Renminbi-IMF influence goes both ways

2015 ◽  
Keyword(s):  
Foreign Exchange ◽  
Global Market ◽  
Transformative Change ◽  
Development Bank ◽  
Foreign Exchange Reserves ◽  
Reserve Currency ◽  
Content Type ◽  
Financial Governance ◽  
China Development ◽  
Global Financial System

Significance The deeper question is whether China's accelerating integration with the global financial system will catalyse transformative change in China's state-market relationship or whether global market actors will adapt to accommodate a resilient Chinese mode of financial governance. Impacts The renminbi's use as a reserve currency will remain limited due to scepticism about further steps on the reform path. China's foreign exchange reserves will be swollen by increased appetite for outbound trade settlement in renminbi. The China Development Bank will lead China's policy banks in assuming an even greater role in the renminbi's outward push. The IMF will have less leverage to impose structural adjustments on the capital accounts of debtor countries.

Policy shocks, current account and the macroeconomy in a developing country

2019 ◽  
Vol 46 (3) ◽  
pp. 710-726
Author(s):  
Moumita Basu ◽  
Ranjanendra Narayan Nag
Keyword(s):  
Exchange Rate ◽  
Developing Country ◽  
Foreign Exchange ◽  
Current Account ◽  
Current Account Balance ◽  
Foreign Exchange Reserves ◽  
Effective Demand ◽  
Content Type ◽  
Traded Goods ◽  
The Current Account

Purpose This is a theoretical paper in the field of international macroeconomics. The purpose of this paper is to focus on a dynamic interaction between current account imbalance and unemployment in response to some policy-induced shocks for a small open economy under a flexible exchange rate. Design/methodology/approach The paper uses a two-sector framework: one sector is traded and another is the non-traded sector that is subject to an effective demand constraint. The current account imbalance arises due to the discrepancy between production of traded goods, household consumption of traded goods and government purchases of importables. The authors keep the asset structure simple by considering only domestic currency and foreign bonds that are imperfect substitutes. The paper considers a standard methodology of dynamic adjustment process involving change in foreign exchange reserves and exchange rate under perfect foresight. The saddle path properties of the equilibrium are also examined. Findings The results of comparative static exercises depend on a set of structural features of a developing country, which include asset substitutability, wage price rigidity and sectoral asymmetries. The paper shows that expansionary monetary policy, balanced budget fiscal expansion and financial liberalization have an ambiguous effect on the current account balance, foreign exchange reserves, non-traded sector and the level of employment. Originality/value The existence of Keynesian unemployment with fixed prices is the key ingredient of this paper. The paper introduces the problem of effective demand to analyze the dynamics of current account balance and exchange rate, which, in turn, determine the sectoral composition of output and level of employment.

Angolan government will push for oil sector boost

2019 ◽  
Keyword(s):  
Foreign Exchange ◽  
Deep Water ◽  
Oil Fields ◽  
New Wave ◽  
Foreign Exchange Reserves ◽  
Medium Term ◽  
Institutional Reforms ◽  
Content Type ◽  
Oil Sector

Significance This is the first major test of recent legislative and institutional reforms as President Joao Lourenco’s government looks to bring in new players and revitalise the sector. New exploration is badly needed to restore dwindling production, alongside measures to monetise gas reserves and smaller oil fields, in addition to the large deep-water fields that have traditionally attracted oil majors. Impacts New oil discoveries are the best short-to-medium term hope for shoring up Angola’s foreign exchange reserves. If successful, the licensing round could bring a new wave of offshore exploration and deliver a boost to ports and services industries. The ANPG hopes to put new discoveries on production from 2026 to replace output as existing fields decline. Activity in southern Angola will also affect sentiment in neighbouring Namibia, where oil majors have recently taken new acreage.

Impact analysis of US quantitative easing policy on emerging markets

2018 ◽  
Vol 13 (1) ◽  
pp. 185-202 ◽  
Author(s):  
Joung-Yol Lin ◽  
Munkh-Ulzii John Batmunkh ◽  
Massoud Moslehpour ◽  
Chuang-Yuang Lin ◽  
Ka-Man Lei
Keyword(s):  
Emerging Markets ◽  
Foreign Exchange ◽  
Fixed Effects ◽  
Quantitative Easing ◽  
Foreign Exchange Reserves ◽  
Data Set ◽  
Stock Market Returns ◽  
Content Type ◽  
Foreign Capital Inflows ◽  
Watson Statistic

