Policy Papers

July 19, 2011

2011 Triennial Surveillance Review - External Study - An Evaluation of IMF Surveillance of the Euro Area

Description: External Study prepared by Jean Pisani-Ferry, André Sapir, and Guntram B. Wolff:

This report provides an independent evaluation of recent IMF surveillance in the euro area (EA). It focuses on the euro area as a whole and on four countries severely hit by the recent economic and financial crisis, namely Greece, Ireland, Portugal and Spain.

Notes: This paper represents the views of the authors and does not necessarily represent IMF views or IMF policy. The views expressed herein should be attributed to the authors and not to the IMF, its Executive Board, or its management.

July 11, 2011

Consolidated Spillover Report - Implications from the Analysis of the Systemic-5

Description: Spillover reports explore the external effects of policies in five systemic economies based on the issues identified by partners. Without reprising all the results and nuances, this paper draws some overarching lessons from the exercise for the global policy debate.

July 6, 2011

Key Trends in Implementation of the Fund's Transparency Policy

Description: At the time of the 2005 review of the Fund’s transparency policy, it was agreed that information on key trends in implementation of the transparency policy would be circulated to the Board regularly, along with lists indicating the publication status of reports discussed by the Board. The set of tables provided in this report updates the last Key Trends with information on documents issued through December 2010.

June 30, 2011

Report on the Incidence of Longer-Term Program Engagement

Description: Longer-term program engagement (LTPE) occurs when a member has spent at least seven of the past 10 years under Fund-supported financial arrangements. In response to the Executive Board’s request for periodic updates on the incidence of LTPEs, this is the twelfth such report and provides information through June 22, 2011.

June 15, 2011

Macroeconomic and Operational Challenges in Countries in Fragile Situations

Description: There is broad recognition that countries in fragile situations face unique challenges. While fragility may afflict countries at different levels of income and capacity, common features of fragile states are institutions that are seen to be weak and lack legitimacy, as well as a fractious political setting, which in turn elevates the risk of violence.

Fragilities impose large costs and hardships on local populations that can spill over to neighboring countries—directly through conflict, crime, and disease, but also through economic linkages. Considering these unique challenges, the international community is developing forms of engagement that stress peacebuilding, social cohesion, and statebuilding. They incorporate recognition of the need for sustained engagement, a willingness to take calculated risks in uncertain environments, fuller attention to the political economy of reforms and capacity constraints, and coordination of donor efforts.

Notes: Also available in French

June 15, 2011

Changing Patterns of Global Trade

Description: The past few decades have seen important shifts that have reshaped the global trade landscape. As a share of global output, trade is now at almost three times the level in the early 1950s, in large part driven by the integration of rapidly growing emerging market economies (EMEs). The expansion in trade is mostly accounted for by growth in noncommodity exports, especially of high-technology products such as computers and electronics. It is also characterized by a growing role of global supply chains and an ongoing shift of technology content toward EMEs. These developments in global trade have been associated with growing trade interconnectedness and carry important implications for trade patterns, in particular in response to relative price changes. The aim of this paper is to outline the factors underlying these changes and analyze their implications for the outlook for global trade patterns.

June 10, 2011

The Case for a General Allocation of SDRs During the Tenth Basic Period

Description: This paper is the outcome of a periodic process regarding the allocation (or cancellation) of Special Drawing Rights (SDRs), and is a report by the Managing Director to the Board of Governors and the Executive Board along with a staff paper that assesses the merits of a general allocation. Following consultations with the Executive Board on the case for a general allocation, the Managing Director decided not to make a proposal for a general SDR allocation at this time. Though there was openness among many Directors to consider a proposal in the upcoming basic period, there was also a widely-shared sense that it would be premature at this stage, owing to ongoing discussions on the role of the SDR in the context of reform of the international monetary system. Decisions by the Fund on a general allocation or cancellation of SDRs take place at regular intervals (or basic periods) of normally five years, with the Managing Director’s report due six months before each new basic period. The tenth basic period begins on January 1, 2012. The report can either propose a general SDR allocation (or cancellation of previous allocations), or conclude that the conditions set out in the IMF’s Articles of Agreement for an allocation or cancellation of SDRs are not currently in place, including broad support among IMF members that participate in the SDR Department. Under the IMF’s Articles of Agreements, the Managing Director may also propose allocations of SDRs at the request of the Board of Governors or the Executive Board. In this regard, an allocation could be considered if there is a long-term global need for reserves that could be usefully filled at least in part by SDRs and if it would not lead to inflationary pressures, assuming there is broad support among IMF members participating in the SDR Department.

June 2, 2011

Niger - Assessment Letter for the World Bank and the European Union

Description: Niger’s macroeconomic performance in 2010 was strong, mainly reflecting the exceptional 2010–11 harvest. The bumper crop and the completion of the year-long transition to democracy have also brightened the near-term economic outlook. The recently-adopted revised 2011 budget foresees an increase in expenditure financed in large part by the expected pick-up in external support, helped by the freeing up of resources as ill-targeted fuel price subsidies are gradually phased out. The authorities have expressed a wish to initiate discussions on an economic program that could be supported by the Fund under the Extended Credit Facility in the coming months.

Also available in French

June 1, 2011

Mapping Cross-Border Financial Linkages - A Supporting Case for Global Financial Safety Nets

Description: This paper maps cross-border financial linkages and identifies factors that drive them, contributing to the discussion on the appropriate design of a global financial safety net (GFSN). It builds on previous staff work and complements the findings of the companion paper on the Analytics of Systemic Crises and the Role of Global Financial Safety Nets. This paper notes the growing roles of financial linkages and complexity in injecting latent instability into the global financial system, underscoring the value of a GFSN design that is effective in forestalling the risk that a localized liquidity shock propagates through the global financial network turning into a large-scale systemic crisis.

May 31, 2011

Analytics of Systemic Crises and the Role of Global Financial Safety Nets

Description: In response to the global crisis, the Fund overhauled its lending toolkit and boosted its resources, strengthening its ability to pre-empt financial crises. This paper—with the companion paper on Mapping Cross-Border Financial Linkages—takes another look at the recent global crisis in the context of a broader review of past systemic crises to (i) assess whether rising linkages across countries is a source of latent systemic instability and (ii) ascertain whether the global financial safety net (GFSN) is adequate to contain crisis and contagion risks arising from such systemic instability. This paper develops a new methodology to identify systemic crises and reviews associated policy responses from a global, rather than country-level, perspective