Policy Papers
2011
February 14, 2011
Assessing Reserve Adequacy
Description: The dramatic increase in reserves holdings over the past decade has resumed since the global financial crisis, even at an accelerated pace. While the crisis has heightened perceptions of the importance of holding adequate reserves, there is little consensus on what constitutes an adequate level from a precautionary perspective: traditional metrics are narrowly-based and often provide conflicting signals; while newer approaches tend to be hostage to stylized modeling assumptions and calibrations. As a result, assessments tend to rely on comparisons with peers, probably amplifying the upward trend as perceived needs rise in line with actual holdings.
February 14, 2011
Assessing Reserve Adequacy - Supplementary Information
Description:
The dramatic increase in reserves holdings over the past decade has resumed since the global financial crisis, even at an accelerated pace. While the crisis has heightened perceptions of the importance of holding adequate reserves, there is little consensus on what constitutes an adequate level from a precautionary perspective: traditional metrics are narrowly-based and often provide conflicting signals; while newer approaches tend to be hostage to stylized modeling assumptions and calibrations. As a result, assessments tend to rely on comparisons with peers, probably amplifying the upward trend as perceived needs rise in line with actual holdings.
The metric proposed in the main paper is based on outflows—principally in relation the relevant stock of underlying foreign liabilities or domestic assets—during periods of exchange market pressure (EMP). Especially as it remains the primary reason countries accumulate reserves for insurance purposes, the metric is based on balance of payments drains experienced during EMP episodes—i.e., a measure of sufficient reserves periods of pressure and ahead of a full-blown crisis.
February 14, 2011
2011 Triennial Surveillance Review and Review of the 2007 Decision - Concept Note
Description: Over the past three years, the IMF has worked to assist members in addressing the repercussions of the global financial crisis while also tackling gaps in its surveillance framework that the crisis laid bare. This reform agenda has drawn extensively from the recommendations of the 2008 Triennial Surveillance Review (TSR), as well as subsequent IMF and IEO reviews of the Fund's performance in the run-up to the crisis. This TSR provides an opportunity to take stock of the steps taken and to assess recent experience with surveillance.
February 14, 2011
Recent Experiences in Managing Capital Inflows—Cross-Cutting Themes and Possible Policy Framework
Description: Emerging markets (EMs) are experiencing a surge in capital inflows, lifting asset prices and growth prospects. While inflows are typically beneficial for receiving countries, inflow surges can carry macroeconomic and financial stability risks. This paper reviews the recent experience of EMs in dealing with capital inflows and suggests a possible framework for IMF policy advice on the spectrum of measures available to policymakers to manage inflows, including macroeconomic policies, prudential measures and capital controls. Illustrative applications of this framework suggest that it may be appropriate for several countries, based on their current circumstances, to consider prudential measures or capital controls in response to capital inflows. The suggested framework is intended to inform staff policy advice to all Fund members with open capital accounts. It forms part of a broader effort to sharpen Fund surveillance, preserve evenhandedness, and foster greater global policy coordination. As indicated in the Supplement to this paper, this broader effort includes the development of “global rules of the game” on macroprudential policies, capital account liberalization, and reserve adequacy, and the preparation of spillover reports assessing spillovers from the five systemic economies—all of which will inform the current and broader framework being developed.
February 10, 2011
Framework Administered Account for Selected Fund Activities - Africa Regional Technical Assistance Center South (AFRITAC South) Subaccount
Description: In March 2009, the Fund established a new Framework Administered Account to administer external financial resources for selected Fund activities (the "SFA Instrument"). The financing of activities under the terms of the SFA Instrument is implemented through the establishment and operation of a subaccount within the SFA. This paper requests Executive Board approval to establish the Africa Regional Technical Assistance Center South (AFRITAC South) Subaccount (the "AFRITAC South Subaccount" or the "Subaccount") under the terms of the SFA Instrument.
February 9, 2011
Report on the Technical Assistance Evaluation Mission to Transition Economies - Albania and Georgia
Description: This evaluation of technical assistance (TA) and training in statistics looks at the experience of two transition economies, Albania and Georgia, during roughly the period 2005–2010. The TA, including the training, to these countries covered all the topical areas on which the IMF’s Statistics Department’s (STA) focuses, i.e., national accounts, price statistics, and monetary, balance of payments and government finance statistics, albeit with differing emphases between the two countries. Part of the assistance was funded directly from the IMF’s budget, while other elements (in particular the peripatetic advisors) were financed externally, in these cases by the Japanese government.
February 8, 2011
Interim Report for the Eighth Review of the Fund’s Data Standards Initiatives
Description: This paper notes developments in the data standards initiatives since the Board discussions on the Seventh Review of the Fund’s Data Standards Initiatives (December 2008) and on Broadening Financial Indicators in the SDDS (March 2010). It explores themes that would be relevant for the Eighth Review, currently scheduled for early 2012. As one major theme, it seeks Directors’ feedback on a proposal for a possible enhanced data dissemination standard (SDDS Plus, a new tier within the existing data dissemination framework) that would be primarily intended for IMF member subscribers to the SDDS with systemically important financial sectors while contributing to address further the data gaps revealed in the global crisis. This new initiative would be designed to enhance and supplement, but not to replace, the SDDS.
January 21, 2011
2011 Review of Conditionality and the Design of Fund-Supported Programs - Concept Note
Description: The Fund regularly assesses conditionality in IMF-supported programs, with the next formal review planned for 2011. This paper summarizes previous assessments of conditionality, outlines staff’s proposed approach to the forthcoming review, and seeks Directors’ early views on the approach.
January 12, 2011
New Growth Drivers for Low-Income Countries - The Role of the BRICs
Description: The emergence of BRICs—Brazil, Russia, India, and China—is reshaping low-income countries’ (LICs) international economic relations. While industrial countries remain LICs’ dominant development partners, LIC-BRIC ties have increased so rapidly over the past decade that BRICs have become new growth drivers for LICs. Trade with BRICs is already close to half of the value of combined trade with the European Union and the United States, and larger than with other emerging market economies. BRIC FDI and development financing are making a significant impact in some key areas despite their relatively small volumes compared with those from advanced countries. Beyond the increased flows of goods and capital, BRICs have brought new dynamics in LICs’ economic relations with the rest of the world, complementing as well as competing with OECD partners. Nevertheless, while potential benefits from the LIC-BRIC ties are enormous, there are challenges and risks in realizing such benefits.
January 7, 2011
Enhancing International Monetary Stability--A Role for the SDR?
Description: The SDR has enjoyed renewed attention lately in the context of debates on international monetary reform. To be sure, the term SDR has been used to refer to three different concepts—(i) a composite reserve asset created in 1969: the “official SDR” as defined in the Fund’s Articles; (ii) a potential new class of reserve assets: tradable SDRdenominated securities issued by the Fund or an investment vehicle backed by a subset of the Fund’s membership; and (iii) a unit of account, which could be used to price internationally traded assets (e.g., sovereign bonds) and goods (e.g., commodities), to peg currencies, and to report balance of payments data. All three are discussed in this paper.