Assessing Reserve Adequacy In Low Income Countries

Author : Mr.Valerio Crispolti,Ms.Era Dabla-Norris,Mr.Jun Il Kim,Ms.Kazuko Shirono,Mr.George C. Tsibouris
Publisher : International Monetary Fund
Page : 78 pages
File Size : 41,7 Mb
Release : 2013-03-08
Category : Business & Economics
ISBN : 9781475554526

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Assessing Reserve Adequacy in Low-Income Countries by Mr.Valerio Crispolti,Ms.Era Dabla-Norris,Mr.Jun Il Kim,Ms.Kazuko Shirono,Mr.George C. Tsibouris Pdf

Low-income countries routinely experience exogenous disturbances—sharp swings in the terms of trade, export demand, natural disasters, and volatile financial flows—that contribute to higher volatility in aggregate output and consumption compared with other countries. Assessing Reserve Adequacy in Low-Income Countries presents the findings of an analysis of a range of external shocks faced by these countries, beginning with a discussion of the impact of external shocks on macroeconomic growth, volatility, and welfare. Although sound macroeconomic and prudential policy frameworks are the first line of defense for limiting vulnerability, international reserves constitute the main form of self-insurance against such shocks. The evidence suggests that low-income countries with reserve coverage above three months of imports were better able to smooth consumption and absorption in the face of external shocks compared with those with lower reserve holdings. The analysis also points to the importance of country characteristics and vulnerabilities in assessing reserve adequacy.

Author : International Monetary Fund. Strategy, Policy, & Review Department
Publisher : International Monetary Fund
Page : 42 pages
File Size : 44,7 Mb
Release : 2016-03-06
Category : Business & Economics
ISBN : 9781498345644

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Guidance Note on the Assessment of Reserve Adequacy and Related Considerations by International Monetary Fund. Strategy, Policy, & Review Department Pdf

operational guidance to staff on reserve adequacy discussions in the IMF’s bilateral and multilateral surveillance. It is based on the views presented in the policy paper Assessing Reserve Adequacy—Specific Proposals and the related Board discussion. The note addresses key issues related to Staff’s advice on the assessment of the adequacy of reserves and related items, including answering the following questions: What is the expected coverage of reserve issues at different stages of the bilateral surveillance process (Policy Note, mission, and Staff Report)? Which reserve adequacy tools best fit different economies based on their financial maturity, economic flexibility, and market access? What do possible reserve needs in mature markets relate to, and how can their adequacy be assessed? How can reserve adequacy discussions for emerging and deepening financial markets be tailored and applied to better evaluate reserve levels in: (i) commodity-intensive economies; (ii) countries with capital flow management measures (CFMs); and (iii) partially and fully dollarized economies? What reserve adequacy considerations hold for countries with limited access to capital markets? How can metrics for these economies be tailored to evaluate their reserve needs? How should potential drains on reserves be covered? What are the various measures of the cost of reserves for countries with and without market access?

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 65 pages
File Size : 53,9 Mb
Release : 2013-11-14
Category : Business & Economics
ISBN : 9781498341110

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Assessing Reserve Adequacy - Further Considerations by International Monetary Fund Pdf

Reserves remain a critical liquidity buffer for most countries. They are generally associated with lower crisis risks (crisis prevention) as well as space for authorities to respond to shocks (crisis mitigation). While other instruments, such as official credit lines and bilateral swap lines, are also external buffers, for most countries they principally act as a complement to their official reserves. For countries with sound fundamentals and a good policy framework, reserves provide policy makers with considerable space to respond to transitory shocks. However, this space diminishes as fundamentals deteriorate and the existence of adequate reserves does not, by itself, eliminate the risk of market pressures.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 54 pages
File Size : 43,5 Mb
Release : 2014-12-19
Category : Business & Economics
ISBN : 9781498342445

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Assessing Reserve Adequacy - Specific Proposals by International Monetary Fund Pdf

