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After moving slowly downward for the better part of four decades, central bank gold holdings have risen since the Global Financial Crisis. We identify 14 “active diversifiers,” defined as countries that purchased gold and raised its share in total reserves by at least 5 percentage points over the last two decades. In contrast to the diversification of foreign currency reserves, which has been undertaken by advanced and developing country central banks alike, active diversifiers into gold are exclusively emerging markets. We document two sets of factors contributing to this trend. First, gold appeals to central bank reserve managers as a safe haven in periods of economic, financial and geopolitical volatility, when the return on alternative financial assets is low. Second, the imposition of financial sanctions by the United States, United Kingdom, European Union and Japan, the main reserve-issuing economies, is associated with an increase in the share of central bank reserves held in the form of gold. There is some evidence that multilateral sanctions imposed by these, and other countries have a larger impact than unilateral sanctions on the share of reserves held in gold, since the latter leave scope for shifting reserves into the currencies of other non-sanctioning countries.

Russian Federation --- Macroeconomics --- Economics: General --- Banks and Banking --- Investments: Metals --- International Finance: General --- Foreign Exchange --- International Monetary Arrangements and Institutions --- Monetary Policy --- Metals and Metal Products --- Cement --- Glass --- Ceramics --- Economic & financial crises & disasters --- Economics of specific sectors --- Banking --- Investment & securities --- Gold --- Commodities --- Gold reserves --- Central banks --- International reserves --- Reserve assets --- Gold prices --- Prices --- Currency crises --- Informal sector --- Economics --- Foreign exchange reserves

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This paper discusses Costa Rica’s Fourth Review under the Extended Arrangement under the Extended Fund Facility (EFF), First Review under the Resilience and Sustainability Arrangement, Request for Modification of Reform Measure under the Resilience and Sustainability Facility (RSF), and Monetary Policy Consultation. Program performance under both the EFF and the RSF remains strong. All performance criteria and indicative targets have been met for the fourth review of the EFF. Inflation exceeded the outer band of the Monetary Policy Consultation Clause in December 2022, triggering a Board consultation, but has been on a strong downward trend, returning to the central bank’s tolerance band in April. Implementation of most structural reforms is on track. Progress on implementing the Public Employment Bill has been slower than anticipated but the single wage spine has been put in place for one quarter of executive branch positions, meeting the prior action for this review.

Costa Rica --- Money and Monetary Policy --- International Economics --- Banks and Banking --- Inflation --- Public Finance --- Macroeconomics --- Monetary Policy --- International Agreements and Observance --- International Organizations --- Price Level --- Deflation --- Debt --- Debt Management --- Sovereign Debt --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Fiscal Policy --- Monetary economics --- International institutions --- Banking --- Public finance & taxation --- Climate change --- Monetary policy --- International organization --- Prices --- Public debt --- Credit --- Money --- International reserves --- Central banks --- Fiscal stance --- Fiscal policy --- International agencies --- Debts, Public --- Foreign exchange reserves

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This paper explores how non-U.S. central banks behave when firms in their economies engage in currency mismatch, borrowing more heavily in dollars than justified by their operating exposures. We begin by documenting that, in a panel of 53 countries, central bank holdings of dollar reserves are significantly correlated with the dollar-denominated bank borrowing of their non-financial corporate sectors, controlling for a number of known covariates of reserve accumulation. We then build a model in which the central bank can deal with private-sector mismatch, and the associated risk of a domestic financial crisis, in two ways: (i) by imposing ex ante financial regulations such as bank capital requirements; or (ii) by building a stockpile of dollar reserves that allow it to serve as an ex post dollar lender of last resort. The model highlights a novel externality: individual central banks may tend to over-accumulate dollar reserves, relative to what a global planner would choose. This is because individual central banks do not internalize that their hoarding of reserves exacerbates a global scarcity of dollar-denominated safe assets, which lowers dollar interest rates and encourages firms to increase the currency mismatch of their liabilities. Relative to the decentralized outcome, a global planner may prefer stricter financial regulation (e.g., higher bank capital requirements) and reduced holdings of dollar reserves.

