External Sector Research Articles

Sovereign External Debt and Private Sector Entry in International Financial Markets

The aim of this paper is to shed light on the public and private sector interdependencies in the international financial market. Using annual data on sovereign and private sector external indebtedness for 95 emerging and developing countries in the 1970-2012 period it looks at the relationship between the level and structure of public external debt and the likelihood of private sector entry in international bond and loan markets. The private sector entry in the offshore loans and bonds markets is shown to be conditional on the amount of public sector external debt. The relationship is complex but in general the saturation of the financial market with external government liabilities renders the private sector entry into the bonds’ market more difficult.

A Study on Impact of Foreign Trade in India in The Post Liberalisation Era

Foreign trade makes a significant contribution to the economy growth of a country. The policy regime in India with regard to liberalization of the external sector has brought tremendous changes in India’s foreign trade. So, the present study attempts to analyse the trend and composition of foreign trade since 1991 and also to analyse the impact of trade on the economic growth of India. The study reveals that though the total exports and imports both have increased but the growth rate of imports is more than the growth rate of exports. It is also found that manufactured goods compose major portion of the export goods while petroleum and crude products contribute major portion of the imported goods. The study also reveals that import has a negative influence on economic growth while export and economic openness are positively related with the economic growth of India.

Islamic Republic of Afghanistan: Technical Assistance Report-Report on the External Sector Statistics Mission (March 12-22, 2018)

Islamic Republic of Afghanistan: Technical Assistance Report-Report on the External Sector Statistics Mission (March 12-22, 2018)

Differentiation of Personnel Potential Management Methods of Enterprise

The purpose of the article is to determine personnel potential management methods of enterprise taking into account the retrospective nature of the potential (acquired characteristics), its current state and characteristics, future capabilities and capabilities that will be necessary for sustainable development of the enterprise, and the formation of author’s vision of personnel management system at the enterprise by stages and in the context of management functions. In the course of the study, it was founded that the personnel potential management of enterprise should begin at a stage before the establishment of official labor relations «employer-employee», because it is necessary to find and engage the future full-time worker of high qualification in the state of the enterprise, which refers to the personnel potential. The system of personnel potential management at enterprise is structured according to the management stage (before employment, employment, after employment). The change of the work itself, its transition from traditional to non-traditional ones, which is dominated by flexible structures, leads to the expansion of the concept «employee of the company» and management of combined labor force, when for the implementation of business tasks, the company involves not only staff members but also external sector experts, appears the so-called out-market of labor relative to a company that does not have the same external labor market to the fullest. The expanded vision of systematization of personnel potential management methods at the enterprise was presented on the basis on belonging to management functions, adding motivational methods, since motivation is the basic control function. In addition, the grouping of methods by the nature of changes in the management system, which involves the allocation of innovative methods, supplemented by traditional, because, over time, each innovative method spreads into traditional. Two classification points were also introduced, according to which it is advisable to group methods by facet: depending on the manifestations of the potential, out-management methods (target future and past potential) and in-management methods (aimed at the present potential) were introduced.

Impact of China on Malaysian Economy: Empirical Evidence of Sign-Restricted Structural Vector Autoregression (SVAR) Model

China has been developing aggressively since its accession into the World Trade Organisation. Consequently, China has become one of the major trading partners to many countries in the world including Malaysia. To what extent China has affected Malaysian economy has been a hot issue facing the economists and practitioners. This paper examines the influence of China on Malaysian economic performances. Using structural vector autoregression (SVAR) methodology that takes into account the effect of other major trading partner countries such as the U.S., Japan and Singapore, the results indicate that different utilisation of foreign country variables to represent external sector in the model brings about different impact on domestic variables. It is shown that the U.S. is particularly important to affect domestic output while China is more important in influencing domestic inflation and the exchange rate, especially with regards to their respective income shocks. In addition, Singapore plays more dominant role in affecting domestic sector when foreign monetary policy shocks are considered. Japan is however more influential in affecting the exchange rate in some other shocks. While China is showing their dominance in the world economy, the study implies that knowing which country exactly affects which domestic variables is very crucial in mitigating the adverse impact of foreign policy change or shocks in the process of transforming Malaysia’s economy toward high income nation in the near future.

