Institutional research & analysis

Source: IMF

INSTITUTIONAL

Working PaperJune 26, 2026

Optimal Currency Basket Estimation

Small open economies often anchor their exchange rate to a basket of foreign currencies, with weights typically set from trade shares or financial exposure. Such schemes ignore the heterogeneity of pass-through across currencies and the covariance structure of bilateral rates, and therefore do not minimize the volatility of imported inflation, the central bank’s mandate. This paper proposes a minimum-variance framework — formally analogous to a Markowitz portfolio problem in pass-through spac...

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Working PaperJune 26, 2026

Central Bank Communication in Times of Uncertainty: AI-assisted Decoding of Recent Trends in Europe

More frequent large macroeconomic shocks since the global financial crisis have entrenched uncertainty, particularly in Europe. This has increased the premium on central bank communication in guiding expectations and strengthening macroeconomic resilience. European central banks have responded by adapting their communication toolkits and styles. This study provides a systematic assessment of recent central bank communication across advanced and emerging European economies, combining a survey ...

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Working PaperJune 26, 2026

Brazil's VAT Reform: Improving Equity

After decades in the making, Brazil’s landmark VAT reform was approved in 2023. The primary objective of the reform is to eliminate distortions and reduce the complexity of the current consumption tax system while maintaining revenue neutrality. In addition, specific design features were included to alleviate the VAT’s inherent regressivity and improve the equity of the Brazilian tax system. This paper assesses the reform’s expected equity print leveraging a microstatic model based on househo...

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Working PaperJune 26, 2026

Assessing Macrofinancial Linkages in China Using a Machine-Learned Parsimonious VAR Model

This paper examines macrofinancial linkages between property developers, financial institutions, and macroeconomic outcomes in China. Using a parsimonious vector autoregressive (VAR) model enabled by a machine learning algorithm, it quantifies how idiosyncratic shocks can propagate and be amplified across sectors, with potential implications for financial stability. Stress originating from privately owned developers and regionally focused financial institutions—though relatively limited in sc...

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Working PaperJune 26, 2026

Stablecoins and Macroeconomic Stability: A DSGE Investigation

The paper develops a new monetarist DSGE model to examine the macroeconomic implications of fiat-money-backed stablecoins and the effectiveness of prudential policies in mitigating associated risks. The model features two segmented sectors: a centralized real economy where fiat money facilitates consumption and investment, and a decentralized virtual economy characterized by anonymous bilateral search and matching, in which transactions are exclusively conducted using stablecoins. Calibrated ...

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Working PaperJune 26, 2026

Climate Shocks, Debt Defaults and Investment in Climate Adaptation – Squaring an Impossible Trilemma

Climate disasters tend to be associated with increased sovereign default risk. Countries face an “impossible trilemma”: scale up adaptation investment, keep debt sustainable amidst high borrowing costs and avoid the higher risk of default from delayed adaptation. Using a global panel of disaster event-level shocks, we find that a 1pp increase in disaster related losses as a share of GDP raises the odds of sovereign default by approximately 2-3 percent. An additional US$1 billion in cumulative...

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Working PaperJune 26, 2026

The Political Economy of Foreign Exchange Interventions

Exchange rate movements have implications for the purchasing power of residents or voters. Given that the exchange rate is often seen as a barometer of government performance, there could be strong incentives to influence exchange rate valuation during elections. This paper investigates whether political economy factors affect Foreign Exchange Intervention (FXI) policy across countries. It investigates whether central banks tend to implement FX sales, leaning against depreciations, during ele...

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Working PaperJune 26, 2026

Production Networks and the (Asymmetric) Transmission of Monetary Policy

I study how the production network shapes monetary policy transmission to prices. Using U.S. data, I show that industries farther upstream from final demand exhibit larger cumulative price responses to monetary shocks, while downstream industries absorb shocks through output. A calibrated multi-sector New Keynesian model rationalizes these patterns: upstream sectors, which sell predominantly to other firms, reprice more frequently and therefore exhibit less price rigidity. A counterfactual de...

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How To NoteJune 26, 2026

How to Prepare a Gender Budget Statement

Gender budgeting integrates a gender perspective into the budget process by promoting gender equality through both fiscal policies and public financial management (PFM) tools. A key PFM tool specific to gender budgeting is the Gender Budget Statement. Governments prepare Gender Budget Statements as a transparency and accountability document to communicate how the budget aims to improve gender equality. Gender Budget Statements must be accessible to a broad audience and present information tha...

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How To NoteJune 26, 2026

How (Not) to Price Fuel Products

Half of all countries in the world regulate fuel prices through various forms of interventions in price formulas. These interventions pursue a range of social, political, and economic objectives, including protecting consumers from price volatility or promoting domestic industries. However, they rarely achieve their objectives and often have unintended and costly consequences. This How-to-Note provides guidance on the structure and components of fuel price formulas, what practices should be a...

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ReportJune 23, 2026

Potential Output and High-Income Convergence in Fiji

This paper examines Fiji’s potential output growth using a production-function approach and analyzes income convergence toward high-income status. Potential growth is estimated at around 3.4 percent over the medium term, with capital accumulation and productivity as the main drivers. The analysis indicates that convergence to high-income status by 2050 is feasible under conditions of sustained and productive investment, particularly targeted at enhancing resilience to climate-related shocks.

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ReportJune 23, 2026

Monetary Operations and Liquidity Dynamics in Fiji

This paper examines the implementation of monetary policy in Fiji, with a focus on liquidity dynamics and their implications for monetary transmission. It documents how persistent surplus liquidity—shaped by foreign exchange inflows and fiscal cash-management practices—has influenced the transmission of the policy rate and short-term money-market conditions. It also assesses how liquidity conditions have interacted with the existing operational framework and discusses options to strengthen mo...

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