Reserves have a central place in the policy tool kit of most economies, providing insurance against shocks. In conjunction with sound policies, they can help reduce the likelihood of balance of payment crises and preserve economic and financial stability. Reserves, however, can result from both precautionary and non-precautionary policy objectives and institutional settings. While they can bring several important benefits, reserve holdings can sometimes be costly. This paper brings together recent Fund work on reserve adequacy issues aiming to strengthen their discussion in bilateral surveillance. Despite the ongoing debate on reserve issues, there is little consensus about how to assess reserve holdings in different economies, even though this is an important aspect of a member’s external stability assessment. The work stream of which this paper is part aims to fill this gap by outlining a framework for discussing reserve adequacy issues in different economies. In this regard, the paper also forms part of the Fund’s response to the 2012 IEO evaluation of the Fund’s advice related to international reserves, which recommended, inter alia, that assessments of international reserves in bilateral surveillance reports should be more detailed and reflect country circumstances. To this end, the paper proposes that, where warranted, individual country Article IV reports include a fuller discussion of the authorities’ stated objectives (precautionary and non-precautionary) for holding reserves, an assessment of the reserve needs for precautionary purposes, and a discussion of the cost of reserves. The aim would be to ensure evenhandedness so that countries with similar circumstances are assessed in similar ways, while allowing the depth and emphasis of this discussion to vary depending on country conditions and needs

Author : Ms.Era Dabla-Norris,Mr.Jun Il Kim,Ms.Kazuko Shirono
Publisher : International Monetary Fund
Page : 37 pages
File Size : 49,5 Mb
Release : 2011-10-01
Category : Business & Economics
ISBN : 9781463923280

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Optimal Precautionary Reserves for Low-Income Countries by Ms.Era Dabla-Norris,Mr.Jun Il Kim,Ms.Kazuko Shirono Pdf

This paper develops a cost-benefit approach that helps to quantify the optimal level of international reserves in low-income countries, focusing on the role of reserves in preventing and mitigating absorption drops triggered by large external shocks. The approach is applied to a sample of 49 LICs over the period 1980-2008 to yield estimates of the likelihood and severity of a crisis. The calibration results suggest that the standard metric of three months of imports is inadequate for countries with fixed exchange rate regimes. The results also highlight the role of overall policy frameworks and availability of Fund-support in determining optimal reserve levels, raising questions about the uniform applicability of standard rules of thumb across countries.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 31 pages
File Size : 44,9 Mb
Release : 2013-11-14
Category : Business & Economics
ISBN : 9781498341127

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Assessing Reserve Adequacy - Further Considerations - Supplementary Information by International Monetary Fund Pdf

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Author : Kristin Magnussen
Publisher : International Monetary Fund
Page : 29 pages
File Size : 50,8 Mb
Release : 2011-06-01
Category : Business & Economics
ISBN : 9781455268443

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International Reserve Adequacy in Central America by Kristin Magnussen Pdf

Countries’ absolute and relative international reserves adequacy has recently attracted considerable attention. The analysis has however concentrated on the largest and most advanced economies. We apply various methodologies for assessing reserve adequacy in Central America, taking into account the region’s high degree of deposit dollarization. We find that reserve cover is low both in an absolute and relative sense, suggesting further reserve accumulation is an important policy option for reducing vulnerabilities.

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 49 pages
File Size : 53,9 Mb
Release : 2001-09-01
Category : Business & Economics
ISBN : 9781451856347

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Reserve Adequacy in Emerging Market Economics by International Monetary Fund Pdf

This paper analyzes reserve adequacy in emerging market countries. It argues that the old rule of thumb of maintaining reserves equivalent to three months of imports has become obsolete and that, instead, a new benchmark is needed which takes into account the increased importance of capital flows. The paper suggests such a benchmark, consisting of the sum of short-term debt on a residual maturity basis (the external drain) and an allowance for possible capital flight (the internal drain), taking into account differences in country risk and exchange rate regime.

Author : International Monetary Fund. Monetary and Capital Markets Department,International Monetary Fund. Strategy, Policy, & Review Department,International Monetary Fund. Research Dept.
Publisher : International Monetary Fund
Page : 20 pages
File Size : 43,9 Mb
Release : 2011-02-14
Category : Business & Economics
ISBN : 9781498339377

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Assessing Reserve Adequacy - Supplementary Information by International Monetary Fund. Monetary and Capital Markets Department,International Monetary Fund. Strategy, Policy, & Review Department,International Monetary Fund. Research Dept. Pdf

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.

Author : Mr.Alessandro Prati,Mr.Luca Antonio Ricci,Lone Engbo Christiansen,Mr.Stephen Tokarick,Mr.Thierry Tressel
Publisher : International Monetary Fund
Page : 72 pages
File Size : 50,5 Mb
Release : 2011-03-15
Category : Business & Economics
ISBN : 9781616350536

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External Performance in Low-Income Countries by Mr.Alessandro Prati,Mr.Luca Antonio Ricci,Lone Engbo Christiansen,Mr.Stephen Tokarick,Mr.Thierry Tressel Pdf

Assessments of exchange rate misalignments and external imbalances for low-income countries are challenging because methodologies developed for advanced and emerging economies cannot be automatically applied to poorer nations. This paper uses a large database, unique in the set of indicators and number of countries it covers, to estimate the relationship in low-income countries between a set of fundamentals in the medium to long term and the real effective exchange rate, the current account, and the net external assets position.

