The Financial Action Task Force’s gray list publicly identiﬁes countries with strategic deﬁciencies in their AML/CFT regimes (i.e., in their policies to prevent money laundering and the ﬁnancing of terrorism). How much gray-listing aﬀects a country’s capital ﬂows is of interest to policy makers, investors, and the Fund. This paper estimates the magnitude of the eﬀect using an inferential machine learning technique. It ﬁnds that gray-listing results in a large and statistically signiﬁcant reduction in capital inﬂows.
Jannick Damgaard, Thomas Elkjaer, and Niels Johannesen
Macro statistics on foreign direct investment (FDI) are blurred by offshore centers with
enormous inward and outward investment positions. This paper uses several new data
sources, both macro and micro, to estimate the global FDI network while disentangling real
investment and phantom investment and allocating real investment to ultimate investor
economies. We find that phantom investment into corporate shells with no substance and no
real links to the local economy may account for almost 40 percent of global FDI. Ignoring
phantom investment and allocating real investment to ultimate investors increases the
explanatory power of standard gravity variables by around 25 percent.
International Monetary Fund. Western Hemisphere Dept.
This paper takes stock of St. Lucia’s plans to manage climate change, from the perspective of their macroeconomic implications, and suggests macro-relevant reforms that could strengthen the likelihood of success of the national strategy. To meet its renewable energy plans, St. Lucia will need to mobilize private investment. External assistance will be needed to develop supporting infrastructure. Building capacity for project assessment and investment promotion is a high priority, to shape needed investments into bankable projects. Elsewhere, capacity-building would be most useful to help cost sectoral plans, complete the disaster-preparedness strategy, move toward carbon taxation, and strengthen skills in public investment management and public financial management.
Ms. Yevgeniya Korniyenko, Manasa Patnam, Rita Maria del Rio-Chanon, and Mason A. Porter
This paper studies the interconnectedness of the global financial system and its susceptibility
to shocks. A novel multilayer network framework is applied to link debt and equity
exposures across countries. Use of this approach—that examines simultaneously multiple
channels of transmission and their important higher order effects—shows that ignoring the
heterogeneity of financial exposures, and simply aggregating all claims, as often done in
other studies, can underestimate the extent and effects of financial contagion.The structure of
the global financial network has changed since the global financial crisis, impacted by
European bank’s deleveraging and higher corporate debt issuance. Still, we find that the
structure of the system and contagion remain similar in that network is highly susceptible to
shocks from central countries and those with large financial systems (e.g., the USA and the
UK). While, individual European countries (excluding the UK) have relatively low impact on
shock propagation, the network is highly susceptible to the shocks from the entire euro area.
Another important development is the rising role of the Asian countries and the noticeable
increase in network susceptibility to shocks from China and Hong Kong SAR economies.
Post-crisis dynamics show a shrinkage in the overall amount of crossborder bank lending,
which has been interpreted in the literature as a retreat in financial globalization. In this
paper, we argue that aggregate figures are not sufficient to support such a claim in terms of
the overall structure of the global banking network. Based on a systematic approach to
measuring, mapping and analyzing financial interconnectedness among countries using
network theory, we show that, despite the decline in aggregate lending volumes, the structure
of the network has developed increased connections in some dimensions. Some parts of the
network are currently more interlinked regionally than before the crisis, and less dependent
on major global lenders. In this context, at a more disaggregate level, we document the
characteristics of the increasing regionalization of lending flows, the different evolution of
linkages through bank affiliates and direct cross-border claims, as well as the shift in the
importance of key borrower and lender nodes. These changes in the banking network have
important insights in terms of policy implications since they indicate that the global banking
network has evolved, but it has not undergone a generalized retrenchment in financial
Mr. Sebastian Acevedo Mejia, Lu Han, Miss Marie S Kim, and Ms. Nicole Laframboise
This paper studies the role of airlift supply on the tourism sector in the Caribbean. The
paper examines the relative importance of U.S.-Caribbean airlift supply factors such as the
number of flights, seats, airlines, and departure cities on U.S. tourist arrivals. The possible
endogeneity problem between airlift supply and tourist arrivals is addressed by using a
structural panel VAR and individual country VARs. Among the four airlift supply
measures, increasing the number of flights is found to be the most effective way to boost
tourist arrivals on a sustained basis. As a case study, the possible crowding effect of
increasing the number of U.S. flights to Cuba is investigated and, based on past
observations, we find no significant impact on flights to other Caribbean countries. The
impact of natural disasters on airlift supply and tourist arrivals is also quantified.