Not seven, but eleven? European crises or “new normal”?

Not seven, but eleven? European crises or “new normal”?

Republic of Uzbekistan: Technical Assistance Report-Report on the External Sector Statistics Mission (November 20-December 1, 2017)

At the request of the Republic of Uzbekistan authorities for technical assistance (TA) on external sector statistics (ESS), and with the support of the Middle East and Central Asia Department (MCD) of the International Monetary Fund (IMF), a mission from the IMF Statistics Department (STA) visited Tashkent from November 20 through December 1, 2017. This was the first TA mission on ESS since the Republic of Uzbekistan Presidential Order of September 12, 2017, “On Measures to Ensure the Accessibility and Openness of Economic and Financial Data for the Republic of Uzbekistan” was issued.

Miocene tectono-sedimentary evolution of the eastern external Betic Cordillera (Spain)

ABSTRACTAn interdisciplinary study of Miocene successions in the eastern External Betic Zone (South Iberian Margin) was carried out. Evidences of syn-sedimentary tectonic activity were recognized. The results enabled a better reconstruction of the stratigraphic architecture (with an improved chronostratigraphic resolution) in the framework of the Miocene foredeep evolution of the eastern EBZ. Two main depositional sequences were dated as uppermost Burdigalian-upper Serravallian p.p. and middle-upper Tortonian. p.p., respectively. The vertical and lateral diversification of lithofacies associations and thicknesses resulted from the syn-depositional tectonic complexity of the area. A great variety of sedimentary depositional realms is due to different subsidence rates, and the growing of anticlines and synclines during the Langhian p.p.-Serravallian. After a regression with an early Tortonian erosional gap, platform to hemipelagic realms developed during the middle Tortonian. The end of the sedimentation coincided with the emplacement of an important olisthostrome-like mass consisting of Triassic material related to either the development of thrust systems or diapirs emerged in the middle-late Tortonian, during the nappe emplacement. Correlations with other external sectors of the Betic Chain, and the external domains of the Rif, Tell, and northern Apennine Chains highlighted a similar Miocene foredeep evolution during the building of these orogens.

Dominican Republic: Technical Assistance Report-Balance of Payments Statistics and International Investment Position (April 27-May 1, 2015)

This Technical Assistance Report discusses the findings and recommendations made by the IMF mission regarding the balance of payments and international investment position in Dominican Republic. The Central Bank of the Dominican Republic has made considerable progress in disseminating external sector statistics. It will soon disseminate monthly the international reserves and foreign currency liquidity data template to the IMF and data for Table 6 (Gross External Debt Position: by Sector) in the Quarterly External Debt Statistics to the World Bank. Much progress has also been made on the project to compile data on manufacturing services on inputs owned by others.

Bhutan: Technical Assistance Report-Report on the External Sector Statistics Technical Assistance Mission (April 2-13, 2018)

As part of the IMF-South Asia Regional Training and Technical Assistance Center (SARTTAC) work program, a technical assistance (TA) mission on external sector statistics (ESS) was conducted during April 2–13, 2018. The mission assisted the Royal Monetary Authority (RMA) in compiling and disseminating external debt statistics (EDS) consistent with the international investment position (IIP), reviewed the compilation method of direct investment statistics, and assessed the coverage of external flows related to hydropower projects.

External Sector Variables and the Performance of the Real Sector in Nigeria: The Case of Agriculture

External Sector Variables and the Performance of the Real Sector in Nigeria: The Case of Agriculture

Exchange rate pass-through to consumer prices in Ghana: is there asymmetry?

