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Over Their Heads: The IMF and the Prelude to the Euro-zone Crisis

Monday, 30 March 2015
publication
The years prior to the global financial crisis were a peculiar period for the International Monetary Fund (IMF). It was struggling to define its role and justify its existence even as trouble was brewing in countries it would later help to rescue. To understand the Fund’s current strengths and weaknesses, a look back at this era is highly illuminating. Three major developments for the IMF, spanning the years 2005–2009, are chronicled.

Capital Flows and Spillovers

Monday, 30 March 2015
publication
Şebnem Kalemli-Özcan
This paper shows that debt flows have contractionary effects on emerging markets’ output, while equity flows have expansionary effects. Such correlations can be driven by counter-cyclical debt flows and pro-cyclical equity flows, or by debt flows that lead to an appreciation and hurt exports, and by equity flows that improve the productivity of the real economy, broadly defined.

Short-selling Bans and the Global Financial Crisis: Are They Interconnected?

Friday, 27 March 2015
publication
Pierre Siklos, Martin T. Bohl, Badye Essid
This paper observes that short-selling bans spread globally beginning in 2007. The authors seek to empirically determine whether there were spillover effects over and above the domestic impact from the imposition of such bans.

The Global Liquidity Safety Net: Institutional Cooperation on Precautionary Facilities and Central Bank Swaps

Friday, 20 March 2015
publication
C. Randall Henning
A country’s qualification for the IMF’s Flexible Credit Line should open access to the precautionary facilities of regional financial arrangements and to central bank swaps.

The UK shows a way to break out of Washington’s yoke on global economic affairs

Tuesday, 17 March 2015
blog
The UK has reasserted its desire to be a leader in the world economy. If it pries some followers away from the US, we could end the inertia that has beset global policy making in recent years. Prime Minister David Cameron’s pledge to join the Asian Infrastructure Investment Bank (AIIB) despite the Obama administration's objections is perhaps the most significant development in global economic governance since the BRICS nations decided to formalize their relationship through an annual summit.

Internationalization of the Renminbi: Developments, Problems and Influences

Tuesday, 3 March 2015
publication
Ming Zhang
Due to the 2008-2009 global financial crisis, the Chinese government began to promote renminbi (RMB) internationalization in order to raise its international status, decrease reliance on the US dollar and advance domestic structural reform. This internationalization has achieved progress not only in cross-border trade settlement, but also in the offshore RMB markets. However, the rampant cross-border arbitrage and the relatively slow development of RMB invoicing compared to RMB settlement are becoming increasingly problematic.

Changing Global Financial Governance: International Financial Standards and Emerging Economies since the Global Financial Crisis

Friday, 27 February 2015
publication
Hyoung-kyu Chey
One of the most remarkable changes in global financial governance since the 2008-2009 crisis has been the primary forums that establish international standards extending their memberships to include emerging economies. There are two disparate perspectives in the literature on the impact of this change on international financial regulation: the weakening cooperation view, which sees an attenuation of international cooperation due to this change, and the enduring status quo view, which sees the domination of global financial governance by advanced economies persisting even despite it. This paper presents an alternative — more positive — perspective.

The Influence of RMB Internationalization on the Chinese Economy: Theory and Policy

Thursday, 26 February 2015
publication
Qiyuan Xu, Fan He
Since China's pilot scheme for RMB cross-border settlement was launched in 2009, it has become increasingly important for monetary authorities in terms of macroeconomic policy frameworks. The authors use an analytical model that includes monetary supply and demand to examine the influences of RMB cross-border settlement on China's domestic interest rate, asset price and foreign exchange reserves. They also look at how RMB settlement behaves in different ways with the various items in China's balance of payments.

Central banks may be making a mess of things, but they aren't at "war"

Tuesday, 24 February 2015
blog
I don’t know near enough about Brazil to pass judgement on Guido Mantega’s tenure as the country’s finance minister. But he already has a legacy, for it was he who gave us the “currency war.” Mr. Mantega (in)famously uttered that phrase in 2010 to the delight of headline writers, business channel pundits and foreign-exchange analysts the world over.

The Risk of OTC Derivatives: Canadian Lessons for Europe and the G20

Friday, 20 February 2015
publication
Over-the-counter (OTC) derivatives played an important role in the buildup of systemic risk in financial markets before 2007 and in spreading volatility throughout global financial markets during the crisis. In recognition of the financial and economic benefits of derivatives products, the G20 moved to regulate the use of OTC derivatives. Attention has been drawn to the detrimental effects of the United States and the European Union to coordinate OTC reform, but this overlooks an important aspect of the post-crisis process: the exemption of non-financial operators from OTC derivative regulatory requirements.
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