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We explore a model intended to capture the interaction between exchange rate policy, fiscal policy, and outright default on foreign-currency denominated debt. We examine how the exchange rate affects the supply of short-term debt facing the government. We show that under a credible hard peg (currency board), default is a more likely outcome, even without an exceptionally large short-term debt, precisely because a devaluation is not an option. In a more conventional fixed peg, it can be optimal for the government to choose a level of the exchange rate that would be likely to result in partial or complete debt default. Depending on the exchange rate regime, multiple equilibria exist, in one of which the interest rate is high, the exchange rate is overvalued, output is low, and default is high. Under a hard peg, there is a unique equilibrium.
Exports and Imports --- Foreign Exchange --- Central Banks and Their Policies --- Fiscal Policy --- International Monetary Arrangements and Institutions --- International Lending and Debt Problems --- Development Planning and Policy: Trade Policy --- Factor Movement --- Foreign Exchange Policy --- Currency --- Foreign exchange --- International economics --- Exchange rates --- Exchange rate policy --- Real exchange rates --- Debt default --- Exchange rate adjustments --- External debt --- Debts, External --- Mexico
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This paper examines the reaction of the bilateral Ch$/US$ exchange rate to monetary policy actions in Chile and the United States. The approach is to regress the change in the exchange rate following a policy announcement on changes in market interest rates in response to the same announcement. U.S. monetary policy actions that raise the three-month treasury bill rate by 1 percentage point lead to depreciations of the Chilean peso by about 1.5 to 2 percent. The exchange rate also reacts to monetary policy actions in Chile, but the response appears to be smaller, and cannot be estimated with much precision on the available sample.
Banks and Banking --- Foreign Exchange --- Monetary Policy --- Central Banks and Their Policies --- Open Economy Macroeconomics --- Interest Rates: Determination, Term Structure, and Effects --- Development Planning and Policy: Trade Policy --- Factor Movement --- Foreign Exchange Policy --- Currency --- Foreign exchange --- Finance --- Banking --- Exchange rates --- Exchange rate policy --- Central bank policy rate --- Market interest rates --- Deposit rates --- Financial services --- Interest rates --- United States
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The Millennium Development Goals (MDGs) represent a global commitment to improve economic and social conditions in low-income countries. Capacity building is key to promoting higher economic growth, which, in turn, is an important prerequisite for making progress toward the MDGs. This paper uses the UNDP's emerging framework for capacity building to show how the IMF supports capacity building at the individual, organizational, and the system level, thereby contributing to the efforts of countries to meeting the MDGs.
Banks and Banking --- Finance: General --- Macroeconomics --- Social Services and Welfare --- Development Planning and Policy: General --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Labor Economics: General --- Government Policy --- Provision and Effects of Welfare Program --- Finance --- Banking --- Labour --- income economics --- Social welfare & social services --- Financial Sector Assessment Program --- Financial sector policy and analysis --- Labor --- Poverty reduction strategy --- Poverty --- Financial services industry --- Banks and banking --- Labor economics --- United Arab Emirates
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This Selected Issues paper covers three topics of particular relevance to Mauritania: export competitiveness and exchange rate policy, the monetary policy framework, and the transfer of government deposits from commercial banks to the central bank. The paper reports on the recent economic developments over 1999–2001. It describes a stable macroeconomic environment with robust growth, low inflation, manageable current account deficits, and a comfortable level of gross foreign reserves. The paper also looks at the issue of export competitiveness and exchange rate policy.
Banks and Banking --- Exports and Imports --- Foreign Exchange --- Investments: General --- Money and Monetary Policy --- Finance: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Trade: General --- Development Planning and Policy: Trade Policy --- Factor Movement --- Foreign Exchange Policy --- General Financial Markets: General (includes Measurement and Data) --- Banking --- Monetary economics --- Currency --- Foreign exchange --- International economics --- Investment & securities --- Finance --- Commercial banks --- Credit --- Real effective exchange rates --- Exports --- Financial institutions --- Money --- International trade --- Monetary base --- Banks and banking --- Money supply --- Mauritania, Islamic Republic of
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