Macroeconomics --- Economics: General --- Banks and Banking --- Finance: General --- Foreign Exchange --- Financial Risk Management --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Macroeconomic Aspects of International Trade and Finance: General --- International Financial Markets --- Monetary Policy --- Financial Crises --- General Financial Markets: Government Policy and Regulation --- Financial Institutions and Services: Government Policy and Regulation --- Economic & financial crises & disasters --- Economics of specific sectors --- Banking --- Finance --- Currency --- Foreign exchange --- Financial crises --- Economic sectors --- International reserves --- Central banks --- Banking crises --- Currency mismatches --- Financial sector policy and analysis --- Reserves accumulation --- Exchange rates --- Currency crises --- Informal sector --- Economics --- Foreign exchange reserves --- Financial risk management --- Banks and banking, Central --- Hong Kong Special Administrative Region, People's Republic of China

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This Selected Issues paper presents the main features and weaknesses of the current Panamanian tax system and provides an international comparison of its performance. Panama’s macroeconomic performance has been notably robust. Panama’s macroeconomic performance has been notably robust, but Panama’s tax collection has been historically low. A tax system without adequate revenues led to chronic fiscal deficits and a lack of resources to invest in human capital (education and health) and promote social inclusion policies. In addition, the tax system is notably regressive, and several rules are very inefficient and distortive contradicting the overall policy objective of the country to attract investment. Taxation of the business sector is very complex. On the other hand, the system is very generous regarding benefits. Overall, the desirable reform direction is clear: A reduction in tax incentives, following their analysis, as well as stronger anti-abuse provisions, and revenues from an international minimum tax can finance reductions in the inefficient parts of the tax system, such as the multiple business taxes and the strict loss carry forward.

Money and Monetary Policy --- International Economics --- Taxation --- Banks and Banking --- Production and Operations Management --- Corporate Taxation --- Public Finance --- Monetary Policy --- International Agreements and Observance --- International Organizations --- Business Taxes and Subsidies --- Taxation, Subsidies, and Revenue: General --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- International Investment --- Long-term Capital Movements --- Monetary economics --- International institutions --- Public finance & taxation --- Banking --- Macroeconomics --- Corporate & business tax --- International economics --- Monetary policy --- International organization --- International reserves --- Central banks --- Total factor productivity --- Tax incentives --- Taxes --- Corporate income tax --- Revenue administration --- International agencies --- Foreign exchange reserves --- Industrial productivity --- Corporations --- Revenue --- Panama

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This paper explores how non-U.S. central banks behave when firms in their economies engage in currency mismatch, borrowing more heavily in dollars than justified by their operating exposures. We begin by documenting that, in a panel of 53 countries, central bank holdings of dollar reserves are significantly correlated with the dollar-denominated bank borrowing of their non-financial corporate sectors, controlling for a number of known covariates of reserve accumulation. We then build a model in which the central bank can deal with private-sector mismatch, and the associated risk of a domestic financial crisis, in two ways: (i) by imposing ex ante financial regulations such as bank capital requirements; or (ii) by building a stockpile of dollar reserves that allow it to serve as an ex post dollar lender of last resort. The model highlights a novel externality: individual central banks may tend to over-accumulate dollar reserves, relative to what a global planner would choose. This is because individual central banks do not internalize that their hoarding of reserves exacerbates a global scarcity of dollar-denominated safe assets, which lowers dollar interest rates and encourages firms to increase the currency mismatch of their liabilities. Relative to the decentralized outcome, a global planner may prefer stricter financial regulation (e.g., higher bank capital requirements) and reduced holdings of dollar reserves.

Hong Kong Special Administrative Region, People's Republic of China --- Macroeconomics --- Economics: General --- Banks and Banking --- Finance: General --- Foreign Exchange --- Financial Risk Management --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Macroeconomic Aspects of International Trade and Finance: General --- International Financial Markets --- Monetary Policy --- Financial Crises --- General Financial Markets: Government Policy and Regulation --- Financial Institutions and Services: Government Policy and Regulation --- Economic & financial crises & disasters --- Economics of specific sectors --- Banking --- Finance --- Currency --- Foreign exchange --- Financial crises --- Economic sectors --- International reserves --- Central banks --- Banking crises --- Currency mismatches --- Financial sector policy and analysis --- Reserves accumulation --- Exchange rates --- Currency crises --- Informal sector --- Economics --- Foreign exchange reserves --- Financial risk management --- Banks and banking, Central