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Europe > Cayman Islands

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Cover IMF Staff Country Reports
St. Kitts and Nevis: Technical Assistance Report-Strengthening Core Business Functions Audit Capacity (RTAT)
International Monetary Fund. Western Hemisphere Dept.
The Inland Revenue Department, St. Kitts and Nevis, benefited from a remote Capacity Development (CD) activity delivered by CARTAC over the period November 2021 – March 2022 on auditing of financial institutions. The main objective of this CD was to strengthen the capacity of the auditors to perform audits and verify the accuracy of reporting by taxpayers in the Financial Sector. The training included (i) an overview of the financial sector, financial products/instruments and business processes; (ii) guidance in auditing the banks and insurance companies; and (iii) awareness of the key tax risks within this sector. A total of 22 auditors from the large, medium and small taxpayers’ unit, participated in the training. The training was held over a fifteen (15) day period and concluded with the auditors developing an audit schedule and preparation of audit notification letters to taxpayers selected for audit.
Keywords:
Strengthening audit capacity; core business functions audit capacity; IRD audit team; team Training Program; IRD auditor; World Bank staff; a number of audit case; Auditing; Financial sector; Training and development in revenue administration; Financial audit; Insurance companies; Caribbean
Cover IMF Working Papers
The Impact of Gray-Listing on Capital Flows: An Analysis Using Machine Learning
Mizuho Kida and Simon Paetzold
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.
Keywords:
capital flows; AML/CFT; gray list; machine learning; emerging market economies; inferential machine learning technique; gray-listing affect; analysis using machine learning; coefficient estimate; Capital flows; Capital inflows; Anti-money laundering and combating the financing of terrorism (AML/CFT); Machine learning; Foreign direct investment; Global
Cover IMF Working Papers
What Is Real and What Is Not in the Global FDI Network?
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.
Keywords:
WP; Total FDI; investor economy; FDI position; conversion factor; Global FDI Network; Special Purpose Entities; Phantom FDI; Real FDI; inward FDI; FDI statistics; FDI network; Foreign direct investment; Special purpose vehicle; Tax avoidance; Offshore financial centers; Business enterprises; Global
Cover IMF Staff Country Reports
St. Lucia: Climate Change Policy Assessment
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.
Keywords:
ISCR; CR; balance of payments; price cap; capital stock; credit line; interest rate; private sector; risk management strategy; tax system; carbon tax; government program; capital budget; investment priority; government financing; climate change; Climate change; Natural disasters; Carbon tax; Budget planning and preparation; Climate policy; Caribbean; Global
Cover IMF Working Papers
Evolution of the Global Financial Network and Contagion: A New Approach
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.
Keywords:
WP; UK shock; equity; FDI equity; FDI-equity layer; USA banking shock; Financial contagion; spillovers; network analysis; PageRank centrality measure; bank funding; Foreign direct investment; Stocks; Portfolio investment; Commercial banks; Global; Europe
Cover IMF Working Papers
The Global Banking Network in the Aftermath of the Crisis: Is There Evidence of De-globalization?
Mr. Eugenio M Cerutti and Haonan Zhou
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 linkages.
Keywords:
WP; exchange rate; emerging market; regression analysis; Cross-border Lending; Banking Network; Financial Interconnectedness; CBS data; borrower country; Katz-Bonacich centrality; bank size; lender-borrower pair; credit-borrower dependence; flow process; borrower capital account openness; lender bank assets; Cross-border banking; Offshore financial centers; International banking; Foreign banks; Financial statistics; Global; Europe; Asia and Pacific
Cover IMF Working Papers
Uphill Capital Flows and the International Monetary System
Mr. Balazs Csonto and Mr. Camilo E Tovar Mora
Uphill capital flows constitute a key transmission channel through which reserve accumulation can distort the stability of the international monetary system. This paper examines and quantifies the importance of this transmission channel by examining how foreign official purchases of U.S. Treasuries influences the U.S. yield curve at different maturities. Our findings suggest that a percentage point increase in foreign official holdings relative to outstanding marketable securities reduces the term premium by 2.0–2.4 basis points at maturities of 2–3 years. These estimates are then used to gauge the role of a global policy in reducing excess reserve accumulation?e.g., a composite global reserve asset or through global liquidity facilities. Findings show that a policy that reduces the demand for Treasuries by $100 billion would increase yields by 1.5–1.8 basis points.
Keywords:
WP; Treasuries; term premium; premium; Uphill capital flows; yield curve; U.S. Treasuries; reserve accumulation; foreign holdings; Treasury securities; yield dynamics; foreign exchange; Capital flows; Securities; Reserves accumulation; International reserves; Global