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  • Monetary Policy, Central Banking, and the Supply of Money and Credit: General x
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Mr. Adolfo Barajas, Thorsten Beck, Mohammed Belhaj, and Samy Ben Naceur
The past two decades have seen a rapid increase in interest in financial inclusion, both from policymakers and researchers. This paper surveys the main findings from the literature, documenting the trends over time and gaps that have arisen across regions, income levels, and gender, among others. It points out that structural, as well as policy-related, factors, such as encouraging banking competition or channeling government payments through bank accounts, play an important role, and describes the potential macro and microeconomic benefits that can be derived from greater financial inclusion. It argues that policy should aim to identify and reduce frictions holding back financial inclusion, rather than targeting specific levels of inclusion. Finally, it suggests areas for future research.
Woon Gyu Choi and Mr. David Cook
This paper shows that stabilizing volatility in credit growth often conflicts with price stability: unusual credit expansions often occur when inflation is low relative to goals, and credit slumps often appear when inflation is overshooting. We find that central banks with inflation targeting (IT) are responsive to credit conditions in both advanced economies and emerging-market economies (EMEs). However, EMEs are more sensitive to inflation conditions, responding to credit growth only when consistent with IT. Macroprudential measures are also deployed to address credit growth volatility when orthodox policy moves would be inconsistent with IT, complementing monetary policy.
International Monetary Fund. Monetary and Capital Markets Department
This paper first takes a historical perspective, studying the implications of the oil boom of the 2000s on industry structure and economy-wide productivity. It then examines progress with the ongoing transition thus far both in the real sector and in the labor market, bearing in mind the short time span that has passed. This paper also explores two possible explanations for lagging productivity—namely, product market regulation and the low level of research and innovation. An extensive data set of mainland Norwegian firms is used to empirically assess the potential productivity gains from product market reforms as well as increasing research and development spending.
Mr. Stijn Claessens
Macroprudential policies – caps on loan to value ratios, limits on credit growth and other balance sheets restrictions, (countercyclical) capital and reserve requirements and surcharges, and Pigouvian levies – have become part of the policy paradigm in emerging markets and advanced countries alike. But knowledge is still limited on these tools. Macroprudential policies ought to be motivated by market failures and externalities, but these can be hard to identify. They can also interact with various other policies, such as monetary and microprudential, raising coordination issues. Some countries, especially emerging markets, have used these tools and analyses suggest that some can reduce procyclicality and crisis risks. Yet, much remains to be studied, including tools’ costs ? by adversely affecting resource allocations; how to best adapt tools to country circumstances; and preferred institutional designs, including how to address political economy risks. As such, policy makers should move carefully in adopting tools.
International Monetary Fund
A technical note on the stress test of Israel’s banking, insurance, and pension sectors is presented. The Israel Financial Sector Assessment Program Update stress testing exercise comprises a comprehensive analysis of solvency and liquidity risks of key banking and insurance institutions. Satellite models cover housing and corporate credit, household nonhousing credit, profit components, profit retention behavior, and haircut models of government and financial institution bonds. Single-factor tests have been conducted to estimate vulnerabilities to market risk and an idiosyncratic credit shock from exposures to the largest borrower groups and the three largest corporate borrowers.
International Monetary Fund
The staff report for the 2008 Article IV Consultation of Israel on economic developments and policies is examined. Fiscal and monetary credentials have been established in markets. Banks and their supervisory arrangements have been robust, and growth has been strong, sustained, and balanced. Although public debt is much reduced, to about 80 percent of GDP, it remains vulnerable. Although domestic securities prices tracked those abroad downward, prompting outflows from provident funds, flows in domestic credit markets remained largely undisturbed.
Mr. Antonio Spilimbergo
IMF research summaries on (1) oil market developments and the global economy (by Selim Elekdag), and (2) credit booms (by Marco Terrones); country study on India (by Helene Poirson); call for papers for November 2007 Jacques Polak Eighth Annual Research Conference; listing of contents of Vol. 54, Issue No. 2 of IMF Staff Papers; listing of recent IMF Working Papers; and listing of visiting scholars at the IMF during April-June 2007
Mr. Mohsin S. Khan
Movements in global capital during the late 1990s and the greater emphasis on price stability led many countries to abandon fixed exchange rate regimes and to design institutions and monetary policies to achieve credibility in the goal of lowering inflation. Such recent developments have brought to the forefront the idea that freely mobile capital, independent monetary policy, and fixed exchange rates form an "impossible trinity." It is possible to have two of these policies, but not all three. Inflation-targeting regimes being adopted by many countries provide a way of resolving this dilemma.