Archive for the ‘Uncategorized’ Category

IMF staff published a new report on stability in the global banking network.

To know whether the system get more or less prone to a banking crisis, the authors use “model simulations and econometric estimates based on a world-wide dataset,” and “find an M-shaped relationship between financial stability of a country’s banking sector and its interconnectedness.”

In particular, “for banking sectors that are not very connected to the global banking network, increases in interconnectedness are associated with a reduced probability of a banking crisis. Once interconnectedness reaches a certain value, further increases in interconnectedness can increase the probability of a banking crisis.” Their “findings suggest that it may be beneficial for policies to support greater interlinkages for less connected banking systems, but after a certain point the advantages of increased interconnectedness become less clear.”

More excerpts here, where you can ask for a PDF copy too. Or you can order a print copy (broken link as of today): http://www.imfbookstore.org/IMFORG/WPIEA2011186

An IMF working paper by Xavier Debrun says (summary):

Despite growing interest among policymakers, there is no theory of independent fiscal institutions. The emerging literature on “fiscal councils” typically makes informal parallels with the theory of central bank independence, but a very simple formal example shows that such a shortcut is flawed. The paper then illustrates key features of a model of independent fiscal agencies, and in particular the need (1) to incorporate the intrinsically political nature of fiscal policy – which precludes credible delegation of instruments to unelected decisionmakers – and (2) to focus on characterizing “commitment technologies” likely to credibly increase fiscal discipline.

Introduction:

The fiscal legacy of the economic and financial crisis of 2008-09 brought to the fore serious concerns about the capacity of governments to maintain sustainable public finances. Several vulnerable countries came under severe market pressure, while government bond yields in countries considered so far as safe havens also started rising. Of particular concern is the fact that the large fiscal deficits and ballooning government debts caused by the crisis came on top of already substantial inherited liabilities and ahead of intensifying demographic pressures on entitlement spending. These trends are on a collision course with the intertemporal budget constraint, making ambitious and sustained consolidations unavoidable.  The challenge is formidable and markets are on the watch, pushing governments to look for ways to firm up the credibility of their commitments to sound public finances.

While formal fiscal policy rules have long been used to contain tendencies toward fiscal profligacy (e.g. Fabrizio and Mody, 2006; and Debrun and others, 2008), it has been argued that many of the limitations and failures associated with numerical rules—most notably their inflexibility in the face of unusual circumstances—could be overcome by establishing nonpartisan agencies. Through independent analysis, assessments, and forecasts, such bodies could enhance policymakers’ incentives to deliver sustainable policies.

Read the rest of this entry »

A recent IMF Working Paper by staff of the Middle East and Central Asia Department, “Iran — The Chronicles of the Subsidy Reform,” [1] analyses the December 2010 changes in subsidies of domestic energy and agricultural prices, which increased about 20 times, making it the first major oil-exporting country to reduce substantially implicit energy subsidies.

Their paper reviews the economic and technical issues involved in the planning and early implementation of the reform, including the money transfers to households (via newly created bank accounts) and the public relations campaign that were critical to the success of the reform. It also looks at the reform from a chronological standpoint, in particular in the final phases of the preparation. The paper concludes by an overview of the main challenges for the second phase of the reform.
Read the rest of this entry »

CPSS-IOSCO principles for financial market infrastructures

New and more demanding international standards for payment, clearing and settlement systems have today been issued for public consultation by the Committee on Payment and Settlement Systems (CPSS) and the Technical Committee of the International Organization of Securities Commissions (IOSCO).

The new standards (called “principles”) are designed to ensure that the essential infrastructure supporting global financial markets is even more robust and thus even better placed to withstand financial shocks than at present. They are set out in a consultative report Principles for financial market infrastructures which contains a single, comprehensive set of 24 principles designed to apply to all systemically important payment systems, central securities depositories, securities settlement systems, central counterparties and trade repositories (collectively “financial market infrastructures” or “FMIs”). These FMIs collectively record, clear and settle transactions in financial markets.

When finalised, the new principles will replace the three existing sets of CPSS and CPSS-IOSCO standards, Read the rest of this entry »

Libya is a member of the Organization of Petroleum Exporting Countries (OPEC) and the country’s economy relies heavily on hydrocarbon exports. For an analysis of Libya’s energy sector, ask us for the Energy Information Administration’s Country Analysis Brief. Excerpts:

Read the rest of this entry »

Join the partners and friends of TradeFlow21 by supporting the American Red Cross relief efforts in Haiti.  Now is the time!  Simply text “HAITI” to “90999″ and a donation of $10 will be given to the Red Cross, charged to your phone bill.

Thank you.