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Kotaro Ishi, Mr. Kenji Fujita, and Mr. Mark R. Stone
What is the case for adding the unconventional balance sheet policies used by major central banks since 2007 to the standard policy toolkit? The record so far suggests that the new liquidity providing policies in support of financial stability generally warrant inclusion. As the balance sheet policies aimed at macroeconomic stability were used only by a small number of highly credible central banks facing a lower bound constraint on conventional interest rate policy, they are not relevant for most central banks or states of the world. Best practices of these policies are documented in this paper.
Mr. Benjamin L Hunt
Over the last decade, GDP growth in emerging Asia was roughly twice as fast as average world growth. The IMF’s Global Economy Model (GEM) is used to estimate the impact that emerging Asia’s growth differential has had on Australia. The simulation analysis, which replicates some key features from the last decade, suggests that roughly 25 percent of Australia's growth over the last decade has been from emerging Asia’s growth differential over that period. Looking ahead, the analysis suggests that should emerging Asia continue to grow in a similar fashion, Australia’s growth dividend could almost double. On the other hand, if growth in emerging Asia remained strong, but became more balanced across the tradable and nontradable goods sectors then Australia’s growth dividend would be slightly lower than the estimate for the last decade.
International Monetary Fund
This paper assesses the impact of a disruption to capital inflows by examining past episodes of capital inflows in New Zealand and other countries. It also reviews the IMF’s Global Economy Model (GEM), which is used to provide some estimates of the equilibrium relationship between New Zealand’s real effective exchange rate and real commodity prices. The analysis also suggests that permanent changes in non-energy commodity prices can have a significant impact on New Zealand’s equilibrium exchange rate.
International Monetary Fund
This Selected Issues paper reviews how Australia’s economy has adapted to a flexible Australian Dollar. The paper provides a background on the float and the initial policy challenges. It discusses the main elements of the Future Fund proposal, and estimates how much Australia and other countries in the Asia-Pacific region would gain from greater financial integration. The results suggest that these welfare gains are large, giving an argument in favor of a progressive capital account liberalization across the region, once the needed supporting measures are in place.
International Monetary Fund
This Selected Issues paper analyzes inflation in Norway with a view to shedding light on this surprising development and the possible near-term course of inflation, using statistical and econometric analyses. The paper reviews recent developments of monetary policy and inflation in Norway, applies statistical and econometric tools to identify factors influencing inflation, and describes the implications of the analysis for policymaking. Using data for six advanced small open economies explicitly targeting inflation, the paper examines empirically whether deviations of the exchange rate from their equilibrium levels systematically affect the conduct of monetary policy.
International Monetary Fund
This Selected Issues paper reviews the benefits and costs of reserves for Chile, with emphasis on standard methodologies for assessing reserve adequacy. It reports an empirical methodology that analyzes simultaneously key explanatory variables behind a country’s level of reserves. The paper previews mechanisms that could supplement a country’s liquidity needs in times of stress. This paper also describes the instruments available for hedging foreign exchange risk, the demand and supply of foreign exchange hedging in the onshore market, and assesses foreign exchange exposure in different industrial sectors using factor analysis.
Mr. Mark Zelmer
The limited supply of government securities in some industrial countries has important ramifications for the operating techniques used by central banks to implement monetary policy, provide credit to the financial sector, and also for the assets they hold on their balance sheets. The paper reviews the salient facts regarding industrial central bank balance sheets and operating techniques, and outlines different options for dealing with a limited supply of government securities. The main conclusion is that central banks may wish to consider extending credit using a broad range of assets as collateral, and engage in outright transactions of securities guaranteed by financial institutions.
Mr. Tamim Bayoumi and Mr. Barry J. Eichengreen
This paper examines some popular explanations for the smooth operation of the pre-1914 gold standard. We find that the rapid adjustment of economies to underlying disturbances played an important role in stabilizing output and employment under the gold standard system, but no evidence that this success also reflected relatively small underlying disturbances. Finally, the paper also suggests an explanation for the evolution of the international monetary system based on growing nominal inertia over time.
International Monetary Fund


This chapter presents several papers included in the Bretton Woods conference. The Bretton Woods Conference of 1944 had left many issues of development finance unresolved. In fact, very early, the World Bank took a different direction from that envisaged by its founders. The IMF came into existence on December 27, 1945. The eventual growth in the Fund's activities led to the disappearance of the nonresident Executive Director. A teleological approach in the examination of the IMF’s authority was inspired not only by the principle that the Fund must be effective in the pursuit of its purposes but also by the belief that the Articles, and especially the provisions on the par value system, constituted an international monetary system. In the 1950s, the Bank made an important contribution to helping countries cope with the external debt problems left over from the 1930s. Moreover now it is trying, in cooperation with the IMF, to help countries make necessary adjustments on a case-by-case basis.

International Monetary Fund. Research Dept.
This paper begins by describing the basic concepts of Islamic banking, focusing on the issue of elimination of the rate of interest from the system. Islam expressly prohibits a fixed or predetermined return on financial transactions but allows uncertain rates of return deriving from risk-taking activities. Consequently, a banking structure in which the return for the use of money fluctuates according to actual profits made from such use would be consistent with the precepts of Islam. The paper concludes that from an economic standpoint the principal difference between the Islamic and the traditional banking systems is not that one allows interest payments and the other does not. The more relevant distinction is that the Islamic system treats deposits as shares and accordingly does not guarantee their nominal value, whereas in the traditional system such deposits are guaranteed either by the banks or by the government.