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Central Bank Vulnerability And The Credibility Of Commitments
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Book Synopsis Central Bank Vulnerability and the Credibility of Commitments by : Mr.Mario I. Bléjer
Download or read book Central Bank Vulnerability and the Credibility of Commitments written by Mr.Mario I. Bléjer and published by International Monetary Fund. This book was released on 1998-05-01 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt: A loss of solvency increases central bank vulnerability, reducing the credibility of commitments to defend a nominal regime, including an exchange rate peg. This paper develops a methodology to assess central bank solvency and exposure to risk. The measure, based on Value-at-Risk, is frequently used to evaluate commercial risk. The paper emphasizes that the ability to sustain nominal commitments cannot be gauged by focusing only on selected accounts (such as reserves), but requires a comprehensive solvency and vulnerability analysis of the monetary authorities’ complete portfolio (including off-balance-sheet operations). The suggested measure has powerful reporting value and its disclosure could improve monitoring of sovereign solvency risk.
Book Synopsis Central Bank Vulnerability and the Credibility of Commitments by : Mario I. Blejer
Download or read book Central Bank Vulnerability and the Credibility of Commitments written by Mario I. Blejer and published by . This book was released on 2005 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: The 1990s currency debacles revitalized the search for early warning and forward-looking indicators of financial vulnerabilities. This paper contributes to this task by proposing an approach to assess central bank solvency and to examine the factors putting it at risk, and by refining the concepts relevant for solvency analysis of central bank portfolios. It postulates that a loss of solvency increases central bank financial vulnerability and leads to credibility losses regarding its ability to defend a nominal regime, including exchange rate pegs. The methodology proposed for appraising central banks' financial vulnerability is based on Value-at-Risk (VaR), a concept developed to assess commercial risk. While central banks cannot commercially fail, they behave equivalently if they forsake their commitment to an announced nominal regime. Since a default in central bank commitments would arise from the increased vulnerability caused by solvency losses, solvency measures, such as VaR, are good forward-looking indicators of possible credibility crises. The paper analyzes risks derived both from traditional central bank operations and from off-balance sheet positions, including foreign exchange forwards and financial sector guarantees. Methodological and policy implications are derived. Main factors putting central bank solvency at risk are the volatilities of the exchange rate, of expected exchange rate changes, of international interest rates, of country risk coefficients, and of the magnitudes of the corresponding positions exposed. Therefore, central banks with positions implying high VaR face difficulties in defending rigorous nominal commitments and should not attempt to peg their currencies. Alternatively, if fixing the rate is deemed essential, the central bank should diminish its portfolio's risk exposure and vulnerability in order to reduce the likelihood of credibility crises. Available data and technology permits the tracking of central-bank VaR measures along the lines suggested here. We claim that this indicator, if disclosed to institutions and investors can reduce the likelihood of contagion and improve the monitoring of sovereign risk.
Book Synopsis Credible Commitment to Optimal Escape from a Liquidity Trap by : Mr.Olivier Jeanne
Download or read book Credible Commitment to Optimal Escape from a Liquidity Trap written by Mr.Olivier Jeanne and published by International Monetary Fund. This book was released on 2004-09-01 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: An independent central bank can manage its balance sheet and its capital so as to commit itself to a depreciation of its currency and an exchange rate peg. This way, the central bank can implement the optimal escape from a liquidity trap, which involves a commitment to higher future inflation. This commitment mechanism works even though, realistically, the central bank cannot commit itself to a particular future money supply. It supports the feasibility of Svensson's Foolproof Way to escape from a liquidity trap.
Book Synopsis Checks and Balances, Private Information, and the Credibility of Monetary Commitments by : Philip Keefer
Download or read book Checks and Balances, Private Information, and the Credibility of Monetary Commitments written by Philip Keefer and published by World Bank Publications. This book was released on 2001 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: In economically volatile conditions in which it is more difficult for the public to distinguish inflation deliberately generated by government from inflation created by unanticipated economic shocks, the anti-inflationary effect of central bank independence will be unchanged but the effectiveness of exchange rate pegs will be significantly improved. Keefer and Stasavage develop and test several new hypotheses about the anti-inflationary effect of central bank independence and exchange rate pegs in the context of different institutions and different degrees of citizen information about government policies.
