The GCC countries maintain a policy of open capital accounts and a pegged (or nearly-pegged) exchange rate, thereby reducing their freedom to run an independent monetary policy. This paper shows, however, that the pass-through of policy rates to retail rates is on the low side, reflecting the...

This paper analyzes the impact of strained government finances on macroeconomic stability and the transmission of fiscal policy. Using a variant of the model by Curdia and Woodford (2009), we study a "sovereign risk channel" through which sovereign default risk raises funding costs in the...

Using a central bank legislation database, this paper documents and analyzes worldwide institutional arrangements for central bank lending to the government and identifies international practices. Key findings are: (i) in most advanced countries, central banks do not finance government...

The Paraguayan economy suffered setbacks throughout 2011–12 owing to drought, export ban, and inflation. Recovery measures have been under way with active government intervention in the implementation of a new budget, tax reforms, and new monetary and fiscal policies. The central bank has...

This paper presents key findings of the Third Review under the Policy Support Instrument (PSI) in Rwanda. Program performance was broadly satisfactory. All end-June quantitative assessment criteria were met. Structural benchmarks were partially met as the pace of implementation of structural...

This paper describes Kenya’s third review under the three-year arrangement under the Extended Credit Facility (ECF) and request for modification of performance criteria. The Executive Board approved a three-year ECF arrangement for Kenya on January 31, 2011, which has been augmented on...

The financial turmoil that began in mid-2007 produced severe stress in interbank markets and prompted significant changes in central banks’ funding operations. We examine the changing characteristics of ECB official interventions through the crisis and assess how they affected the efficiency...

In 2010, average inflation has remained low in all West African Economic and Monetary Union (WAEMU) countries, but has edged up in the second half of the year. After a moderate fiscal easing by about 1½ percentage points of GDP in 2009, mostly the result of higher capital spending, the...

The Belarus authorities are moving in the direction of a flexible exchange rate system supported by an inflation-targeting (IT) regime, which would have significant benefits for the economy. A full-fledged IT framework (FFIT) requires a number of essential building blocks, which could be viewed...