The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy
The Return of the Policy That Shall Not Be Named: Principles of Industrial Policy

Author: Reda Cherif

Publisher: International Monetary Fund

Published: 2019-03-26

Total Pages: 79

ISBN-13: 1498305563

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Industrial policy is tainted with bad reputation among policymakers and academics and is often viewed as the road to perdition for developing economies. Yet the success of the Asian Miracles with industrial policy stands as an uncomfortable story that many ignore or claim it cannot be replicated. Using a theory and empirical evidence, we argue that one can learn more from miracles than failures. We suggest three key principles behind their success: (i) the support of domestic producers in sophisticated industries, beyond the initial comparative advantage; (ii) export orientation; and (iii) the pursuit of fierce competition with strict accountability.

Stress Testing at the IMF
Stress Testing at the IMF

Author: Mr.Tobias Adrian

Publisher: International Monetary Fund

Published: 2020-02-05

Total Pages: 73

ISBN-13: 1513520741

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This paper explains specifics of stress testing at the IMF. After a brief section on the evolution of stress tests at the IMF, the paper presents the key steps of an IMF staff stress test. They are followed by a discussion on how IMF staff uses stress tests results for policy advice. The paper concludes by identifying remaining challenges to make stress tests more useful for the monitoring of financial stability and an overview of IMF staff work program in that direction. Stress tests help assess the resilience of financial systems in IMF member countries and underpin policy advice to preserve or restore financial stability. This assessment and advice are mainly provided through the Financial Sector Assessment Program (FSAP). IMF staff also provide technical assistance in stress testing to many its member countries. An IMF macroprudential stress test is a methodology to assess financial vulnerabilities that can trigger systemic risk and the need of systemwide mitigating measures. The definition of systemic risk as used by the IMF is relevant to understanding the role of its stress tests as tools for financial surveillance and the IMF’s current work program. IMF stress tests primarily apply to depository intermediaries, and, systemically important banks.

Financial Inclusion: What Have We Learned So Far? What Do We Have to Learn?
Financial Inclusion: What Have We Learned So Far? What Do We Have to Learn?

Author: Adolfo Barajas

Publisher:

Published: 2020-08-07

Total Pages: 51

ISBN-13: 9781513553009

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The past two decades have seen a rapid increase in interest in financial inclusion, both from policymakers and researchers. This paper surveys the main findings from the literature, documenting the trends over time and gaps that have arisen across regions, income levels, and gender, among others. It points out that structural, as well as policy-related, factors, such as encouraging banking competition or channeling government payments through bank accounts, play an important role, and describes the potential macro and microeconomic benefits that can be derived from greater financial inclusion. It argues that policy should aim to identify and reduce frictions holding back financial inclusion, rather than targeting specific levels of inclusion. Finally, it suggests areas for future research.

Market Power and Monetary Policy Transmission
Market Power and Monetary Policy Transmission

Author: Mr. Romain A Duval

Publisher: International Monetary Fund

Published: 2021-07-09

Total Pages: 56

ISBN-13: 1513588001

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We show that firms’ market power dampens the response of their output to monetary policy shocks, using firm-level data for the United States and a large cross-country firm-level dataset for 14 advanced economies. The estimated impact of a firm’s markup on its response to a monetary policy shock is large enough to materially affect monetary policy transmission. We also find some evidence that the role of markup in monetary policy transmission, while independent from other channels, is greater for firms whose characteristics — notably size and age — are likely to be associated with greater financial constraints. We rationalize these findings through a simple partial equilibrium model in which borrowing constraints amplify disproportionately low-markup firms’ responses to changes in interest rates.

Inequality and Fiscal Policy
Inequality and Fiscal Policy

Author: Mr.Benedict J. Clements

Publisher: International Monetary Fund

Published: 2015-09-21

Total Pages: 450

ISBN-13: 1513567756

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The sizeable increase in income inequality experienced in advanced economies and many parts of the world since the 1990s and the severe consequences of the global economic and financial crisis have brought distributional issues to the top of the policy agenda. The challenge for many governments is to address concerns over rising inequality while simultaneously promoting economic efficiency and more robust economic growth. The book delves into this discussion by analyzing fiscal policy and its link with inequality. Fiscal policy is the government’s most powerful tool for addressing inequality. It affects households ‘consumption directly (through taxes and transfers) and indirectly (via incentives for work and production and the provision of public goods and individual services such as education and health). An important message of the book is that growth and equity are not necessarily at odds; with the appropriate mix of policy instruments and careful policy design, countries can in many cases achieve better distributional outcomes and improve economic efficiency. Country studies (on the Netherlands, China, India, Republic of Congo, and Brazil) demonstrate the diversity of challenges across countries and their differing capacity to use fiscal policy for redistribution. The analysis presented in the book builds on and extends work done at the IMF, and also includes contributions from leading academics.

