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Thread: IMF Iraq is a Special Case

  1. #1
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    IMF- Iraq is a Special Case

    Long (and I do mean long ) ago I stated that Iraq was a "special case". Well, here is the IMF not only backing that up, but discussing the methodologies they're using to make calculations of the exchange rates in "special case" countries. It is over 60 pages long so I just included what follows, enjoy

    Staff is developing an extension to the toolkit that takes into account
    differences across country groups with concentrated sources of external
    income. 14 To illustrate the issues and the potential applications of the toolkit,
    we have conducted an exercise that begins with the CGER regression specifications and systematically examines possible differences in slope or
    intercept values and finally selects one modified regression specification.
    Results from this exercise (which are further discussed in Annex 4) suggest
    the value of modeling—in some manner—that allows for structural
    differences, particularly in special case countries. The exercise suggests
    significant differences in a number of slope coefficients (though none in
    intercepts): 15
    Nonrenewable commodity exporters: The slope coefficients on the
    balance (in the MB regression) and on the terms of trade and
    government consumption (in the ERER regression) are higher for
    nonrenewable commodity exporters (see Tables 1 and 2 in Appendix 4).
    This is not surprising because the fiscal balance in commodity-exporting
    countries is dominated by swings in oil revenues and hence strongly
    correlated with the CA, which is also dominated by such swings.
    Furthermore, given that their exports are less diversifed, commodity-exporting
    countries are exposed to large terms of trade fluctuations that
    can induce large business cycle fluctuations, passing them through to
    domestic prices and the RER. Finally, fiscal transfers from oil revenues to
    the domestic economy in oil-exporting countries tend to raise domestic
    prices and appreciate the RER. These results are consistent with the
    findings of Bems and de Carvalho Filho (2009) for oil exporters.



    addition, under the
    Articles, the IMF is required to “oversee the international monetary system
    in order to ensure its effective operation, and . . . oversee the compliance of
    each member with its obligations.” In this regard, the IMF established an
    interdepartmental Consultative Group on Exchange Rates (CGER), which
    began assessing the exchange rates of the G-7 countries in 1997. Over time,
    country coverage of CGER was expanded and a broader methodology for
    exchange rate assessments was developed based on three pillars: (1) the
    macrobalance (MB) approach, which estimates deviations relative to a current
    account (CA) norm; (2) the equilibrium real exchange rate (ERER) approach,
    which estimates deviations from an exchange rate norm; and (3) the external
    sustainability (ES) approach, which estimates deviations from a sustainable
    CA balance.




    Appendix 2 . Country Groups
    The following groups of economies are identified as having distinct structural
    characteristics commonly thought to influence exchange rate assessments20
    Exporters of non-renewable commodities (the ratio of exports of nonrenewable
    commodities to output exceeds 15 percent and the ratio of
    exports of non-renewable commodities to total exports exceeds 25 percent;
    covers 14 percent of economies): Algeria, Angola, Azerbaijan, Bahrain,
    Brunei, Congo Republic, Gabon, Guinea, Iran, Iraq, Kazakhstan, Kuwait,
    Liberia, Libya, Mauritania, Mongolia, Nigeria, Norway, Oman, Papua
    New Guinea, Russia, Saudi Arabia, Trinidad and Tobago, Turkmenistan,
    Venezuela, Zambia.


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    Last edited by dollarsign; 12-21-2014 at 08:53 PM.

  2. #2
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    Thanks DS...good to see you posting. Any opinion on how this plays out for Iraq?
    [Still kicking]

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    Full implementation of the SFA

    Hi 40plus, hope all is well. I think it will only play out when the Strategic Framework Agreement is brought into full force. Section V, item 4 is what we need.

    Section V Economic and Energy Cooperation
    4. Support Iraq's further integration into regional and international financial and economic communities and institutions, including membership in the World Trade Organization and through continued normal trade relations with the United States.

    This implies that their banks, and therefore their currency, would be fully integrated into the global system.


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    Quote Originally Posted by dollarsign View Post
    Hi 40plus, hope all is well. I think it will only play out when the Strategic Framework Agreement is brought into full force. Section V, item 4 is what we need.

    Section V Economic and Energy Cooperation
    4. Support Iraq's further integration into regional and international financial and economic communities and institutions, including membership in the World Trade Organization and through continued normal trade relations with the United States.

    This implies that their banks, and therefore their currency, would be fully integrated into the global system.


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    dream dream dream , dream dream dream dream

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    Nothing to dream about, the U.S. Govt. is on the hook to make it happen once this is enforced. If you don't like what the Strategic Framework Agreement says, take it up with the framers.

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    Conspicuous by its absence

    http://www.imf.org/external/pubs/ft/wp/2015/wp1580.pdf

    This is a very good read, showing the types Capital Control Measures used by 100 different countries over a period of years. These measures can be triggered by large inflows or outflows. One country is Conspicuous by its omission, Iraq. The table of 100 countries is divided into High, Upper Middle, and Lower Middle & Low income. Certainly Iraq qualifies as one of those, yet they were left out.
    Anyway, a good way to gain an understanding of these control measures.
    Enjoy

    ​$

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    Quote Originally Posted by dollarsign View Post
    http://www.imf.org/external/pubs/ft/wp/2015/wp1580.pdf

    This is a very good read, showing the types Capital Control Measures used by 100 different countries over a period of years. These measures can be triggered by large inflows or outflows. One country is Conspicuous by its omission, Iraq. The table of 100 countries is divided into High, Upper Middle, and Lower Middle & Low income. Certainly Iraq qualifies as one of those, yet they were left out.
    Anyway, a good way to gain an understanding of these control measures.
    Enjoy

    ​$

    Much appreciated DS. As always, good to read your posts.
    [Still kicking]

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