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Law > Business and Financial

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Cover Selected Decisions and Selected Documents of the International Monetary Fund
Selected Decisions and Selected Documents of the International Monetary Fund
Forty-Third Issue Supplement
International Monetary Fund. Legal Dept.

Abstract

A supplement to the Forty-Third Issue of Selected Decisions and Selected Documents of the International Monetary Fund, incorporating items posted after January 1, 2023.

Keywords:
MCP decision; Review of the Fund's Policy; payments policy; adequacy assessment framework; fund surveillance; Balance of payments need; Anti-money laundering and combating the financing of terrorism (AML/CFT); Liquidity; Lines of credit; Global
Cover Shocks and Capital Flows
Shocks and Capital Flows
Policy Responses in a Volatile World

Abstract

The high exposure of open economies to shocks makes them particularly vulnerable to volatile capital flows and advanced economy monetary policy spillovers. How should and do domestic policymakers respond? The traditional answer has been to use flexible exchange rates as a shock absorber. But flexible exchange rates may not offer full insulation when financial markets are imperfect. This book brings together recent empirical studies at the International Monetary Fund (IMF) on the effectiveness of different tools in responding to such shocks. The 18 chapters in this volume provide a rich background to the recently launched Integrated Policy Framework by the IMF. They comprise assessments of countries’ actual use of different tools, as well as in-depth evaluations of their effectiveness and side effects, covering macroprudential policies, monetary policy, foreign-exchange intervention, and capital flow management policies. Many of the studies involve new data and methods to tackle the inherently difficult problems in identifying and comparing the effects of policies under different circumstances. As a result, the volume offers the reader a comprehensive, in-depth coverage of the policy-oriented empirical research that has informed the development of a new way of thinking about open-economy macroeconomics at the IMF.