Book Synopsis Checks and Balances, Private Information, and the Credibility of Monetary Commitments by : Philip Keefer
Download or read book Checks and Balances, Private Information, and the Credibility of Monetary Commitments written by Philip Keefer and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In economically volatile conditions in which it is more difficult for the public to distinguish inflation deliberately generated by government from inflation created by unanticipated economic shocks, the anti-inflationary effect of central bank independence will be unchanged but the effectiveness of exchange rate pegs will be significantly improved. Keefer and Stasavage develop and test several new hypotheses about the anti-inflationary effect of central bank independence and exchange rate pegs in the context of different institutions and different degrees of citizen information about government policies. Theory provides strong reason to believe that while central bank independence will prove more effective as a commitment mechanism in countries where multiple players in government have veto power (checks and balances), the number of veto players will have no effect on the credibility of exchange rate pegs. Conversely, Keefer and Stasavage argue that central bank independence does not solve problems of commitment that arise when citizens are imperfectly informed about the contribution of government policy to inflation. Exchange rate pegs, however, mitigate these problems. The authors present extensive evidence from cross-country tests using newly developed data that provide strong support for their propositions. This paper - a product of Regulation and Competition Policy, Development Research Group - is part of a larger effort in the group to understand the institutional conditions for policy reform and success.
Author :International Monetary Fund. Research Dept. Publisher :International Monetary Fund ISBN 13 :1589064488 Total Pages :224 pages Book Rating :4.5/5 (89 download)
Book Synopsis IMF Staff Papers, Volume 52, No. 2 by : International Monetary Fund. Research Dept.
Download or read book IMF Staff Papers, Volume 52, No. 2 written by International Monetary Fund. Research Dept. and published by International Monetary Fund. This book was released on 2005-08-29 with total page 224 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines contractionary currency crashes in developing countries. It explores the causes of India’s productivity surge around 1980, more than a decade before serious economic reforms were initiated. The paper finds evidence that the trigger may have been an attitudinal shift by the government in the early 1980s that, unlike the reforms of the 1990s, was pro-business rather than pro-market in character, favoring the interests of existing businesses rather than new entrants or consumers. A relatively small shift elicited a large productivity response, because India was far away from its income possibility frontier.
Book Synopsis The Quality of Eligible Collateral, Central Bank Losses and Monetary Stability by : Philipp Lehmbecker
Download or read book The Quality of Eligible Collateral, Central Bank Losses and Monetary Stability written by Philipp Lehmbecker and published by Peter Lang. This book was released on 2008 with total page 276 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book investigates to what extent the quality of eligible collateral is able to explain inflation. Addressing this question, hypotheses derived from the Theory of Property Economics by Heinsohn & Steiger are tested. Data are collected using a questionnaire, answered by central banks. An index of the quality of eligible collateral is constructed. Regression analyses are performed based on a sample of 62 countries for the period 1990 to 2003. A negative, robust and statistically significant correlation between inflation and the quality of eligible collateral is found. Central bank independence cannot contribute to the explanation of inflation. The result supports the theory of Heinsohn & Steiger: Securitisation of central bank lending is crucial for price stability.
Book Synopsis Central Bank Finances by : David Archer
Download or read book Central Bank Finances written by David Archer and published by . This book was released on 2013 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author :Sylvester C. W. Eijffinger Publisher :International Finance Section Department of Econ Ton Univers ISBN 13 : Total Pages :100 pages Book Rating :4.F/5 ( download)
Book Synopsis The Political Economy of Central-bank Independence by : Sylvester C. W. Eijffinger
Download or read book The Political Economy of Central-bank Independence written by Sylvester C. W. Eijffinger and published by International Finance Section Department of Econ Ton Univers. This book was released on 1996 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Dominant Currency Paradigm: A New Model for Small Open Economies by : Camila Casas
Download or read book Dominant Currency Paradigm: A New Model for Small Open Economies written by Camila Casas and published by International Monetary Fund. This book was released on 2017-11-22 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.
Book Synopsis Challenges to Central Banking from Globalized Financial Systems by : Ms.Andrea Schaechter
Download or read book Challenges to Central Banking from Globalized Financial Systems written by Ms.Andrea Schaechter and published by International Monetary Fund. This book was released on 2004-03-02 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt: Increasing global financial market integration is presenting new challenges to central banks as they seek to attain low inflation and financial stability. This volume is based on a conference hosted by the IMF in September 2002. It examines key issues such as the choice of nominal anchor for countries susceptible to shifts in capital flows, what can be done to prevent and deal decisively with financial crises, and how central bankers should think about the difficult choices when monetary objectives and financial stability objectives come into conflict.
Book Synopsis Open Issues in European Central Banking by : L. Smaghi
Download or read book Open Issues in European Central Banking written by L. Smaghi and published by Springer. This book was released on 2000-01-04 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt: With the start of EMU, the Eurosystem has taken over monetary policy for the 11 countries of the Euro-area. But the division of powers within the Eurosystem, between the European Central Bank and the constituent National Central Banks, is not satisfactory. This volume provides an analysis of the strengths and weaknesses of the Eurosystem and offers concrete proposals concerning the decision-making organs, balance sheets and the distribution of seigniorage.
