Liquidity Management Under Fixed Exchange Rate With Open Capital Account PDF Download
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Author | : Mariam El Hamiani Khatat |
Publisher | : International Monetary Fund |
Total Pages | : 57 |
Release | : 2019-03-18 |
Genre | : Business & Economics |
ISBN | : 1498302912 |
Download Liquidity Management under Fixed Exchange Rate with Open Capital Account Book in PDF, ePub and Kindle
This paper introduces a theoretical framework for liquidity management under fixed exchange rate arrangement, derived from the price-specie flow mechanism of David Hume. The framework highlights that the risk of short-term money market rates un-anchoring from the uncovered interest rate parity due to money and foreign exchange market frictions could jeopardize financial stability and market development. The paper then discusses operational solutions that stabilize money market rates close to the level implied by the Uncovered Interest Rate Parity (UIP). Liquidity management under fixed exchange rate with an open capital account presents specific challenges due to: (1) the larger liquidity shocks induced by foreign reserve swings that challenge the development of money markets; and (2) more complicated liquidity forecasts. The theoretical framework is empirically tested based on the estimate of “offset” coefficients for Denmark and Hong Kong SAR.
Author | : International Monetary Fund |
Publisher | : International Monetary Fund |
Total Pages | : 33 |
Release | : 2017-12-14 |
Genre | : Business & Economics |
ISBN | : 1498346200 |
Download Gulf Cooperation Council Book in PDF, ePub and Kindle
Effective liquidity management is important to promote macro-financial stability in the GCC countries. Fixed exchange rate regimes provide credible nominal anchors in the GCC countries, but combined with open capital accounts, they also entail limited monetary policy independence. At the same time, high dependence on hydrocarbon revenue has made the region vulnerable to oil price-driven liquidity swings. And the latter can affect monetary policy implementation, including by exacerbating credit and asset price cycles. This highlights the importance of frameworks aimed at forecasting liquidity and ensuring appropriate liquidity levels through the timely absorption or injection of liquidity by central banks. Over the past decade, liquidity management in the GCC countries has been based mainly on passive instruments. Abundant liquidity during times of high oil prices have placed liquidity absorption at the center of the central bank operations. Reserve requirements have helped absorb liquidity but have not been used very actively. Standing facilities, another key instrument, are more passive in nature, with the amount of liquidity absorbed or injected driven by banks rather than monetary authorities. Central banks bills or other instruments have also been used, but issuance has not systematically been based on market principles. In addition, these operations have been constrained by limited liquidity forecasting capability and the shallow nature of interbank and domestic debt markets.
Author | : Mr.Ilan Goldfajn |
Publisher | : International Monetary Fund |
Total Pages | : 33 |
Release | : 1997-07-01 |
Genre | : Business & Economics |
ISBN | : 1451850980 |
Download Capital Flows and the Twin Crises Book in PDF, ePub and Kindle
This paper develops a model that focuses on the interaction of liquidity creation by financial intermediaries with capital flows and exchange rate collapses. The intermediaries’ role of transforming maturities is shown to result in larger movements of capital and a higher probability of crisis. These movements resemble the observed cycle in capital flows: large inflows, crisis and abrupt outflows. The model highlights how adverse productivity and international interest rate shocks may trigger a sudden outflow of capital and an exchange collapse. The initial shock is magnified by the behavior of individual foreign investors linked through their deposits in the intermediaries. The expectation of an eventual exchange rate crisis links investors’ behavior even further.
Author | : Mariam El Hamiani Khatat |
Publisher | : International Monetary Fund |
Total Pages | : 57 |
Release | : 2019-03-18 |
Genre | : Business & Economics |
ISBN | : 1498304311 |
Download Liquidity Management under Fixed Exchange Rate with Open Capital Account Book in PDF, ePub and Kindle
This paper introduces a theoretical framework for liquidity management under fixed exchange rate arrangement, derived from the price-specie flow mechanism of David Hume. The framework highlights that the risk of short-term money market rates un-anchoring from the uncovered interest rate parity due to money and foreign exchange market frictions could jeopardize financial stability and market development. The paper then discusses operational solutions that stabilize money market rates close to the level implied by the Uncovered Interest Rate Parity (UIP). Liquidity management under fixed exchange rate with an open capital account presents specific challenges due to: (1) the larger liquidity shocks induced by foreign reserve swings that challenge the development of money markets; and (2) more complicated liquidity forecasts. The theoretical framework is empirically tested based on the estimate of “offset” coefficients for Denmark and Hong Kong SAR.
