Tito Cordella, Andrew Powell, 02 September 2019

Countries almost always repay loans from the IMF and the World Bank before others, even though this preferred treatment rarely appears in legal contracts. This column presents a framework to investigate this puzzle. It argues that the ability to restrict lending allows international financial institutions to lend at the risk-free rate and creates incentives for repayment. IMF and World Bank loans are thus complementary to commercial lending.

Cinzia Alcidi, Daniel Gros, 23 May 2019

The relationship between high public debt and low interest rates is once again at the forefront of debate. This column shows that countries with high debt levels pay a risk premium. This creates the potential for self-reinforcing loops of high debt and high risk premia, which can become explosive. 

Beatrice Scheubel, Livio Stracca, Cédric Tille, 26 April 2019

More than ten years on from the start of the Global Crisis, policymakers are discussing the effectiveness of the global financial safety net – the combination of reserves, central bank swap lines, regional financial arrangements, and the IMF. This column evaluates the effectiveness of the use of IMF support and foreign reserves in globally driven crises. It finds that actual use of IMF support helps during currency crises – the type of crisis for which the support was originally designed. Use of reserves is of limited effectiveness and only during sudden stops. 

José Antonio Ocampo, 09 April 2019

The IMF will turn 75 this year. Updating and reforming of some aspects of its core functions should be considered to reflect the current global monetary context. This column analyses the IMF’s global reserve system, identifying three issues and suggesting two alternatives. Ultimately, greater use of the Fund’s Special Drawing Rights would mitigate several problems in the current system.

Adrian Alter, Gaston Gelos, Heedon Kang, Machiko Narita, Erlend Nier, 03 April 2019

The IMF’s new iMaPP database integrates five major existing databases to build a comprehensive picture of macroprudential policies in use globally. This column shows how this rich dataset provides novel insights into the non-linear effects of changes in loan-to-value limits as one example of how better data can help policymakers to use macroprudential tools more precisely and effectively.

Giancarlo Corsetti, Aitor Erce, Timothy Uy, 13 February 2019

During the euro area crisis, management of official loan maturities emerged as a critical item in the discussion on which instruments and strategies are most effective at ensuring debt sustainability. Using a theoretical model calibrated to Portugal and cross-country data, this column shows that lengthening loan maturities and managing debt repayment flows has substantial effects on sustainability. It also unveils a key policy trade-off in official lending between increasing the amount of safe debt (immune from rollover risk) and strengthening the incentive to default in response to negative shocks to fundamentals.

Thorsten Beck, Emily Jones , Peter Knaack, 15 October 2018

In today’s world of globalised finance, regulators in developing countries have to weigh up the international ramifications of their decisions. This column presents the results of a research project which combines cross-country panel analysis and in-depth case studies of the political economy of the adoption of Basel II/III in the developing world. It finds that regulators in developing countries do not merely adopt Basel II/III because these standards provide the optimal technical solution to financial stability risks in their jurisdictions; concerns about reputation and competition are also important. 

José De Gregorio, Barry Eichengreen, Takatoshi Ito, Charles Wyplosz, 11 September 2018

Twenty years ago, ICMB and CEPR published the first Geneva Report on the World Economy. Over these last two decades, the world of international finance has changed and so too has the IMF. This column introduces the latest report, in which the same team of authors highlight seven key developments affecting the monetary and financial environment and their implications for the Fund. 

Era Dabla-Norris, Ruud de Mooij, 07 August 2018

A key problem in tax research is that quantitative information is often only available for tax rates, not tax bases. This column introduces a new IMF database on tax reforms published, which uses text-mining techniques to infer multiple dimensions of tax reforms enacted in 23 advanced and emerging economies over the last four decades. The database, which covers both direct and indirect taxes, can help address well-known methodological pitfalls in existing tax research and offers opportunities for novel analysis of tax policy.

Luis Brandao-Marques, Gaston Gelos, 21 December 2017

Some have speculated that the rise in nonbank financing has weakened the transmission mechanism of monetary policy. This column used international data to investigate this claim. Overall, the evidence suggests that nonbanks tend to respond more strongly to monetary policy than banks. Although monetary policy remains potent in an environment with more nonbank intermediation, it will need to continuously adapt to changes in the transmission mechanism.

