Financial Committee Research Articles

Managing Director’s Global Policy Agenda to the International Monetary and Financial Committee

The latest snapshot of the global economy looks uneasily familiar: a brittle, uneven recovery, with slower-than-expected growth and increasing downside risks. Bold and resolutely executed policies are needed to prevent growth from settling into a “new mediocre,” with unacceptably low job creation and inclusion. Measures should emphasize: lifting growth, building resilience, and achieving coherence. The IMF will help members deliver on this policy agenda by redeploying resources toward lending and capacity building for members facing pressing challenges; strengthening macro-financial surveillance; providing policy advice and analysis on managing the impending monetary normalization, including on deploying macro-prudential tools; and implementing growth-friendly fiscal policies and macro-critical structural reforms. Staff will also build on existing work and develop options for next steps should ratification of the 2010 reforms be delayed beyond year end.

Quota Formula—Data Update and Further Considerations

The IMF staff has updated individual member country data for the variables used in the quota formula for the period 2000-12. The updated database also incorporates the recently released 2011 International Comparison Program (ICP) global estimates for purchasing power parity rates (PPP) rates. The staff paper also presents updated calculated quota shares based on the current quota formula. The current quota formula includes a GDP variable, which is a blend of GDP at market rates and GDP at purchasing power parity (PPP), openness, variability, and international reserves. The International Monetary and Financial Committee has called for agreement on a new quota formula as part of the 15th General Review of Quotas. The paper presents a limited set of illustrative simulations of possible reforms of the quota formula using the updated quota data. These simulations are purely illustrative and do not represent proposals. The new data tables that can be downloaded via the below link include also the comparable value of each variable for the previous quota dataset, which was based on data covering the period 1999-2011. The information is presented in millions of SDRs (Table A1) and in percent of their respective global totals (Tables A2 and A3). A table showing calculated quota shares based on the current quota formula is also included (Table A4). Data sources and a description of the quota variables are discussed in Quota Formula – Data Update and Further Considerations - Statistical Appendix; IMF Policy Paper; July 2014. Download Quota Data: Updated IMF Quota Formula Variables - July 2014

Provisional Agenda for the Twenty-Eighth Meeting of the International Monetary and Financial Committee

The following is the provisional agenda for the Twenty-Eight Meeting of the International Monetary and Financial Committee, which is to be convened at the IMF's Headquarters in Washington, D.C. on October 12, 2013

Managing Director’s Global Policy Agenda to the International Monetary and Financial Committee

Over the past five years much has been done to avoid the worst and stave off a great depression. While the recovery has been disappointing until recently, there are some encouraging signs that activity is strengthening in advanced economies. Breaking the cycle of growth shortfalls and recurring market jitters requires carefully managing multiple transitions that are already underway. These transitions include the normalization of global financial conditions; a shift in global growth dynamics, and a rebalancing of global demand; and the completion of reforms to the international financial system. Much more ambitious reform implementation and policy coherence are needed to address these challenges and avoid five more years of growth disappointments.

Provisional Agenda for the Twenty-Seventh Meeting of the International Monetary and Financial Committee

The following is the provisional agenda for the Twenty-Seventh Meeting of the International Monetary and Financial Committee, which is to be convened at the IMF's Headquarters in Washington, D.C. on April 20, 2013.

Eurozone Collective Action Clauses and Specialised Agencies of the United Nations as International Organisations: Do CACs Constitute an Expropriation under International Law?

In February 2012, Eurozone Member States signed a modified version of the Treaty Establishing the European Stability Mechanism (ESM). This convention provides, inter alia, for the mandatory inclusion of standardised and identical CACs in all new Eurozone sovereign bonds from 1 January 2013. A sub-committee of the Economic and Financial Committee on EU Sovereign Debt Markets developed and published the terms of mandatory CACs on 26 March 2012 (the “Model CAC”). As a result, from 1 January 2013, Eurozone sovereign bond issuers will be obliged to include the Model CAC in bonds with a maturity greater than one year, irrespective of their governing law. The Model CAC will apply to both international and domestic issue. CACs in future Eurozone sovereigns are beyond the will of the issuing State. Can this excuse countries from obligations arising from instruments such as the Convention of the Specialised Agencies of 1947?

