International Monetary Fund. Monetary and Capital Markets Department and International Monetary Fund. Strategy, Policy, & Review Department
This IMF report to the AHLC is the first since September 2018. Following limited engagement over the past three years, policy discussions have intensified in recent months. These discussions have focused mainly on establishing a medium term macro-fiscal framework, including the broad outlines of a reform scenario.
The Israeli economy has weathered the COVID-19 crisis exceptionally well, but risks are high. With substantial fiscal and monetary support, real GDP growth reached 8.1 percent in 2021, driven by consumption and high-tech exports. The rapid vaccination campaign boosted confidence. The outlook is positive but still subject to high uncertainty.
Wouter Bossu, Mr. Masaru Itatani, and Arthur D. P. Rossi
This paper analyzes the legal foundations of central bank digital currency (CBDC) under central bank and monetary law. Absent strong legal foundations, the issuance of CBDC poses legal, financial and reputational risks for central banks. While the appropriate design of the legal framework will up to a degree depend on the design features of the CBDC, some general conclusions can be made. First, most central bank laws do not currently authorize the issuance of CBDC to the general public. Second, from a monetary law perspective, it is not evident that “currency” status can be attributed to CBDC. While the central bank law issue can be solved through rather straithforward law reform, the monetary law issue poses fundmental legal policy challenges.
Thitipat Chansriniyom, Mr. Natan P. Epstein, and Valeriu Nalban
The paper extends a standard semi-structural model to account for nonlinear and asymmetric effects of monetary policy credibility. In our setting, central bank credibility is proportional to the deviation of inflation expectations from the announced inflation target, with positive deviations being more costly compared to negative ones. A loss in policy credibility as a result of shocks leads to a more persistent, backward-looking inflation process, and is associated with lower output. We find that the extended model with credibility effects matches well the key macroeconomic data over specific past episodes for Indonesia and Philippines and consider its adaptation to integrated policy frameworks as an area for further exploration.