Asia and Pacific > China, People's Republic of

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  • Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy x
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International Monetary Fund
Rapid technological innovation is ushering in a new era of public and private digital money, bringing about major benefits in terms of efficiency and inclusion. To reap the full benefits and manage risks, authorities around the world will have to address new policy challenges. These are widespread, complex, rapidly evolving, and have profound implications. This paper identifies the main challenges currently arising regarding consumer protection and financial integrity, domestic financial and economic stability, as well as the stability and efficiency of the international monetary system. The paper argues that many of these challenges intersect the Fund’s mandate. The Fund must therefore monitor, and advise on, this rapid and complex transition for all members. The paper ends with a broad vision of how to deliver on this mandate and serve its members, including by enhancing resources, and collaborating closely with other institutions. This is the first of two papers, the second of which lays out a more detailed operational strategy.
Sophia Chen, Mr. Lev Ratnovski, and Pi-Han Tsai
We jointly estimate credit and fiscal multipliers in China. We use the tenure of the provincial party secretary, interacted with the type of stimulus used in other provinces, to obtain separate instruments for provincial credit and government expenditure. We estimate a fiscal multiplier of 0.8 and a credit multiplier of 0.2 in 2001-2015. The multipliers have changed over time. The fiscal multiplier has increased from 0.75 in 2001-2008 to 1.4 in 2010-2015. The credit multiplier has declined from 0.17 to zero over the same periods. Our results suggest that reducing credit growth in China is unlikely to disrupt output growth, whereas fiscal policy may be effective in supporting macroeconomic adjustment.
Muneesh Kapur and Rakesh Mohan
The macroeconomic policy response in India after the North Atlantic financial crisis (NAFC) was rapid. The overshooting of the stimulus and its gradual withdrawal sowed seeds for inflationary and BoP pressures and growth slowdown, then exacerbated by domestic policy bottlenecks and volatility in international financial markets during mid-2013. Appropriate domestic oil prices and fiscal consolidation will contribute to the recovery of private sector investment. Fiscal consolidation would also facilitate a reduction in inflation, which would moderate gold imports and favorably impact real exchange rate and current account deficit.
Mr. Tamim Bayoumi and Mr. Trung T Bui
Event studies are used to analyze the impact of U.S. financial, fiscal, and monetary policies from US to foreign asset prices across a range of G20 countries and Switzerland. The initial announcement that the Administration supported tighter regulation of banks led to a generalized fall in advanced economy bank shares compared to local equity markets. For later Dodd-Frank announcements, however, falls in U.S. bank equity prices were accompanied by increases in U.K. and Swiss valuations, implying a potential for regulatory arbitrage. Turning to macro policies, the 2008/9 fiscal and monetary stimulus packages generally supported foreign activity, while the impact of similar stimulus in 2010 is less clear.
Isabel K. Yan and Mr. Michael Kumhof
Several emerging economies have, until recently, experienced large government surpluses and accelerating foreign exchange reserve accumulation. This has been accompanied by economic booms, exchange rate appreciations and in some cases increases in domestic inflation. We show that one way to understand these episodes is as manifestations of balance of payments anti-crises, as reflecting the perception that the government intends to discontinue its accumulation of reserves in the near future. The end-phase of such crises is characterized by nominal interest rates approaching their zero lower bound in accelerating fashion and, if the government targets CPI inflation, by fast increasing domestic inflation.
Mr. Ari Aisen and Mr. Francisco José Veiga
While most economists agree that seigniorage is one way governments finance deficits, there is less agreement about the political, institutional, and economic reasons for relying on it. This paper investigates the main determinants of seigniorage using panel data on about 100 countries, for the period 1960-1999. Estimates show that greater political instability leads to higher seigniorage, especially in developing, less democratic, and socially polarized countries, with high inflation, low access to domestic and external debt financing and with higher turnover of central bank presidents. One important policy implication of this study is the need to develop institutions conducive to greater economic freedom as a means to lower the reliance on seigniorage financing of public deficits.
Mr. Alexander Plekhanov and Mr. Raju J Singh
Countries have adopted various institutional responses to subnational government borrowing. Using a sample of 44 countries 1982-2000, this paper provides a panel data analysis to determine the most effective borrowing constraints for containing local fiscal deficits. The results suggest that no single institutional arrangement is superior under all circumstances. The appropriateness of specific arrangements depends upon other institutional characteristics, particularly the degree of vertical fiscal imbalance, the existence of any bailout precedent, and the quality of fiscal reporting.
International Monetary Fund
The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.