Jeremy Bulow, John Geanakoplos, 30 June 2017

After another six months of discussions, Greek debt negotiations succeeded in once again kicking the can down the road. This column analyses how sophisticated and experienced negotiators like the IMF, the Eurozone leadership, and by now even the Greeks, could have let negotiations drag out for so many years, and goes on to propose a plan which might be just radical enough to meet the needs of all parties.

Myrvin L. Anthony, Narcissa Balta, Tom Best, Sanaa Nadeem, Eriko Togo, 06 June 2017

The case for state-contingent debt instruments, linking contractual debt to a pre-defined variable, has been theorised but not developed. This column gives a historical perspective of the issuance of these instruments to alleviate liquidity and/or solvency pressures on the sovereign in ‘normal times’ and during restructurings. It also discusses the valuable lessons that inflation-linked bonds provide for development of the state-contingent debt instrument market.

Charles Wyplosz, 17 February 2017

The IMF has just released its self-evaluation of its Greek lending, in which it admits to many mistakes. This column argues that the report misses one important error – reliance on the Debt Sustainability Analysis – but notes that the IMF’s candour should be a model for the other participants in the lending, namely, the European Commission and the ECB.

Aqib Aslam, Emine Boz, Eugenio Cerutti, Marcos Poplawski-Ribeiro, Petia Topalova, 13 February 2017

A growing literature aims to understand the remarkable slowdown in global trade growth in recent years. This column discusses a chapter in the IMF’s October 2016 World Economic Outlook on the drivers of the trade slowdown, and compares the findings to those of other recent studies. It argues that a variety of factors have contributed to weak trade growth, with widespread anaemic economic activity and the change in its composition being among the key drivers. 

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Before the financial crisis the global safety net consisted mostly of a single, imposing, though somewhat dated, building: the IMF. The last years, like emerging markets cityscapes, have witnessed a construction boom of sprawling suburbs and towering high rises: there are regional financing arrangements (RFAs), standing and limited value bilateral swap lines, contingent reserves and ever increasing levels of self-insurance through foreign reserves. The new skyline certainly looks impressive. The question is whether this complex architecture is more solid and capable of withstanding large shocks. An even more important question is whether the governance within this crowded complex is capable of preventing such “shocks” – which more often than not, are the result of past policy mistakes –– and if not, how it can be fixed.

Claudia Buch, Matthieu Bussière, Linda Goldberg, 09 December 2016

The Global Crisis has triggered substantive policy responses, but assessing the impacts of these and the effects on the real economy is a challenging task. This column discusses the work of the International Banking Research Network in examining international spillovers of prudential instruments through credit provision by banks. It finds that prudential instruments sometimes spill over across borders through bank lending, and that international spillovers vary across prudential instruments and are heterogeneous across banks. There appears to be no one channel or even direction of transmission that dominates spillovers.

Pınar Yeşin, 26 October 2016

The IMF invests significant resources in developing models to estimate equilibrium exchange rates. This column assesses the predictive power of one vintage of IMF exchange rate models during 2006–2011. The models performed exceptionally well at predicting exchange rate movements over the medium run, which is particularly remarkable given that the period covered the unanticipated Global Crisis and the assessments were not shared publicly at the time.

Beatrice Scheubel, Livio Stracca, 04 October 2016

The global financial safety net is one of the key infrastructures of financial globalisation. However, its current constellation does not reflect a coherent design, but rather the interaction of different instruments used for different purposes and developed over time. This column presents the first database that brings together all of the relevant data for assessing the global financial safety net, including foreign exchange reserves, IMF instruments, regional financing arrangements, and central bank swap lines. An analysis shows that the availability of the net helps to cushion the effects of capital flow reversals.

Vítor Constâncio, Philipp Hartmann, 24 November 2016

The ECB’s 2016 Sintra Forum on Central Banking focused on the international monetary and financial system. In this column, the organisers of the forum highlight some of the main points from the discussions, including concerns that the world economy may be suffering from a shortage of safe assets and proposals for which areas international regulatory reforms should be further developed. 

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