Purpose Since the 2008 financial crisis, the USA has three times implemented quantitative easing (QE) policy. The results of the policy, however, were far below all expectations. Furthermore, it flooded emerging markets (EMs) with low-priced dollars. The purpose of this paper is to investigate the overall and individual impacts of the policy on EMs. Design/methodology/approach This study uses panel data regression model together with the fixed effects model. Also, a unit root test is conducted to check stationary properties of the data, as well as Durbin-Watson statistic to check serial correlation issues in the models. In estimating empirical models, this paper employs macroeconomic data set of stock market returns, exchange rates, lending interest rates, consumer price index, monetary aggregates and foreign exchange reserves from seven diversified emerging economies. The EMs in this study include China, Indonesia, Singapore, Hong Kong, Taiwan, Russia and Brazil. The time period undertaken in this study is from 2008 to 2012. In order to measure impacts of the different stages of the policy, the authors use dummy variables to represent each stage of the policy. Findings The results of the study show that the QE policy has significant impacts on foreign exchange reserves, foreign exchange markets and stock markets of the sample economies. Domestic credit markets, however, appear to be least influenced field by the policy. Finally, the results show that only the first stage of the policy exhibits strong significant impacts, however, leverage of the policy decreases over time. Research limitations/implications Further studies may use different samples, also variables that measure foreign capital inflows such as changes in financial accounts, foreign direct investment and foreign portfolio investment. Originality/value The present study has the following contributions on assessing the impacts of QE policy. First, the overall and individual impacts of the policy are analyzed. Second, in order to establish more valid results, the sample of this study is designed to include several EMs from three continents and diverse regions.

Trade Invoicing, Bank Funding, and Central Bank Reserve Holdings

2018 ◽  
Vol 108 ◽  
pp. 542-546 ◽  
Author(s):  
Gita Gopinath ◽  
Jeremy C. Stein
Keyword(s):  
Central Bank ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Banking System ◽  
Foreign Exchange Reserves ◽  
Reserve Currency ◽  
Bank Funding ◽  
Cross Country ◽  
Currency Composition ◽  
Bank Reserve

We develop a model that shows how the currency denomination of a country's imports influences the funding structure of its banking system, and in turn, the currency composition of its central bank's reserve holdings. The link between the dollar's role in bank funding and its role as a central bank reserve currency is stronger when the country's fiscal capacity is limited, and when exchange rates are volatile. In the data, there is a pronounced cross-country relationship between the fraction of imports that are dollar invoiced, and the fraction of central-bank foreign-exchange reserves that are held in dollars.

The World’s Wallet?

2018 ◽  
pp. 92-110
Author(s):  
Rhys Jenkins
Keyword(s):  
Foreign Exchange ◽  
Export Credit ◽  
Foreign Exchange Reserves ◽  
Economic Success ◽  
Sovereign Wealth Funds ◽  
Financial Flows ◽  
Chinese Banks ◽  
Key Features ◽  
Foreign Lending ◽  
China Development

China’s economic success has led to the accumulation of the world’s largest foreign exchange reserves. The chapter discusses the role played by Chinese sovereign wealth funds in reinvesting reserves abroad, as well as the growth of foreign lending by the Chinese banks and the expansion of export credit, with particular attention to the activities of the China Development Bank and the China Exim Bank. Chinese aid has been particularly controversial, with widely differing claims regarding the volume of aid that China gives. The chapter discusses the scale of aid and the key features of the way in which Chinese aid is organized. It identifies the main drivers of Chinese financial flows, distinguishing between the different types. It concludes with a discussion of the wider implications of the growth of Chinese finance for development finance and the access of countries which have been marginalized by traditional lenders.

The determinants of aggregate and dis-aggregated import demand in Ghana

2019 ◽  
Vol 10 (3) ◽  
pp. 356-367
Author(s):  
Nomfundo Portia Vacu ◽  
Nicholas Odhiambo
Keyword(s):  
Foreign Exchange ◽  
Import Price ◽  
Import Demand ◽  
Foreign Exchange Reserves ◽  
Consumer Spending ◽  
Content Type ◽  
Goods And Services ◽  
Long Run ◽  
Investment Spending ◽  
Liberalisation Policy