Keywords:
Capital flows; monetary policy; exchange rate policy; foreign exchange intervention; macroprudential policy; capital controls; FX debt; account restrictiveness; exchange rate intervention; IT regime; Exchange rates; Macroprudential policy instruments; Global; Asia and Pacific; Caribbean; Central America; Europe
Cover Policy Papers
Review of the Flexible Credit Line, The Short Term Liquidity Line and the Precautionary and Liquidity Line, and Proposals for Reform
International Monetary Fund. Strategy, Policy, & Review Department
The Fund’s precautionary toolkit rests on the simple proposition that facilitating crisis prevention is far less costly than crisis resolution. Its value increases with systemic risk. Serial shocks to the global trading and financial systems pose significant and persistent headwinds for well-integrated emerging markets. An adequately funded global financial safety net (GFSN) with a suite of precautionary tools allows qualifying members to respond to balance of payments (BoP) shocks, reducing the incidence of crises and limiting contagion. The Fund is the only layer of the GFSN available to all members; other layers vary in their availability and externalities. In this context, the overarching objective of this review of the Flexible Credit Line (FCL), Short-term Liquidity Line (SLL), and Precautionary and Liquidity Line (PLL) is to ensure that the precautionary facilities toolkit (henceforth “the toolkit”) is fit for purpose for the challenges ahead.
Keywords:
Flexible Credit Line (FCL); Short-term Liquidity Line (SLL); Precautionary and Liquidity Line (PLL); Global Financial Safety Net (GFSN); PLL qualification assessment; FCL arrangement; SLL reform package; qualification assessment; FCL user; SLL access; SLL instrument; SLL Arrangements; Balance of payments need; Anti-money laundering and combating the financing of terrorism (AML/CFT); Liquidity; Debt sustainability; Global; Western Hemisphere
Cover FinTech Notes
Capital Flow Management Measures in the Digital Age (2): Design Choices for Central Bank Digital Currency
Mr. Dong He, Annamaria Kokenyne, Mr. Tommaso Mancini Griffoli, Mr. Marcello Miccoli, Mr. Thorvardur Tjoervi Olafsson, Gabriel Soderberg, and Hervé Tourpe
This fintech note looks at how capital flow measures (CFMs) could be implemented with central bank digital currency (CBDC), and what benefits, risks and complexities could arise. There are several implications of the analysis. First, CBDC ecosystems should generally be designed such that they can accommodate the introduction of CFMs. Second, thanks to the programmability of the payment infrastructure given by the new digital technologies, certain CFMs could likely be implemented more efficiently and effectively with CBDC compared to the traditional system. Third, implementing CFMs requires central banks to collaborate on practices and standards. Finally, CFMs on CBDC need to operate alongside traditional CFMs.
Keywords:
Central bank digital currency; Capital flow measures; CBDC implementation; CBDC ecosystem; IMF Fintech Note 2023/009; IMF Library; smart CFMs; fencing CBDC; Central Bank digital currencies; Capital flow management; Capital flows; Foreign assets; Digital wallets; Global
Cover FinTech Notes
Capital Flow Management Measures in the Digital Age: Challenges of Crypto Assets
Mr. Dong He, Annamaria Kokenyne, Xavier Lavayssière, Ms. Inutu Lukonga, Nadine Schwarz, Nobuyasu Sugimoto, and Jeanne Verrier
Capital flow management measures (CFMs) can be part of the broader policy toolkit to help countries reap the benefits of capital flows while managing the associated risks. Their implementation typically requires that financial intermediaries verify the nature of transactions and the identities of transacting parties but is facing the rising challenge of crypto assets. Indeed, crypto assets have become a significant instrument for payments and speculative investments in some countries. They can be traded pseudonymously and held without identification of the residency of the asset holder. Many crypto service providers operate across borders, making supervision and enforcement by national authorities more difficult. The challenges posed by the attributes of crypto assets are compounded by gaps in the legal and regulatory frameworks. This paper aims to discuss how crypto assets could impact the effectiveness of CFMs from a structural and longer-term perspective. To preserve the effectiveness of CFMs against crypto-related challenges, policymakers need to consider a multifaceted strategy whose essential elements include clarifying the legal status of crypto assets and ensuring that CFM laws and regulations cover them; devising a comprehensive, consistent, and coordinated regulatory approach to crypto assets and applying it effectively to CFMs; establishing international collaborative arrangements for supervision of crypto assets; addressing data gaps and leveraging technology (regtech and suptech) to create anomaly-detection models and red-flag indicators that will allow for timely risk monitoring and CFM implementation.
Keywords:
capital flow management measures; CFMs; crypto assets; digital currencies; Regtech; Suptech; untraceable transactions; crypto exchanges; distributed ledger technology; Bitcoin; FINTECH note; asset holder; capital outflow restriction; crypto asset Adoption; crypto-asset exchange; Virtual currencies; Capital flow management; Blockchain and DLT; Capital flows; Anti-money laundering and combating the financing of terrorism (AML/CFT); Global
Cover IMF Staff Country Reports
Iceland: 2018 Article IV Consultation-Press Release; Staff Report; Staff Statement; and Statement by the Executive Director for Iceland
International Monetary Fund. European Dept.
Iceland is experiencing an economic slowdown that has reduced overheating concerns. Tourism growth has decelerated and the króna has stopped appreciating. Demand management has become easier, allowing the authorities to focus on medium-term priorities, including infrastructure, healthcare, education, and the environment. Risks, however, have become more evident. High fuel prices and other factors are challenging the airline business; world trade tensions are escalating; and the United Kingdom—a vital trading partner—is not yet assured of a smooth EU exit. Icelandic policies thus need to focus on further increasing resilience to shocks.
Keywords:
ISCR; CR; competition authority; staff appraisal; baseline rojections; increase government investment; IMF staff projection; liability positions vis-à-vis nonresident; tourism growth; foreign currency; Current account surpluses; Income; Government finance statistics; Fiscal stance; Global; Europe
Cover IMF Staff Country Reports
Iceland: 2017 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Iceland
International Monetary Fund. European Dept.
This 2017 Article IV Consultation highlights Iceland’s continued real GDP growth, driven by tourism. Growth reached 7.2 percent in 2016 and is projected at almost 6 percent in 2017 before tapering to about 2.5 percent over the medium term. Bank credit to the nonfinancial private sector remains muted, growing only 4.3 percent in 2016, but it is expected to pick up. Thus far, growth has been driven not by leverage but by exports, private consumption, and investment. Iceland’s current account surplus is projected to shrink modestly over time, with some export sectors suffering while others thrive.
Keywords:
ISCR; CR; fiscal policy; IMF staff projection; economy; inflation expectation; exchange rate volatility; prudent fiscal policy; CBI transactions; inflation prospect; Tourism; Current account; Inflation; Global
Cover IMF Staff Country Reports
Iceland: 2016 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Iceland
International Monetary Fund. European Dept.
This paper provides an assessment of the economic conditions, outlook, and crises in Iceland. There is a mounting sense that capital controls hurt growth prospects, repressing local financial markets, scaring foreign investors, and impeding savings diversification, and that it is time for them to go. Recent settlements with the bank estates are a huge step forward, improving already favorable macroeconomic conditions. At 4 percent in 2015 and gaining pace, real GDP expansion is among the fastest growing in Europe, opening up a positive output gap. However, the biggest risk for Iceland is overheating. Large wage awards on top of already hot economic readings speak to Iceland’s boom-bust history.
Keywords:
ISCR; CR; Iceland; right; CBI governor; IMF staff projection; CBI transactions; inflation expectation; baseline projection; asset price pressure; Bank supervision; Capital account liberalization; Capital controls; Wages; Global; Europe
Cover IMF Staff Country Reports
Morocco: Ex Post Evaluation of Exceptional Access Under the 2012 Precautionary and Liquidity Line Arrangement
International Monetary Fund. Middle East and Central Asia Dept.
This paper discusses Morocco’s Ex Post Evaluation of Exceptional Access Under the 2012 Precautionary and Liquidity Line (PLL) Arrangement. The Ex Post Evaluation confirms that the 2012–14 PLL arrangement was consistent with the PLL qualification standards and requirements under the exceptional access policy at the time of the PLL arrangement request in August 2012 and at the subsequent reviews. The authorities’ policies helped maintain macroeconomic stability and reduce fiscal and external vulnerabilities, despite unfavorable external developments. It is observed that despite the significant macroeconomic achievements under the 2012–14 PLL arrangement, a number of policy challenges remained to be fully addressed.
Keywords:
IMF Deputy managing director; fund policy; draft central bank bank charter; PLL exit; PLL eligibility; government action; Government debt management; Oil prices; Fiscal stance; Current account deficits; Global; Europe; Maghreb; Sub-Saharan Africa