The External Balance Assessment (EBA) Methodology
The External Balance Assessment (EBA) Methodology

Author: Mr.Steven Phillips

Publisher: International Monetary Fund

Published: 2014-01-13

Total Pages: 68

ISBN-13: 1484346785

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The External Balance Assessment (EBA) methodology has been developed by the IMF’s Research Department as a successor to the CGER methodology for assessing current accounts and exchange rates in a multilaterally consistent manner. Compared to other approaches, EBA emphasizes distinguishing between the positive empirical analysis and the normative assessment of current accounts and exchange rates, and highlights the roles of policies and policy distortions. This paper provides a comprehensive description and discussion of the 2013 version (“2.0”) of the EBA methodology, including areas for its further development.

Fiscal Policy and Long-Term Growth
Fiscal Policy and Long-Term Growth

Author: International Monetary Fund

Publisher: International Monetary Fund

Published: 2015-04-20

Total Pages: 257

ISBN-13: 1498344658

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This paper explores how fiscal policy can affect medium- to long-term growth. It identifies the main channels through which fiscal policy can influence growth and distills practical lessons for policymakers. The particular mix of policy measures, however, will depend on country-specific conditions, capacities, and preferences. The paper draws on the Fund’s extensive technical assistance on fiscal reforms as well as several analytical studies, including a novel approach for country studies, a statistical analysis of growth accelerations following fiscal reforms, and simulations of an endogenous growth model.

FinTech in Financial Inclusion: Machine Learning Applications in Assessing Credit Risk
FinTech in Financial Inclusion: Machine Learning Applications in Assessing Credit Risk

Author: Majid Bazarbash

Publisher: International Monetary Fund

Published: 2019-05-17

Total Pages: 34

ISBN-13: 1498314422

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Recent advances in digital technology and big data have allowed FinTech (financial technology) lending to emerge as a potentially promising solution to reduce the cost of credit and increase financial inclusion. However, machine learning (ML) methods that lie at the heart of FinTech credit have remained largely a black box for the nontechnical audience. This paper contributes to the literature by discussing potential strengths and weaknesses of ML-based credit assessment through (1) presenting core ideas and the most common techniques in ML for the nontechnical audience; and (2) discussing the fundamental challenges in credit risk analysis. FinTech credit has the potential to enhance financial inclusion and outperform traditional credit scoring by (1) leveraging nontraditional data sources to improve the assessment of the borrower’s track record; (2) appraising collateral value; (3) forecasting income prospects; and (4) predicting changes in general conditions. However, because of the central role of data in ML-based analysis, data relevance should be ensured, especially in situations when a deep structural change occurs, when borrowers could counterfeit certain indicators, and when agency problems arising from information asymmetry could not be resolved. To avoid digital financial exclusion and redlining, variables that trigger discrimination should not be used to assess credit rating.

IMF Staff papers
IMF Staff papers

Author: International Monetary Fund. Research Dept.

Publisher: International Monetary Fund

Published: 1996-01-01

Total Pages: 212

ISBN-13: 1451930933

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This paper reviews recent theoretical and empirical work on controls over International capital movements. Theoretical contributions reviewed focus on “second-best “ arguments for capital market restrictions, as well as arguments based on multiple equilibria. The empirical literature suggests that controls have been “effective “ in the narrow sense of influencing yield differentials. But there is little evidence that controls have helped governments meet policy objectives, with the exception of reducing the governments’ debt-service costs, and no evidence that controls have enhanced economic welfare in a manner suggested by theory.

IMF Staff papers, Volume 42 No. 3
IMF Staff papers, Volume 42 No. 3

Author: International Monetary Fund. Research Dept.

Publisher: International Monetary Fund

Published: 1995-01-01

Total Pages: 280

ISBN-13: 145197339X

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This paper analyzes long-term exchange rate modeling. The paper reviews the literature that tests for a unit root in real exchange rates and the closely related work on testing for a unit root in the residual from a regression of the nominal exchange rate on relative prices. It argues that the balance of evidence is supportive of the existence of some form of long-term exchange rate relationship. The paper highlights that the form of this relationship, however, does not accord exactly with a traditional representation of the long-term exchange rate.