Book Synopsis Global Waves of Debt by : M. Ayhan Kose
Download or read book Global Waves of Debt written by M. Ayhan Kose and published by World Bank Publications. This book was released on 2021-03-03 with total page 403 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global economy has experienced four waves of rapid debt accumulation over the past 50 years. The first three debt waves ended with financial crises in many emerging market and developing economies. During the current wave, which started in 2010, the increase in debt in these economies has already been larger, faster, and broader-based than in the previous three waves. Current low interest rates mitigate some of the risks associated with high debt. However, emerging market and developing economies are also confronted by weak growth prospects, mounting vulnerabilities, and elevated global risks. A menu of policy options is available to reduce the likelihood that the current debt wave will end in crisis and, if crises do take place, will alleviate their impact.
Book Synopsis The Capital Needs of Central Banks by : Sue Milton
Download or read book The Capital Needs of Central Banks written by Sue Milton and published by Routledge. This book was released on 2010-10-12 with total page 345 pages. Available in PDF, EPUB and Kindle. Book excerpt: Central banks have evolved over many years, and sometimes centuries, as policy-making, not profit-making, institutions, and yet they are structured legally and financially like ‘for-profit’ companies of the twenty-first century. The question is what is an appropriate level of equity, or capital, for a central bank to have so that it can function for policy effectiveness over profit-maximisation, without hindrance to the achievement and maintenance of policy goals? This collection takes the reader through historical, theoretical and factual discussions on why central banks exist and the role – actual and intended – they have in assisting their home nation in achieving monetary and financial stability. The contributions analyse the different ways central banks are funded and how funding arrangements may impact on their independence. The objective is to explore these themes first from the academic and practitioner’s views – those of the economist, accountant and lawyer’s – and then to introduce practical experiences from a range of different central banks, in terms of their economic and socio-political environments. It will be the first time that the theorist and practitioner, the accountant, the economist and the lawyer come together in one volume. The reader will be able to access the full breadth of views on this important subject. The main observations are that there is no single, quantifiable formula that central banks can use to calculate capital levels. Factors to consider are the historical context of central banks and whether capital was ever appropriate to needs at their foundation; the cultural, social and political contexts; and, in terms of the presentation of financial statements, profit and loss sharing arrangements and what accounting conventions are being used. If these are considered alongside the, often idiosyncratic, mandates individual central banks have, a qualitative understanding of what is an appropriate level of capital is achieved. This collection will be of interest to postgraduates and researchers focusing on the role of central banks in monetary economics; as well as a professional audience of central bankers, the BIS, the IMF, World Bank, EBRD and government departments.
Book Synopsis Financial Sector Crisis and Restructuring by : Carl-Johan Lindgren
Download or read book Financial Sector Crisis and Restructuring written by Carl-Johan Lindgren and published by . This book was released on 1999 with total page 103 pages. Available in PDF, EPUB and Kindle. Book excerpt: An IMF paper reviewing the policy responses of Indonesia, Korea and Thailand to the 1997 Asian crisis, comparing the actions of these three countries with those of Malaysia and the Philippines. Although all judgements are still tentative, important lessons can be learned from the experiences of the last two years.
Author :International Monetary Fund. Research Dept. Publisher :International Monetary Fund ISBN 13 :1451973608 Total Pages :168 pages Book Rating :4.4/5 (519 download)
Book Synopsis IMF Staff papers, Volume 45 No. 3 by : International Monetary Fund. Research Dept.
Download or read book IMF Staff papers, Volume 45 No. 3 written by International Monetary Fund. Research Dept. and published by International Monetary Fund. This book was released on 1998-01-01 with total page 168 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents international evidence on the determinants of trade dynamics. It provides some new empirical perspectives on the relationship between international trade and macroeconomic fluctuations in industrial economies. A comprehensive set of stylized facts concerning fluctuations in trade variables and their determinants is presented. A measure of the quantitative importance of international trade for the propagation of domestic business cycles is then constructed, focusing on the role of external trade as a catalyst for cyclical recoveries.
Book Synopsis Issues in the Governance of Central Banks by :
Download or read book Issues in the Governance of Central Banks written by and published by . This book was released on 2009 with total page 189 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report by the Central Bank Governance Group presents information intended to help decision-makers set up governance arrangements that are most suitable for their own circumstances. The report draws on a large body of information on the design and operation of central banks that the BIS has brought together since it initiated work on central bank governance in the early 1990s. The need to deal with chronic inflation in the 1970s and 1980s prompted the identification of price stability as a formal central bank objective and led to a significant reworking of governance arrangements. The current global financial crisis could have equally important implications for central banks, particularly with respect to their role in fostering financial stability. Although it is too early to know how central banking will change as a result, the report takes an important first step in identifying governance questions that the crisis poses.
