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We estimate sovereign bond spreads of 28 emerging economies over the period January 1998-December 2011 and test the ability of the model in generating accurate in-sample predictions for emerging economies bond spreads. The impact and significance of country-specific and global explanatory variables on bond spreads varies across regions, as well as economic periods. During crisis times, good macroeconomic fundamentals are helpful in containing bond spreads, but less than in non-crisis times, possibly reflecting the impact of extra-economic forces on bond spreads when a financial crisis occurs. For some emerging economies, in-sample predictions of the monthly changes in bond spreads obtained with rolling regression routines are significantly more accurate than forecasts obtained with a random walk. Rolling regression-based bond spread predictions appear to convey more information than those obtained with a linear prediction method. By contrast, bond spreads forecasts obtained with a linear prediction method are less accurate than those obtained with random guessing.

Finance --- Business & Economics --- Investment & Speculation --- State bonds --- Government securities --- Econometric models. --- Government agency securities --- Government bonds --- Public securities --- Treasuries (Securities) --- Treasury bonds --- Bonds --- Debts, Public --- Securities --- Econometric models --- E-books --- Banks and Banking --- Finance: General --- Investments: Bonds --- International Finance Forecasting and Simulation --- Financial Forecasting and Simulation --- Interest Rates: Determination, Term Structure, and Effects --- General Financial Markets: General (includes Measurement and Data) --- Investment & securities --- Yield curve --- Sovereign bonds --- Emerging and frontier financial markets --- Bond yields --- Securities markets --- Financial services --- Financial institutions --- Financial markets --- Interest rates --- Financial services industry --- Capital market --- United States

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The purpose of this paper is to compare in-sample and out-of-sample performances of three parametric and non-parametric early warning systems (EWS) for currency crises in emerging market economies (EMs). The parametric EWS achieves superior out-of-sample results compared to the non-parametric EWS, as the total misclassification error of the former is lower than that of the latter. In addition, we find that the performances of the parametric and non-parametric EWS do not improve if the policymaker becomes more prudent. From a policy perspective, the policymaker faces the standard trade-off when using EWS. Greater prudence allows the policymaker to correctly call more crisis episodes, but this comes at the cost of issuing more false alarms. The benefit of correctly calling more currency crises needs to be traded off against the cost of issuing more false alarms and of implementing corrective macroeconomic policies prematurely.

Currency crises. --- Financial crises. --- Crashes, Financial --- Crises, Financial --- Financial crashes --- Financial panics --- Panics (Finance) --- Stock exchange crashes --- Stock market panics --- Crises --- Financial crises --- Currency question --- Foreign exchange --- Banks and Banking --- Financial Risk Management --- Macroeconomics --- Foreign Exchange --- International Finance Forecasting and Simulation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Financial Crises --- Monetary Policy --- Economic & financial crises & disasters --- Banking --- Early warning systems --- Global financial crisis of 2008-2009 --- International reserves --- Currency crises --- Central banks --- Crisis management --- Global Financial Crisis, 2008-2009 --- Foreign exchange reserves --- United States

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This paper reviews the approaches to systemic risk analysis in 32 central bank financial stability reports (FSRs). We compare and contrast the systemic risk analysis in FSRs with the IMF Article IV staff reports, noting that Article IV staff reports and FSRs frequently pick up analytical content from each other. All reviewed FSRs include a systemic risk assessment, which has not always been the case in Article IV staff reports. Also, compared to Article IV staff reports, on average, FSRs tend to cover a wider range of financial risks and vulnerabilities and tend to have more extensive discussions of the policy mix to mitigate systemic risk. In these assessments, FSRs utilize sophisticated analytical tools, such as stress tests and growth-at-risk, more frequently than Article IV staff reports. We emphasize that a central bank FSR typically presents a rich resource that IMF country teams can leverage, as already done by some, in forming their independent view about systemic risk.

Chile --- Macroeconomics --- Economics: General --- Finance: General --- Financial Institutions and Services: General --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Financial Institutions and Services: Government Policy and Regulation --- General Financial Markets: Government Policy and Regulation --- Financial Markets and the Macroeconomy --- Economic & financial crises & disasters --- Economics of specific sectors --- Finance --- Systemic risk --- Financial sector policy and analysis --- Financial sector stability --- Macroprudential policy --- Stress testing --- Systemic risk assessment --- Currency crises --- Informal sector --- Economics --- Financial risk management --- Financial services industry --- Economic policy

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A strand of research documents Chile’s copper dependence hence significant exposure to terms of trade shocks. Copper prices’ sharp decline and forecast uncertainty since the end of the commodity super-cycle has rekindled the debate on Chile’s adjustment capacity to external shocks. Following Malz (2014), this paper builds a time-varying measure of copper price uncertainty using options contracts. VAR analysis shows that the investment response to an uncertainty shock of average magnitude in the sample is strong and persistent: the cumulative fall in investment from trend at a one-year horizon ranges 2–5.8 percentage points; and it takes between 1½ and 2 years for investment to return to its trend level. Empirical ranges depend on alternative definitions for investment, uncertainty, and options’ maturing time.

Copper --- Prices --- Native element minerals --- Transition metals --- Investments: Metals --- Foreign Exchange --- Investments: Options --- Macroeconomics --- Intertemporal Firm Choice and Growth, Investment, or Financing --- Investment --- Capital --- Intangible Capital --- Capacity --- 'Panel Data Models --- Spatio-temporal Models' --- Metals and Metal Products --- Cement --- Glass --- Ceramics --- Price Level --- Inflation --- Deflation --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Currency --- Foreign exchange --- Finance --- Investment & securities --- Metal prices --- Asset prices --- Exchange rates --- Options --- Financial institutions --- Commodities --- Metals --- Derivative securities --- Chile

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In recent years, Fund staff has prepared cross-country analyses of macroeconomic vulnerabilities in low-income countries, focusing on the risk of sharp declines in economic growth and of debt distress. We discuss routes to broadening this focus by adding several macroeconomic and macrofinancial vulnerability concepts. The associated early warning systems draw on advances in predictive modeling.

Central African Republic --- Business and Economics --- Macroeconomics --- Economics: General --- International Economics --- Financial Risk Management --- Inflation --- Banks and Banking --- Forecasting and Other Model Applications --- Monetary Policy --- Financial Crises --- Macroeconomic Analyses of Economic Development --- Business Fluctuations --- Cycles --- Price Level --- Deflation --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Commodity Markets --- Economic & financial crises & disasters --- Economics of specific sectors --- Financial crises --- Economic sectors --- Prices --- Banking crises --- Early warning systems --- Commodity prices --- Currency crises --- Informal sector --- Economics --- Crisis management