PurposeThe purpose of this paper is to reexamine the speed and magnitude of exchange rate pass-through (ERPT) to consumer prices in Ghana.Design/methodology/approachThe Johansen Maximum Likelihood approach is employed in the estimation of different models of symmetric and asymmetric ERPT. Specifically asymmetric ERPT models with respect to the direction and size of exchange rate changes are estimated.FindingsResults reveal that even though a depreciation in the nominal effective exchange rate will lead to an increase of consumer prices in the long-run, it is not statistically significant. Evidence also suggests a significant asymmetry with respect to direction and size of exchange rate changes. This indicates that the right ERPT model is an asymmetric model. Specifically ERPT is found to be incomplete but relatively higher in periods of depreciation than in periods of appreciation; that is 53 percent against 3 percent. ERPT is also higher during episodes of large changes (about 51 percent).Research limitations/implicationsIt would have been interesting to analyze the impact on consumer prices through changes in import prices. That approach was not adopted due to lack of consistent data on import prices in Ghana.Practical implicationsIt is imperative that the monetary authorities critically monitor exchange rate movements in order to be able to take swift policy action so as to counteract any inflationary pressures from the external sector. In particular, much attention should be paid to events and arrangements that could result in large depreciation of the exchange rate.Originality/valueWhile previous studies have assumed a symmetric ERPT model for Ghana, this paper is unique in that it investigates the most appropriate model for examining ERPT in Ghana whether symmetric or an asymmetric.

Statement by the Managing Director on the Independent Evaluation Office Report on IMF Exchange Rate Policy Advice

I would like to thank the Independent Evaluation Office (IEO) for preparing this informative and timely report, which provides an update on the IMF’s progress in its approach to exchange rate policy advice since 2007. I am pleased with its main finding that the IMF has substantially overhauled its approach to exchange rate policy advice, and concur that some issues need our continued attention. I would like to note that management and staff remain fully committed to the role of the External Sector Report (ESR) in Fund surveillance.

SECTOR EXTERNO, RESTRICCIONES Y CRECIMIENTO ECONÓMICO EN ECUADOR

This research examines the constraint imposed by the external sector on growth in Ecuador in the time period 1980-2015 using cointegration techniques. The results are consistent with the theoretical framework used and conclude that the external sector does indeed hinder Ecuadorian growth. In the timespan analyzed, we found that Ecuador exhibits an elevated marginal propensity to import: when national income rises 1%, imports go up by 1.57%. Moreover, we show that exports are closely related in the short and long term with external income. One policy implication derived from this research is that two mechanisms to shore up economic growth in developing countries could involve bolstering domestic demand and diversifying export destinations.

Morocco

The Executive Board approved a two-year Precautionary and Liquidity Line (PLL) arrangement with Morocco in July 2014. The arrangement followed the 2012–14 PLL arrangement, and sought to build on the progress made in the previous two years. The authorities kept their objective of strengthening macroeconomic stability and promoting stronger and more job-rich growth. They committed to use the backstop provided by the PLL-supported program to help continue reducing vulnerabilities in the fiscal and external sectors, notably by reducing the fiscal and current account deficits. Per the authorities’ request, access was lower than under the previous PLL arrangement, equivalent to 550 percent of quota (about SDR 3.24billion).

2017 External Sector Report Individual Economy Assessments

The external sector assessments use a wide range of methods, including the External Balance Assessment (EBA) developed by the IMF’s Research Department to estimate desired current account balances and real exchange rates (see IMF Working Paper WP/13/272 for a complete description of the EBA methodology and Annex I of the 2015 External Sector Report for a discussion of more recent refinements). In all cases, the overall assessment is based on the judgment of IMF staff drawing on the inputs provided by these model estimates and other analysis. Since estimates are subject to uncertainty, overall assessments are presented in ranges. The external sector assessments are based on data and IMF staff projections as of June 15th, 2017. The external assessments discuss a broad range of external indicators: the current account, the real effective exchange rate, capital and financial accounts flows and measures, FX intervention and reserves and the foreign asset or liability position.[1] The individual economy assessments are discussed with the respective authorities as a part of bilateral surveillance.

