Quasi Fiscal Implications Of Central Bank Crisis Interventions
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| Author | : John Hooley |
| Publisher | : International Monetary Fund |
| Total Pages | : 48 |
| Release | : 2023-06-02 |
| Genre | : Business & Economics |
| ISBN | : |
We develop a stylized balance sheet framework to help identify ‘quasi-fiscal’ components of central bank crisis interventions and show how sources of fiscal risk are created from both the new claims and how they are funded. Combining central bank balance sheet data with survey evidence from intervention announcements, we document the risks to the public sector balance sheet from central banks’ interventions in response to the Covid-19 crisis, including non-conventional lending to the financial and non-financial sectors and large-scale purchases of government securities. Case study analysis indicates that management of fiscal risks from central bank crisis interventions varies greatly across countries, although several good practices can be identified.
| Author | : John Hooley |
| Publisher | : International Monetary Fund |
| Total Pages | : 27 |
| Release | : 2023-06-02 |
| Genre | : Business & Economics |
| ISBN | : |
This paper presents case studies of central bank crisis interventions during the Covid-19 and the Global Financial Crises in four jurisdictions (Canada, Chile, the United Kingdom, and the United States). The paper serves as an Annex to the main IMF Working Paper WP/23/114 ‘Quasi-Fiscal Implications of Central Bank Crisis Interventions.’
| Author | : David Archer |
| Publisher | : |
| Total Pages | : 90 |
| Release | : 2013 |
| Genre | : |
| ISBN | : 9789291979318 |
| Author | : Gustavo Adler |
| Publisher | : International Monetary Fund |
| Total Pages | : 37 |
| Release | : 2016-04-12 |
| Genre | : Business & Economics |
| ISBN | : 148433230X |
The accumulation of large foreign asset positions by many central banks through sustained foreign exchange (FX) intervention has raised questions about its associated fiscal costs. This paper clarifies conceptual issues regarding how to measure these costs both from an ex-post and an ex-ante (relevant for decision making) perspective, and estimates both marginal and total costs for 73 countries over the period 2002-13. We find ex-ante marginal costs for the median emerging market economy (EME) in the inter-quartile range of 2-5.5 percent per year; while ex-ante total costs (of sustaining FX positions) in the range of 0.2-0.7 percent of GDP per year for light interveners and 0.3-1.2 percent of GDP per year for heavy interveners. These estimates indicate that fiscal costs of sustained FX intervention (via expanding central bank balance sheets) are not negligible.
| Author | : Mr. Kelly Eckhold |
| Publisher | : International Monetary Fund |
| Total Pages | : 77 |
| Release | : 2024-05-17 |
| Genre | : Business & Economics |
| ISBN | : |
This paper examines emerging market and developing economy (EMDE) central bank interventions to maintain financial stability during the COVID-19 pandemic. Through empirical analysis and case study reviews, it identifies lessons for designing future programs to address challenges faced in EMDEs, including less-developed financial markets and lower levels of institutional credibility. The focus is on the functioning of the financial markets that are key to maintaining financial stability—money, securities, and FX funding markets. Several lessons emerge, including: (i) objectives should be well-specified and communicated to facilitate eventual exit; (ii) intervention triggers should prioritize liquidity metrics over prices; (iii) actions should be sufficiently large to address market dysfunction; (iv) the risks of fiscal dominance and moral hazard should be minimized; and (v) program design should incentivize self-liquidation by appropriate pricing or through short-term operations that quickly liquidate. While interventions may increase risks to central bank balance sheets, potentially challenging policy solvency and operational independence, a well-designed framework can significantly mitigate these risks.
| Author | : Mr.Stijn Claessens |
| Publisher | : International Monetary Fund |
| Total Pages | : 66 |
| Release | : 2013-01-30 |
| Genre | : Business & Economics |
| ISBN | : 1475561008 |
This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.
| Author | : International Monetary Fund |
| Publisher | : International Monetary Fund |
| Total Pages | : 33 |
| Release | : 1998-03-01 |
| Genre | : Business & Economics |
| ISBN | : 1451844239 |
Recently, monetary authorities have increasingly focused on implementing policies to ensure price stability and strengthen central bank independence. Simultaneously, in the fiscal area, market development has allowed public debt managers to focus more on cost minimization. This “divorce” of monetary and debt management functions in no way lessens the need for effective coordination of monetary and fiscal policy if overall economic performance is to be optimized and maintained in the long term. This paper analyzes these issues based on a review of the relevant literature and of country experiences from an institutional and operational perspective.
| Author | : Darryl King |
| Publisher | : International Monetary Fund |
| Total Pages | : 50 |
| Release | : 2017-07-10 |
| Genre | : Business & Economics |
| ISBN | : 148430585X |
This paper considers the central bank mandate with respect to financial stability and identifies the links to the functioning of securities markets. It argues that while emergency support to securities markets is an important part of the crisis management response, a high bar should be set for its use. Importantly, it should be used only as part of a comprehensive policy package. The paper considers what types of securities markets may be important for financial stability, what market conditions could trigger emergency support measures, and how programs can be designed to restore market functioning while minimizing moral hazard.
| Author | : International Monetary Fund. Fiscal Affairs Dept. |
| Publisher | : International Monetary Fund |
| Total Pages | : 45 |
| Release | : 2008-05-31 |
| Genre | : Business & Economics |
| ISBN | : 1498334520 |
A number of member countries have expressed interest in advice regarding disclosure and management of fiscal risks (defined as the possibility of deviations of fiscal outcomes from what was expected at the time of the budget or other forecast). This paper analyzes the main sources of fiscal risks and—building on an overview of existing practices in a wide range of countries—provides practical suggestions in this area, including a possible Statement of Fiscal Risks and a set of Guidelines for Fiscal Risk Disclosure and Management.
| Author | : Nazim Belhocine |
| Publisher | : International Monetary Fund |
| Total Pages | : 43 |
| Release | : 2023-07-07 |
| Genre | : Business & Economics |
| ISBN | : |
The Eurosystem, having purposefully expanded its footprint in recent years, confronts a period of loss-making as rising policy rates lift the remuneration of bank reserves while assets churn more slowly. This paper projects the net income of the Eurosystem and its “top-five” national central banks over a ten-year horizon, finding that losses, while large, will be temporary and recoupable. The policy conclusions are fourfold. First, the temporary and recoupable nature of the loss-making obviates any need for capital contributions or indemnities from the state, instead allowing losses to be offset against future net income. Second, it must nonetheless be communicated that fiscal impacts will be material, with annual taxes and transfers of 0.1−0.2 percent of GDP giving way to potentially long interruptions in some cases. Third, more-conservative profit distribution policies in the future steady state could help mitigate the on-off pattern of dividends. Finally and most vitally, loss-making must remain orthogonal to monetary policy decision-making, as indeed it is at the ECB. Ultimately, credibility will rest on performance in delivering on the price stability mandate.