Author : Mr.Valerio Crispolti,Ms.Era Dabla-Norris,Mr.Jun Il Kim,Ms.Kazuko Shirono,Mr.George C. Tsibouris
Publisher : International Monetary Fund
Page : 78 pages
File Size : 47,5 Mb
Release : 2013-03-08
Category : Business & Economics
ISBN : 9781616354121

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Assessing Reserve Adequacy in Low-Income Countries by Mr.Valerio Crispolti,Ms.Era Dabla-Norris,Mr.Jun Il Kim,Ms.Kazuko Shirono,Mr.George C. Tsibouris Pdf

Low-income countries routinely experience exogenous disturbances—sharp swings in the terms of trade, export demand, natural disasters, and volatile financial flows—that contribute to higher volatility in aggregate output and consumption compared with other countries. Assessing Reserve Adequacy in Low-Income Countries presents the findings of an analysis of a range of external shocks faced by these countries, beginning with a discussion of the impact of external shocks on macroeconomic growth, volatility, and welfare. Although sound macroeconomic and prudential policy frameworks are the first line of defense for limiting vulnerability, international reserves constitute the main form of self-insurance against such shocks. The evidence suggests that low-income countries with reserve coverage above three months of imports were better able to smooth consumption and absorption in the face of external shocks compared with those with lower reserve holdings. The analysis also points to the importance of country characteristics and vulnerabilities in assessing reserve adequacy.

Author : Scott Roger
Publisher : Unknown
Page : 116 pages
File Size : 45,8 Mb
Release : 1993
Category : Foreign exchange
ISBN : STANFORD:36105008927985

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The Management of Foreign Exchange Reserves by Scott Roger Pdf

Author : International Monetary Fund. Strategy, Policy, & Review Department
Publisher : International Monetary Fund
Page : 120 pages
File Size : 41,8 Mb
Release : 2014-07-30
Category : Business & Economics
ISBN : 9781498343077

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2014 Triennial Surveillance Review - Staff Background Studies by International Monetary Fund. Strategy, Policy, & Review Department Pdf

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Author : International Monetary Fund. African Dept.
Publisher : International Monetary Fund
Page : 65 pages
File Size : 41,9 Mb
Release : 2019-08-14
Category : Business & Economics
ISBN : 9781513510989

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Union of Comoros by International Monetary Fund. African Dept. Pdf

This paper discusses Union of Comoros’ Request for Disbursement Under the Rapid Credit Facility (RCF) and Purchase Under the Rapid Financing Instrument (RFI). Reflecting the large budgetary and external financing gaps arising from emergency assistance and reconstruction needs, the authorities are seeking financial assistance under the RCF and RFI exogenous shock windows. Comoros’ qualification is based on urgent balance of payments needs following a severe natural disaster. The authorities shared staff’s main policy recommendations. Efforts to address the cyclone’s impact will need to focus on mobilizing external financing, creating fiscal space by containing the wage bill, and spending mobilized resources in a well-targeted and timely manner. The authorities plan to address financial sector weaknesses, including by finding a solution for the critical situation of the postal bank, closely monitoring nonperforming loans, and addressing obstacles in the judicial system to facilitate the use of collateral and promote lending.

Author : José Ferrer,Mr. Alexei P Kireyev
Publisher : International Monetary Fund
Page : 39 pages
File Size : 45,6 Mb
Release : 2022-06-17
Category : Business & Economics
ISBN : 9798400213519

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Policy Space Index: Short-Term Response to a Catastrophic Event by José Ferrer,Mr. Alexei P Kireyev Pdf

What policy space does a country have for a short-term response to a catastrophic event? To quantify this space, the paper proposes a policy space index. The index combines a quantitative, albeit relatively limited and narrow, fiscal space concept with the indicators of nominal monetary space and reserve space. Each nominal policy space indicator is then adjusted for individual country’s institutional features, such as the status of its currency, income group, access to capital markets, debt distress level, and the exchange rate regime. The final policy space index is derived as a composite of the three nominal policy space indicators, each adjusted for five institutional features. This index is different from the approach to measure fiscal space at the IMF and requires more work before it can be used operationally. The proposed index allows measuring the overall policy space in each country directly in percent of GDP. By way of illustration, the paper applies the index to the Covid-19 crisis.