Does Balance Sheet Classification Matter? Evidence from Trust Preferred Stock

The Financial Accounting Standards Board (FASB) continues to debate the accounting for financial instruments and the distinction between liabilities and equity. A trend toward shifting items to the liability category is ongoing; for example in 2003 FASB Statement No. 150 required several items, including mandatorily redeemable shares, to be re-classified as liabilities. The AAA Financial Accounting Standards Committee (2001) voiced its concern over the increasing heterogeneity of the liability category and called for quasi-equity categories to improve the representational faithfulness of individual categories. We address the question of whether financial statement categorization of trust preferred stock (TPS) influences its market valuation. We exploit FASB Statement No. 150 as an opportunity for quasi-experimentation. Statement No. 150 required TPS, a mandatorily redeemable financial instrument, to be re-classified from the mezzanine to the liability section of the balance sheet. We empirically test whether the balance sheet label affects market valuation of TPS. Using a sample of 105 firm-year observations from 2001-2004, we find that when TPS is re-classified as a liability the market values TPS more like a liability than when it was reported in the mezzanine. Our evidence adds support to the AAA Committee's contention that financial statement users depend on balances sheet categories, and that additional heterogeneity in the liability section may lead to confusion and miss-interpretation.

WHY ARE THE G-20 DATA GAPS INITIATIVE AND THE SDDS PLUS RELEVANT FOR FINANCIAL STABILITY ANALYSIS?

In the wake of the recent global crisis, the international community is giving an increased focus on stability of the financial system. With the increasing need for data sets to undertake this analysis, the question naturally arises as to what types of data are needed? While various data initiatives are underway, two initiatives at the forefront are: (1) the International Monetary Fund/Financial Stability Board Group of Twenty (IMF/FSB G-20) Data Gaps Initiative (DGI) which is endorsed by the G-20 Finance Ministers and Central Bank Governors as well as the IMF's International Monetary and Financial Committee and (2) the new Special Data Dissemination Standard (SDDS) Plus, aimed particularly at economies with systemically important financial sectors. This paper explains the relevance of the DGI for financial stability analysis and the close link with the SDDS Plus.

An investigation of the relationship between productivity indices and systematic risk based on the capital asset pricing model (among accepted companies in Tehran stock market)

Systematic risk (beta) is one of the most effective factors in predicting the appropriate required rate of returns of portfolios. By understanding the systematic risk of usual portfolios of various companies, investors will be able to consider financial investment more confidentially. The aim of this study was to examine the relationship between productivity indices (operating leverage, financial leverage, combined leverage) as independent variables and systematic risk (Beta) as dependent variables. To do so, 112 companies accepted in Tehran Stock Market were selected based on screening (systematic deletion) in a five-year- period, 2004 to 2008. The required data were gathered from basic financial statements, committee reports, and other available documents in Tehran Stock Market. Regression and Pearson correlation were applied to analyze the data. The results of the study revealed that there was no significant relationship between productivity indices and systematic risk. Some suggestions are provided regarding the topic of the research. Key words: Operating leverage, financial leverage, combined leverage, systematic risk (beta).

Financial Surveillance Strategy - Progress Report

This note provides background to the informal Board briefing on the one-year progress in implementation of the FSS. The Board will have the opportunity to review progress in implementing the FSS in the context of the 2014 TSR and the 2014 review of the Financial Sector Assessment Program (FSAP), as well as through periodic reports to the International Monetary and Financial Committee and the semi-annual work program.

Why are the G-20 Data Gaps Initiative and the SDDS Plus Relevant for Financial Stability Analysis?

In the wake of the recent global crisis the international community is giving an increased focus on stability of the financial system, so-called financial stability analysis. With the increasing need for data sets to undertake this analysis, the question naturally arises as to what types of data are needed? While various data initiatives are underway, two initiatives at the forefront are: (1) the IMF/FSB G-20 Data Gaps Initiative (DGI) created by the international statistical community and endorsed by the G-20 Finance Ministers and Central Bank Governors as well as the IMF’s International Monetary and Financial Committee, and (2) the new Special Data Dissemination Standard Plus (SDDS Plus), aimed particularly at economies with systemically important financial sectors. This paper explains the relevance of the DGI for financial stability analysis and the close link with the SDDS Plus. The importance of the SDDS Plus in promoting the dissemination to the public of a core set of data for financial stability analysis is emphasized.

Why are the G-20 Data Gaps Initiative and the SDDS Plus Relevant for Financial Stability Analysis?

In the wake of the recent global crisis the international community is giving an increased focus on stability of the financial system, so-called financial stability analysis. With the increasing need for data sets to undertake this analysis, the question naturally arises as to what types of data are needed? While various data initiatives are underway, two initiatives at the forefront are: (1) the IMF/FSB G-20 Data Gaps Initiative (DGI) created by the international statistical community and endorsed by the G-20 Finance Ministers and Central Bank Governors as well as the IMF’s International Monetary and Financial Committee, and (2) the new Special Data Dissemination Standard Plus (SDDS Plus), aimed particularly at economies with systemically important financial sectors. This paper explains the relevance of the DGI for financial stability analysis and the close link with the SDDS Plus. The importance of the SDDS Plus in promoting the dissemination to the public of a core set of data for financial stability analysis is emphasized.

