP; short-term debt; government bond
Cover IMF Working Papers
Investors’ Risk Appetite and Global Financial Market Conditions
Ms. Brenda Gonzalez-Hermosillo
A structural vector autoregression model is developed to analyze the dynamics of bond spreads among a sample of mature and developing countries during periods of financial stress in the last decade. The model identifies and quantifies the contribution on bond spreads from global market conditions (including funding liquidity, market liquidity, as well as credit and volatility risks), contagion effects, and idiosyncratic factors. While idiosyncratic factors explain a large amount of the changes in bond spreads over the sample, global market risk factors are fundamental driving forces during periods of stress. The relative importance of the different risk factors changes substantially depending on the crisis episode. Contagion from emerging markets becomes small or non-existent when global financial market risks explicitly are taken into account.
Keywords:
WP; liquidity crisis; subprime mortgage; market liquidity; federal funds rate; risk appetite
Cover IMF Working Papers
Lower for Longer: Neutral Rates in the United States
Mr. Andrea Pescatori and Mr. Jarkko Turunen
We use a semi structural model to estimate neutral rates in the United States. Our Bayesian estimation incorporates prior information on the output gap and potential output (based on a production function approach) and accounts for unconventional monetary policies at the ZLB by using estimates of “shadow” policy rates. We find that our approach provides more plausible results than standard maximum likelihood estimates for the unobserved variables in the model. Results show a significant trend decline in the neutral real rate over time, driven only in part by a decline in potential growth whereas other factors (including excess global savings) matter. Neutral rates likely turned negative during the Global Financial Crisis and are expected to increase only gradually looking forward.
Keywords:
WP; neutral rate; Neutral interest rate; monetary policy; rate gap; rate equation; rate determinant; monetary policy stance; shadow rate; equilibrium Policy rate; rate estimate; Central bank policy rate; Output gap; Potential output; Global financial crisis of 2008-2009; Production growth; Global
Cover IMF Working Papers
Some Simulation Properties of the Major Euro Area Economies in Multimod
Mr. Douglas Laxton and Mr. Benjamin L Hunt
This paper was prepared as part of a euro area macroeconomic model comparisons project. Four standard macroeconomic experiments are considered to illustrate the differences in dynamic adjustment properties of two versions of MULTIMOD, the IMF's multicountry macroeconomic model. One version of MULTIMOD that is examined contains separate country blocks for the three major economies in the euro area, Germany, France, and Italy. The second, more recent version, contains a single block describing the behavior of the whole euro area.
Keywords:
WP; core inflation; euro; nominal interest rate; monetary policy; Macroeconomic models; simulation properties; area interest rates increase; total factor productivity; monetary policy rule; euro area country; aggregate Euro model; rate of inflation; monetary policy stance; only euro area interest rates increase; aggregate euro area model; monetary policy impulse; E. Euro area monetary policy impulse; monetary policy multiplier; Short term interest rates; Inflation; Consumption; Real interest rates; Exports; Global
Cover IMF Working Papers
A Global Perspectiveon External Positions
Mr. Gian M Milesi-Ferretti and Mr. Philip R. Lane
This paper highlights the increased dispersion in net external positions in recent years, particularly among industrial countries. It provides a simple accounting framework that disentangles the factors driving the accumulation of external assets and liabilities (such as trade imbalances, investment income flows, and capital gains) for major external creditors and debtors. It also examines the factors driving the foreign asset portfolio of international investors, with a special focus on the weight of U.S. liabilities in the rest of the world's stock of external assets. Finally, it relates the empirical evidence to the current debate about the roles of portfolio balance effects and exchange rate adjustment in shaping the external adjustment process.
Keywords:
WP; exchange rate; return; trade deficit; U.S. dollar; Financial integration; capital flows; external assets and liabilities; capital flow; portfolio equity; current account; return differential; returns influence; rates of return on asset; asset category; asset trade; portfolio equity instrument; return premium; FDI assets; equity position; Foreign assets; Stocks; Asset prices; Global; Asia and Pacific; Middle East
Cover IMF Working Papers
Push Factors and Capital Flows to Emerging Markets: Why Knowing Your Lender Matters More Than Fundamentals
Mr. Eugenio M Cerutti, Mr. Stijn Claessens, and Mr. Damien Puy
This paper analyzes the behavior of gross capital inflows across 34 emerging markets (EMs). We first confirm that aggregate inflows to EMs co-move considerably. We then report three findings: (i) the aggregate co-movement conceals significant heterogeneity across asset types as only bank-related and portfolio bond and equity inflows do co-move; (ii) while global push factors in advanced economies mostly explain the common dynamics, their relative importance varies by type of flow; and (iii) the sensitivity to common dynamics varies significantly across borrower countries, with market structure characteristics (especially the composition of the foreign investor base and the level of liquidity) rather than borrower country’s institutional fundamentals strongly affecting sensitivities. Countries relying more on international funds and global banks are found to be more sensitive to push factors. Our findings suggest that EMs need to closely monitor their lenders and investors to assess their inflow exposures to global push factors.
Keywords:
WP; equity; equity flow; portfolio equity; Push factors; capital flows; emerging markets; mutual funds; global banks; bond flow; MSCI emerging market index; market characteristic; investor base; inflows to EMs; equity inflow; Bonds; Stocks; Stock markets; Capital inflows; Global; Europe; Africa; Asia and Pacific