The production of the Handbook on Securities Statistics (the Handbook) is a joint undertaking by the Bank for International Settlements (BIS), the European Central Bank (ECB) and the International Monetary Fund (IMF). They have specific interests and expertise in the area of securities statistics and are the core members of the Working Group on Securities Databases (WGSD). In 2007, the WGSD—originally established by the IMF in 1999—was reconvened in response to various international initiatives and recommendations to improve information on securities markets. The WGSD is chaired by the ECB and includes the BIS, the IMF and the World Bank. Selected experts from national central banks, who participated actively in the various international groups that identified the need to improve data on securities markets, were also invited to contribute to some of the WGSD’s deliberations. In mid-2008, the WGSD agreed to sponsor the development of a handbook on securities statistics. In November 2009, the report entitled “The Financial Crisis and Information Gaps”, which was prepared by the Financial Stability Board (FSB) Secretariat and IMF staff at the request of the Group of Twenty (G-20) finance ministers and central bank governors, endorsed the development of the Handbook, as well as the gradual implementation of improved statistics on issuance and holdings of securities at the national and international level. The BIS’s compilation of data on debt securities plays an important role in this respect. The Handbook sponsors responded to the demand from various international groups for the development of methodological standards for securities statistics and released the Handbook in three parts. Part 1 on debt securities issues was published in May 2009, and Part 2 on debt securities holdings in September 2010. Part 3 of the Handbook on equity securities statistics was published in November 2012. The methodology described in all three parts was based on the System of National Accounts 2008 (2008 SNA) and the sixth edition of the Balance of Payments and International Investment Position Manual (BPM6). The three parts also went slightly beyond the confines of these standards by providing guidance and additional information on, for example, the main features of securities, special and borderline cases, and breakdowns of issues and holdings of securities by counterparty. Special attention was also paid to specific operations such as mergers and acquisitions, restructuring, privatization and nationalization, and transactions between general government and public corporations. From the beginning, the intention was to combine the three parts into one volume, thereby eliminating any overlap and repetitions between the parts. The Handbook’s conceptual framework is complemented by a set of tables for presenting securities data both at an aggregated level and broken down by various features. This should allow sufficient flexibility in the presentation of data on issuance and holdings of securities, in line with developments in securities markets and financing. The Handbook is the first publication of its kind to focus exclusively on securities statistics. Recent turmoil in global financial markets has confirmed the importance of timely, relevant, coherent, and internationally comparable data on securities, from the perspective of monetary policy, fiscal policy, and financial stability analysis. This Handbook provides a conceptual framework for the compilation and presentation of statistics on different types.
International Monetary Fund. Monetary and Capital Markets Department
This Financial Sector Assessment Program report on People’s Republic of China–Hong Kong Special Administrative Region highlights that it has developed a sound framework for the regulation of securities markets, which exhibits a high level of implementation of the International Organization of Securities Commissions Principles. Both the Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) are sophisticated regulators and have been able to leverage from domestic and international expertise to develop sound supervisory practices. Further, while traumatic, the Lehman minibond experience has led to material improvements in conduct supervision that have permeated both the SFC and the HKMA. Continuing efforts by the SFC to build up its capacity to identify and monitor emerging risks should increase the SFC’s ability to react in a timely manner to an evolving landscape, marked by an increased interconnection with the Mainland China, an active presence by international players and increased regional competition as an international finance center. It is important to consider translating the operational independence that the regulators have enjoyed into de-jure independence, through modifications in the current legal governance arrangements for both SFC and HKMA.