Author | : International Monetary Fund. Middle East and Central Asia Dept. |
Publisher | : International Monetary Fund |
Total Pages | : 57 |
Release | : 2013-07-30 |
Genre | : Business & Economics |
ISBN | : 1484336038 |
Download United Arab Emirates Book in PDF, ePub and Kindle
This Selected Issues paper on the United Arab Emirates highlights the macroprudential policies. The fixed exchange rate and persistent structural liquidity surpluses in upswings add to the difficulties in managing aggregate demand contain credit expansion. The exchange rate peg and the open capital account allow limited room to deviate from the U.S. interest rates. Monetary policy is further constrained by limited liquidity management capabilities, as liquidity forecasting is in its infancy, and central banks liquidity management relies primarily on reserve requirements and standing facilities for liquidity absorption. The lack of a local currency fixed-income market raises the prominence of real estate as an asset class for investment and the exposure of the banking system to the real estate sector.
Author | : Alexandre Chailloux |
Publisher | : International Monetary Fund |
Total Pages | : 33 |
Release | : 2009-12-01 |
Genre | : Business & Economics |
ISBN | : 1451918224 |
Download Systemic Liquidity Management in the U.A.E. Book in PDF, ePub and Kindle
The paper analyzes the U.A.E.''s liquidity management framework in the context of the 2008 global financial crisis and the measures taken by the Central Bank of the U.A.E. to ease liquidity pressures in the second half of 2008. Drawing also on an empirical analysis of data for 15 U.A.E. banks through end-2008, the paper emphasizes the importance of making available to banks additional instruments to manage their liquidity as well as to strengthen the monitoring of a more comprehensive set of liquidity risk indicators. As regards the former, the paper discusses the merits and scope for the U.A.E. to introduce a domestic bond market.
Author | : International Monetary Fund. Middle East and Central Asia Dept. |
Publisher | : INTERNATIONAL MONETARY FUND |
Total Pages | : 0 |
Release | : 2013-07-30 |
Genre | : Business & Economics |
ISBN | : 9781484336038 |
Download United Arab Emirates Book in PDF, ePub and Kindle
This Selected Issues paper on the United Arab Emirates highlights the macroprudential policies. The fixed exchange rate and persistent structural liquidity surpluses in upswings add to the difficulties in managing aggregate demand contain credit expansion. The exchange rate peg and the open capital account allow limited room to deviate from the U.S. interest rates. Monetary policy is further constrained by limited liquidity management capabilities, as liquidity forecasting is in its infancy, and central banks liquidity management relies primarily on reserve requirements and standing facilities for liquidity absorption. The lack of a local currency fixed-income market raises the prominence of real estate as an asset class for investment and the exposure of the banking system to the real estate sector.
Author | : Rupa Duttagupta |
Publisher | : International Monetary Fund |
Total Pages | : 36 |
Release | : 2005 |
Genre | : Business & Economics |
ISBN | : |
Download Moving to a Flexible Exchange Rate Book in PDF, ePub and Kindle
A growing number of countries are adopting flexible exchange rate regimes because flexibility offers more protection against external shocks and greater monetary independence. Other countries have made the transition under disorderly conditions, with the sharp depreciation of their currency during a crisis. Regardless of the reason for adopting a flexible exchange rate, a successful transition depends on the effective management of a number of institutional and operational issues. The authors of this Economic Issue describe the necessary ingredients for moving to a flexible regime, as well as the optimal pace and sequencing under different conditions.
Author | : Iwan J. Azis |
Publisher | : Springer |
Total Pages | : 129 |
Release | : 2014-12-11 |
Genre | : Business & Economics |
ISBN | : 9812872841 |
Download Managing Elevated Risk Book in PDF, ePub and Kindle
This book discusses the risks and opportunities that arise in Emerging Asia given the context of a new environment in global liquidity and capital flows. It elaborates on the need to ensure financial and overall economic stability in the region through improved financial regulation and other policy measures to minimize the emergent risks. "Managing Elevated Risk: Global Liquidity, Capital Flows, and Macroprudential Policy—An Asian Perspective" also explores the range of policy options that may be deployed to address the impact of global liquidity on domestic financial and socio-economic conditions including income inequality. The book is primarily aimed at policy makers, financial market regulators and supervisory agencies to help them improve national regulatory systems and to promote harmonization of national regulations and practices in line with global standards. Scholars and researchers will also gain important information and knowledge about the overall impacts of changing global liquidity from the book.
Author | : Edwin L.-C. Lai |
Publisher | : Cambridge University Press |
Total Pages | : 347 |
Release | : 2021-07-08 |
Genre | : Business & Economics |
ISBN | : 1108491685 |
Download One Currency, Two Markets Book in PDF, ePub and Kindle
Economic analysis of the future of the international monetary system and the USD, and the rising importance of the RMB.