Predicting Financial Crises: A Study of Asian Economies

Financial crises entail heavy adjustment costs on the global economy in the form of growth deceleration, weak external sector, rising prices and high unemployment. Moreover, the affected economies witness distressed policy reversals which sometimes prove detrimental to the home economy in high growth periods, typical of East Asian tigers during the 1997 financial crisis. These negative externalities inflicted upon the society in event of such crises warrant the need for credible effective crisis detection and monitoring mechanisms. This article contributes to that debate by identifying the presence of synchronicity and contagion risk in Asia in a panel cointegration model involving select financial sector variables. Empirical findings of the study interestingly reveal a strong existence of cointegration among these set of variables for the full period, that is, 1990: Q1 to 2011: Q2 as well as for various sub-periods suggesting high risk of contagion in the region. Further, the article presents a literature review on the role and effectiveness of early warning systems (EWSs) with a view to examine whether this synchronicity was adequately captured by those models or not. Regardless of the econometric techniques, the predictions of EWSs have rarely reflected the real crisis episodes.

The Macroeconomic Effects of Official Debt Restructuring: Evidence from the Paris Club

This paper presents new empirical results on the macroeconomic impact of sovereign debt restructurings with official-sector creditors. Using a novel dataset on Paris Club restructurings and Local Projection methods, we find that Paris Club treatments can have a significant impact on economic growth — 2% higher GDP growth two years after the restructuring — when a nominal haircut is provided. At the same time, the countries that had received nominal debt relief tend to be less prudent in conducting their fiscal policy than those benefiting from a restructuring in NPV terms. Furthermore, as regards the external sector adjustment after debt restructuring, we observe an improvement in the net foreign asset position, due to the combination of less external debt and higher foreign reserves. Our study suggests that the official sector faces some short-term trade-offs between the objectives of stimulating economic growth, promoting fiscal prudence and improving a country’s position in international capital markets when designing a debt restructuring.

Implications of Global Recession and Structural Changes for Korean Economy

We propose the following policy recommendations. First, all our results support the important role played by domestic demand. Both rising inequality and aging population affect Korea's GDP primarily through the private domestic demand channel. In the beginning of the implementation of Chin's Five Year Plan, the external sector is the main driver of boosting an economy. Over time, however, the channel through which domestic demand affects Korea's GDP outweighs external channels such as net export. Second, the policy to address aging population through raising the fertility rate should take into account the trade-off between current employment and investment and the number of future working-aged population. Because production factors, labor and capital, are complementary in general, a decrease in employment would lead to investment slowdown. On the other hand, raising the fertility rate implies an increase in the future working-aged population. Again due to complementarity between production factors, this can boost investment and pick up growth in the future. Therefore, implementation of policies to address aging should be based on the optimal growth of population and take into account the trade-off between its short run and long run effects. Third, a single index for income inequality is limited in fully representing all changes in inequality, and the aggregate effect of rising inequality is better captured by tracking down changes in the entire income distribution instead. Populations within the different income groups might play a different role and the aggregate consequences might depend on the entire income distribution. Instead of targeting a single index for inequality, therefore, policy tools to address rising inequality should be grounded by more sophisticated analysis. Finally, depending on factors such as a country's input-output linkages with other countries, moving up and down in global value chains, and whether a country and its trading partners are growing, a country could either gain or lose from an FTA with a specific country. Given that the gain from trade liberalization may not be bilateral in practice, a careful approach to quantify the effect of trade liberalization should be necessary before the implementation of an FTA with a certain country.

Book Reviews

R.K. Pattnaik of SP Jain Institute of Management and Research reviews “Managing the Macroeconomy: Monetary and Exchange Rate Issues in India,” by Ramkishen S. Rajan and Venkataramana Yanamandra. The Econlit abstract of this book begins: “Provides an empirical assessment of some of India's crucial policy challenges regarding its monetary and external sector management. Discusses a macroeconomic overview of the Indian economy; the effectiveness of monetary policy in India--the interest rate pass-through channel; understanding exchange rate and reserve management in India; the impact of exchange rate pass-through on inflation in India; rupee movements and India's trade balance--exploring the existence of a J-curve; and external financing in India--sources and types of foreign direct investment.”