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International Monetary Fund. Independent Evaluation Office


This evaluation assesses how well IMF-supported programs helped to sustain economic growth while delivering adjustment needed for external viability over the period 2008–19. The evaluation finds that the Fund’s increasing attention to growth in the programs has delivered some positive results. Specifically, it does not find evidence of a consistent bias towards excessive austerity in IMF-supported programs. Indeed, programs have yielded growth benefits relative to a counterfactual of no Fund engagement and boosted post-program growth performance. Notwithstanding these positive findings, program growth outcomes consistently fell short of program projections. Such shortfalls imply less protection of incomes than intended, fuel adjustment fatigue and public opposition to reforms, and jeopardize progress towards external viability. The evaluation examines how different policy instruments were applied to support better growth outcomes while achieving needed adjustment. Fiscal policies typically incorporated growth-friendly measures but with mixed success. Despite some success in promoting reforms and growth, structural conditionalities were of relatively low depth and their potential growth benefits were not fully realized. Use of the exchange rate as a policy tool to support growth and external adjustment during programs was quite limited. Lastly, market debt operations were useful in some cases to restore debt sustainability and renew market access, yet sometimes were too little and too late to deliver the intended benefits. The evaluation concludes that the IMF should seek to further enhance program countries’ capacity to sustain activity while undertaking needed adjustment during the program and to enhance growth prospects beyond the program. Following this conclusion, the report sets out three recommendations aimed at strengthening attention to growth implications of IMF-supported programs, including the social and distributional consequences.

International Monetary Fund. Independent Evaluation Office

2 briefly reviews IMF policies related to program design and how they have evolved over time to give increasing attention to growth. Chapter 3 provides an overview of growth and adjustment outcomes of IMF-supported programs relative to initial conditions, program projections and growth benchmarks. Chapter 4 assesses the growth impact of IMF-supported programs empirically and discusses the role IMF-supported programs in initiating sustained growth surges from a longer-term historical perspective. Chapter 5 assesses the growth and sustainability considerations

International Monetary Fund. Asia and Pacific Dept

Banking Systems and their Macroeconomic Effects, ” IMF Working Paper No. 10/224 ( Washington : International Monetary Fund ). Hofmann B. , I. Shim , and H. S. Shin , 2016 , “ Sovereign Yields and the Risk-Taking Channel of Currency Appreciation, ” BIS Working Papers No. 538 ( Basel : Bank for International Settlements ). International Monetary Fund , 2016 , The Balance Sheet Approach: Lessons from the Fund-wide Pilot Project , forthcoming ( Washington ). International Monetary Fund , 2014 , 2014 Triennial Surveillance Review , IMF

Ms. Elena Loukoianova

.1 Model: Next-Generation Technology for Predicting Private Firm Credit Risk .” Moody's KMV Company . . International Monetary Fund (IMF) . 2009 . Balance of Payments and International Investment Position Manual (BPM6) . Washington, DC . . International Monetary Fund (IMF) . 2014a . “ 2014 Triennial Surveillance Review .” IMF Policy Paper , Washington, DC .

International Monetary Fund

countries see Adequacy of the Global Financial Safety Net , IMF Policy Paper, March 2016. 16 See Crisis Program Review , IMF Policy Paper, November 2015. 17 See Obstfeld, M., 2011, The International Monetary System: Living with Asymmetry , NBER Working Paper No. 17641, December 2011. 18 This policy paper focuses on the GRA toolkit. A separate forthcoming policy paper, “Financing for Development: Enhancing the Financial Safety Net for Developing Countries—Further Considerations” assesses and clarifies some aspects of the concessional lending toolkit

International Monetary Fund. Strategy, Policy, & Review Department

Productivity Growth Shared in a Globalized Economy? IMF World Economic Outlook ( April ). IMF . 2018c . Japan : 2018 Article IV Staff Report . Country Report No. 18/333 . IMF . 2018d . People’s Republic of China : 2018 Article IV Staff Report . Country Report No. 18/240 . IMF . 2018e . United Kingdom : 2018 Article IV Staff Report . Country Report No. 18/316 . IMF . 2018f . United States : 2018 Article IV Staff Report . Country Report No. 18/207 . IMF . 2018g . Interim Surveillance Review . IMF Policy Paper . IMF . 2019a . Dominican Republic

International Monetary Fund

-increasing-resilience-to-large-and-volatile-capital-flows IMF ( 2017 ). “ Approaches to Macrofinancial Surveillance in Article IV Reports ,” IMF Policy Paper, May ( Washington : International Monetary Fund ). IMF ( 2018 ). “ Interim Surveillance Review ,” IMF Policy Paper, June ( Washington : International Monetary Fund ). IMF , 2018 , The IMF’s Annual Macroprudential Policy Survey—Objectives, Design, and Country Responses , IMF Policy Paper (2018)

International Monetary Fund
liquidity in the face of increased vulnerabilities calls for enhancing the liquidity support provided through the global financial safety net (GFSN). The global economy is experiencing a period of protracted uncertainty, marked by frequent episodes of volatility. Demand for liquidity has intensified, in particular from emerging markets, which are experiencing a build-up of vulnerabilities and the depletion of their fiscal buffers. The enhanced GFSN meets only partially this higher demand for liquidity. The IMFC and G20 have called on the Fund to further strengthen the safety net. The uneven use of the Fund’s toolkit for crisis prevention suggests the need to reconsider its design. Despite a major overhaul of the Fund’s lending instruments available for precautionary financing, only a modest number of countries have used them. In particular, the lack of access to a liquidity backstop for members with strong policies—similar to the standing bilateral swap arrangements (BSAs) among central banks—limits the availability of Fund support over the whole duration of the shock during protracted periods of global uncertainty. Moreover, the need to resort to Fund financing still carries a high political cost (stigma) for some members. To enhance further the Fund’s toolkit for crisis prevention, consideration could be given to revisiting the existing toolkit and introducing new instruments. The toolkit could thus be enhanced by: establishing a new facility for precautionary financing that would provide a "standing" liquidity backstop to members with strong fundamentals and policies for use when hit by liquidity shocks; and adjusting the existing toolkit to maintain cohesion. Any change to the Fund toolkit would need to take into account the tradeoffs between reducing stigma and containing moral hazard, while simultaneously safeguarding Fund resources. A Fund policy monitoring instrument could improve the cohesion of the global safety net. As the GFSN has expanded and become more multi-layered, there is a need to improve cooperation across the different layers to unlock financing and signal commitment to reforms. Creating a policy monitoring instrument that is available to all Fund members could help in this regard. Next steps . In light of Directors’ views on these points, staff could come back with subsequent papers that lay out specific and detailed proposals for reforming the lending toolkit. While these papers focus on the GRA lending toolkit, a separate forthcoming paper will assess some aspects of the concessional lending toolkit.