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This paper presents an empirical measure of disinflation credibility and discusses its evolution in Turkey since the 2001 crisis. The results indicate that credibility has improved markedly over this period, boding well for the future of disinflation in Turkey.

Bayesian statistical decision theory. --- Deflation (Finance) --- Disinflation --- Finance --- Bayes' solution --- Bayesian analysis --- Statistical decision --- Econometric models. --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Bayesian Analysis: General --- Central Banks and Their Policies --- International Finance Forecasting and Simulation --- Price Level --- Deflation --- Monetary Policy --- Monetary economics --- Inflation targeting --- Consumer price indexes --- Asset prices --- Prices --- Monetary policy --- Price indexes --- Turkey

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This paper develops a new approach for exploring the effectiveness of foreign currency intervention, focusing on real exchange cycles. Using band spectrum regression methods, it examines the role of macroeconomic fundamentals in determining the equilibrium real exchange rate at short-, medium-, and low frequencies. Next, it assesses the effectiveness of FX intervention depending on the degree of cycle-specific misalignments for 26 advanced- and emerging market economies, covering the period 1990–2018, and using different techniques to mitigate endogeneity concerns. Evidence supports the hypothesis that central banks can lean effectively against short-run cyclical misalignments of the real exchange rate. The effects are present in quarterly data—i.e., at policy-relevant horizons. The effectiveness of intervention rises with the size of the misalignment, and with the duration of one-sided interventions. FX sales appear to be somewhat more effective than FX purchases, and intervention is less effective in more liquid FX markets.

Colombia --- Macroeconomics --- Economics: General --- Foreign Exchange --- Exports and Imports --- International Finance Forecasting and Simulation --- Central Banks and Their Policies --- Business Fluctuations --- Cycles --- International Investment --- Long-term Capital Movements --- Economic & financial crises & disasters --- Economics of specific sectors --- Currency --- Foreign exchange --- International economics --- Exchange rates --- Real effective exchange rates --- Real exchange rates --- Foreign exchange intervention --- Foreign assets --- External position --- Currency crises --- Informal sector --- Economics --- Investments, Foreign

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We show that US natural gas prices have decoupled from oil prices following substantial institutional and technological changes. We then examine how this interrelationship has evolved in Europe using data for Algeria, one of Europe’s key gas suppliers. Taking into account total gas exports and cyclical conditions in partner countries, we find that gas prices remain linked to oil prices, though the nexus has loosened. Both high oil prices and a modest industrial recovery in partner countries have kept gas exports at low levels in recent years, suggesting changing market forces. The paper then shows how such shifts can have important macroeconomic implications for a big gas exporter such as Algeria.

Natural gas --- Petroleum products --- Prices --- Exports and Imports --- Macroeconomics --- Industries: Energy --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- Price Level --- Inflation --- Deflation --- International Finance Forecasting and Simulation --- Open Economy Macroeconomics --- Energy and the Macroeconomy --- Energy: Demand and Supply --- Hydrocarbon Resources --- Trade: General --- Petroleum, oil & gas industries --- International economics --- Fuel prices --- Oil prices --- Natural gas sector --- Exports --- Export prices --- Economic sectors --- International trade --- Gas industry --- Algeria

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With public debt soaring across the world, a growing concern is whether current debt levels are a harbinger of fiscal crises, thereby restricting the policy space in a downturn. The empirical evidence to date is however inconclusive, and the true cost of debt may be overstated if interest rates remain low. To shed light into this debate, this paper re-examines the importance of public debt as a leading indicator of fiscal crises using machine learning techniques to account for complex interactions previously ignored in the literature. We find that public debt is the most important predictor of crises, showing strong non-linearities. Moreover, beyond certain debt levels, the likelihood of crises increases sharply regardless of the interest-growth differential. Our analysis also reveals that the interactions of public debt with inflation and external imbalances can be as important as debt levels. These results, while not necessarily implying causality, show governments should be wary of high public debt even when borrowing costs seem low.

Exports and Imports --- Financial Risk Management --- Macroeconomics --- Public Finance --- Intelligence (AI) & Semantics --- Interest Rates: Determination, Term Structure, and Effects --- Fiscal Policy --- International Lending and Debt Problems --- International Finance Forecasting and Simulation --- Debt --- Debt Management --- Sovereign Debt --- Financial Crises --- Technological Change: Choices and Consequences --- Diffusion Processes --- Personal Income, Wealth, and Their Distributions --- Public finance & taxation --- International economics --- Economic & financial crises & disasters --- Machine learning --- Public debt --- External debt --- Financial crises --- Personal income --- Debts, Public --- Debts, External --- Income --- United States

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This paper investigates the drivers of reserves in emerging markets (EMs) and small island (SIs) and develops an operational metric for estimating reserves in SIs taking into account their unique characteristics. It uses quantile regression techniques to allow the estimated factors driving reserves holdings to vary along the reserves’ holding distribution and tests for equality among the slope coefficients of the various quantile regressions and the overall models. F-tests comparing the inter-quantile differences could not reject the that the models for the different quantiles of SIs reserve distribution were similar but this was rejected for EMs distribution suggesting that models explaining drivers of reserve holdings should take into account the country’s reserve holdings. Empirical analysis suggests that the metric performs better than existing metrics in reducing crisis probabilities in SIs.

Commerce --- Business & Economics --- Accounting --- Reserves (Accounting) --- Investments --- Amortization --- Sinking-funds --- Foreign exchange reserves --- E-books --- Currency reserves, Foreign --- Foreign currency reserves --- Foreign reserves (Foreign exchange reserves) --- International reserves (Foreign exchange reserves) --- Reserves, Foreign exchange --- Finance, Public --- Exports and Imports --- Financial Risk Management --- Foreign Exchange --- Money and Monetary Policy --- Current Account Adjustment --- Short-term Capital Movements --- International Finance Forecasting and Simulation --- Open Economy Macroeconomics --- Financial Crises --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Trade: General --- Economic & financial crises & disasters --- Monetary economics --- International economics --- Currency --- Foreign exchange --- Financial crises --- Monetary base --- Exchange rate arrangements --- Exports --- Current account --- Money --- International trade --- Exchange rate flexibility --- Money supply --- Balance of payments --- Dominican Republic