Provisional Agenda for the Twenty-Sixth Meeting of the International Monetary and Financial Committee

Provisional Agenda Friday, October 12, 2012 Introductory Session Global Economic and Financial Prospects and Policies (11:30 a.m. – 12:45 p.m.) Tokyo International Forum, Hall B5 Restricted Session Early Warning Exercise (2:30 p.m. – 4:00 p.m.) Imperial Hotel, Hikari Room Saturday, October 13, 2012 Restricted Breakfast Dialogue on Policy Challenges (8:00 a.m. – 9:30 a.m.) Imperial Hotel, Hikari Room Plenary Session 1. Opening Remarks by the Chair (10:00 a.m. – 1:00 p.m.) Imperial Hotel, Fuji Room 2. Global Policy Agenda - Securing the recovery and anchoring the future. Issues facing the advanced economies, emerging markets, low-income countries, Arab countries in transition, and the role of the Fund - Strengthening IMF Governance. 2010 Quota and Governance reforms; Quota Formula Review 3. Approval of Press Communiqué Press Conference (1:30 p.m.) Tokyo International Forum, Hall D7 ********** An Informal Gathering of World Economic Leaders, bringing together IMFC members and selected private sector, civil society and academic leaders, will be held on Friday, October 12 from 4:30 p.m. to 6:00 p.m. in the Hikari Room at the Imperial Hotel.

Managing Director's Consolidated Multilateral Surveillance Report to the International Monetary and Financial Committee

After suffering a major setback, global prospects are gradually strengthening again. Improved activity in the United States and better policies in the euro area in response to the deepening economic crisis there have reduced the immediate threat of a sharp global slowdown. Weak recovery is likely to resume in the major advanced economies, and activity should remain relatively solid in emerging market and developing economies.

Managing Director's Action Plan to the International Monetary and Financial Committee

As described in the latest Consolidated Multilateral Surveillance Report, policy actions in Europe and improving U.S. indicators have helped attenuate financial strains. But recent developments point to the fragility of the world economy and the need to come to grips with a formidable policy agenda. Among the challenges ahead are the immediate risks from a return of stresses in Europe and higher oil prices. Beyond that lie the risks from protracted low growth, too rapid fiscal consolidation in certain cases, deleveraging and uncertain medium-term policy frameworks in some key advanced countries. Many emerging markets may have to deal with inflation risks, elevated oil prices, the resurgence and volatility in capital inflows, and the consequences of extended credit booms. Delays in implementing global regulatory reforms also pose risks.

Provisional Agenda for the Twenty-Fifth Meeting of the International Monetary and Financial Committee

The following is the provisional agenda for the Twenty-Fifth Meeting of the International Monetary and Financial Committee, which is to be convened at the IMF's Headquarters in Washington, D.C. on April 21, 2012.

The Liberalization and Management of Capital Flows - An Institutional View

Capital flows have increased significantly in recent years and are a key aspect of the global monetary system. They offer potential benefits to countries, but their size and volatility can also pose policy challenges. The Fund needs to be in a position to provide clear and consistent advice with respect to capital flows and policies related to them. In 2011, the International Monetary and Financial Committee (IMFC) called for ?further work on a comprehensive, flexible, and balanced approach for the management of capital flows.? This paper proposes an institutional view to underpin this approach, drawing on earlier Fund policy papers, analytical work, and Board discussions on capital flows.

Managing Director's Action Plan to the International Monetary and Financial Committee

The risks ahead and the role of the Fund. Global growth is flagging. In the advanced country core of the international monetary system, fiscal and financial vulnerabilities and uncertain growth prospects are feeding on each other, posing instability risks to a world with diminished policy buffers. The Fund’s policy advice on tackling this situation is outlined in the Consolidated Multilateral Surveillance report. While responsibility of implementing the right policies lies with members, the Fund has a responsibility to help--by working out specifics, and finding and coordinating global solutions to immediate threats to global stability. At the same time, we cannot lose sight of the longer-term structural issues in the international monetary system, where at least visible progress if not closure is needed.

Managing Director's Consolidated Multilateral Surveillance Report to the International Monetary and Financial Committee

The global economy has entered a dangerous phase. Policy makers must act boldly to finish the job they began in 2009, lest the gains from the recovery since then be lost. Collective action can put the global economy on a path to strong, sustainable, and balanced growth.

Provisional Agenda for the Twenty-Fourth Meeting of the International Monetary and Financial Committee (IMFC)

Provisional Agenda 1. Adoption of Agenda—Opening Remarks by the Chair 2. The Managing Director’s Consolidated Multilateral Surveillance Report - Presentation by the IMF Economic and Financial Counsellors The Managing Director’s Action Plan - Presentation by the Managing Director 3. Approval of Press Communiqué