Purpose The purpose of this paper is to examine the determinants of aggregate and dis-aggregated import demand for Ghana for the period from 1985 to 2015. Design/methodology/approach The study employed the autoregressive distributed lag bounds testing approach. Findings The long-run finding show that aggregate import demand (AIMD) is positively determined by exports of goods and services and consumer spending, but negatively determined by foreign exchange reserves. It is found that consumer spending is the key positive determinant of the import demand of consumer goods, while foreign exchange reserves, trade liberalisation policy and relative import price are negative determinants. It is found that import demand of intermediate goods is positively determined by consumer spending, government spending and investment spending. The long-run findings further confirm that import demand of capital goods is negatively determined by relative import price. In the short run, the findings suggest that AIMD is positively affected by exports of goods and services, investment spending and consumer spending, but negatively affected by foreign exchange reserves. Import demand of consumer goods is positively influenced by consumer spending, but negatively determined by relative import price. Finally, import demand for intermediate goods is found to be positively determined by investment spending and government spending, while import demand for capital goods is positively associated with exports of goods and services and trade liberalisation policy in the previous period. Originality/value A number of studies have looked at the determinants of import demand, focussing on the aggregated import demand. This study adds the component of dis-aggregated import demand, as it assist in dealing with the issues of bias.

Nigeria Eurobonds will ease short-term budget pressure

2021 ◽  
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Exchange Reserves ◽  
Foreign Reserves ◽  
Short Term ◽  
Content Type ◽  
National Assembly ◽  
Special Drawing ◽  
Special Drawing Rights ◽  
External Borrowing

Significance This comes a month after the National Assembly approved an external borrowing plan of USD6.2bn in August. Also, the IMF has approved the allocation of USD3.35bn in Special Drawing Rights (SDRs) to boost Nigeria’s foreign reserves. Combined, these have provided a modest boost to Nigeria’s faltering foreign-exchange reserves. Impacts The proceeds from the Eurobonds sale will form a significant part of funding the 2022 budget. The Eurobonds and SDR allocation, by boosting reserves, could help narrow the gap between formal and informal exchange rates. There will likely be another Eurobond sale in 2022 as well as more multilateral and bilateral loans. Nigeria’s weak tax collection infrastructure will not generate substantially improved revenues from expected growth.

Libyan unity government could curb public spending

2015 ◽  
Keyword(s):  
Foreign Exchange ◽  
Oil And Gas ◽  
Public Spending ◽  
Foreign Exchange Reserves ◽  
Foreign Reserves ◽  
Medium Term ◽  
Fiscal Health ◽  
Content Type ◽  
Annual Budget ◽  
Spending Cuts

Significance The two largest oil ports, Ras Lanuf and Es Sider -- with a combined capacity of 600,000 barrels per day (b/d) -- are still closed due to fighting between rival factions, even though the UN-sponsored dialogue for a unity government is progressing. Libya is heavily dependent on oil and gas exports; 95% of its annual budget is generated from hydrocarbons. The decline in world oil prices since mid-2014, and the likelihood that oil will remain below 70 dollars per barrel in 2015, mean that Libya will further drain its foreign exchange reserves -- or make large spending cuts. The former is the easier choice. Impacts Financing from foreign reserves has been a policy since June 2014, but it is unclear how much of it has been spent. The use of foreign exchange reserves will prevent a budget crisis in 2015. Over the medium term, fiscal health will deteriorate.

Brazil's BNDES may improve transparency practices

2016 ◽  
Keyword(s):  
Developing Countries ◽  
Developing World ◽  
National Development ◽  
Infrastructure Projects ◽  
Development Bank ◽  
Content Type ◽  
Goods And Services ◽  
Financing Infrastructure ◽  
China Development

Subject The National Development Bank. Significance Development banks of the developing world, like Brazil's National Development Bank (BNDES) and the China Development Bank, play an increasing role in financing infrastructure projects in other developing countries. A challenge for understanding the role of this lending is that transparency by these banks has been low. In 2015, the BNDES put a complete record of its support for the export of Brazilian goods and services online, allowing an analysis of its past patterns of lending. Impacts The BNDES has improved its transparency but corruption issues still plague many of its loan recipients. The drop-off in new projects appears set to continue despite the need for infrastructure funding. The focus may also increasingly concentrate on Brazil rather than projects by Brazilian companies elsewhere.

Ethiopia’s conflict clouds the economic outlook

2021 ◽  
Keyword(s):  
Foreign Exchange ◽  
Debt Service ◽  
Northern Ethiopia ◽  
Foreign Exchange Reserves ◽  
Short Term ◽  
Content Type ◽  
Economic Outlook

Significance Both are desperately needed, as G20 debt service relief will soon expire, and as the conflict in northern Ethiopia increasingly strains the economy and the government’s finances. Impacts A new IMF programme should provide some relief to chronically low foreign exchange reserves. Inflation will continue to rise in the short term but should stabilise somewhat in 2022. The birr will continue to depreciate gradually in line with IMF recommendations.

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