The International Monetary Fund (IMF) is an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world." Formed in 1944, started on 27 December 1945, at the Bretton Woods Conference primarily by the ideas of Harry Dexter White and John Maynard Keynes, it came into formal existence in 1945 with 29 member countries and the goal of reconstructing the international monetary system. It now plays a central role in the management of balance of payments difficulties and international financial crises. Countries contribute funds to a pool through a quota system from which countries experiencing balance of payments problems can borrow money. As of 2016[update], the fund had XDR 477 billion (about US$667 billion).Through the fund and other activities such as the gathering of statistics and analysis, surveillance of its members' economies, and the demand for particular policies, the IMF works to improve the economies of its member countries. The organization's objectives stated in the Articles of Agreement are: to promote international monetary co-operation, international trade, high employment, exchange-rate stability, sustainable economic growth, and making resources available to member countries in financial difficulty. IMF funds come from two major sources: quotas and loans. Quotas, which are pooled funds of member nations, generate most IMF funds. The size of a member's quota depends on its economic and financial importance in the world. Nations with greater economic significance have larger quotas. The quotas are increased periodically as a means of boosting the IMF's resources in the form of special drawing rights.The current managing director (MD) and Chairwoman of the IMF is Bulgarian economist Kristalina Georgieva, who has held the post since October 1, 2019. Indian-American economist Gita Gopinath, who previously served as Chief Economist, was appointed as First Deputy Managing Director, effective January 21, 2022. Pierre-Olivier Gourinchas replaced Gopinath as Chief Economist on January 24, 2022.
This paper studies whether countries benefit from servicing their debts during times of widespread sovereign defaults.Colombia is typically regarded as the only large Latin American country that did not default in the 1980s.Using archival research and formal econometric estimates of Colombia's probability of default, we show that in the early 1980s Colombia's fundamentals were not significantly different from those of the Latin American countries that defaulted on their debts.We also document that the different path chosen by Colombia was due to the authorities' belief that maintaining a good reputation in the international capital market would have substantial long-term payoffs.We show that the case of Colombia is more complex than what it is commonly assumed.Although Colombia had to re-profile its debts, high-level political support from the US allowed Colombia do to so outside the standard framework of an IMF program.Our counterfactual analysis shows that in the short to medium run, Colombia benefited from avoiding an explicit default.Specifically, we find that GDP growth in the 1980s was higher than that of a counterfactual in which Colombia behaved like its neighboring countries.We also test whether Colombia's behavior in the 1980s led to long-term reputational benefits.Using an event study based on a large sudden stop, we find no evidence for such long-lasting reputational gains.
The development and deployment of large language models like ChatGPT worldwide require the expansion of data centers, which consume substantial amounts of electricity. Using descriptive statistics and a multi-country computable general equilibrium model (IMF-ENV), we examine how AI-driven data center growth affects electricity consumption, electricity prices, and carbon emissions. Our analysis of national accounts reveals AI-producing sectors in the U.S. have grown at nearly triple the rate of the private non-farm business sector, with firm-level evidence showing electricity costs for vertically integrated AI companies nearly doubled between 2019-2023. Simulating AI scenarios in the IMF-ENV model based on projected data center power consumption up to 2030, we find the AI boom will cause manageable but varying increases in energy prices and emissions depending on policies and infrastructure constraints. Under scenarios with constrained growth in renewable energy and limited expansion of transmission infrastructure, U.S. electricity prices could increase by 8.6%, while U.S. and global carbon emissions would rise by 5.5% and 1.2% respectively under current policies. Our findings highlight the importance of aligning energy policies with AI development to support this technological revolution, while mitigating environmental impacts.
We study the consumption response to unexpected transitory income gains of different size, using hypothetical questions from the Italian Survey of Household Income and Wealth. Families with low cash-on-hand display a higher Marginal Propensity to Consume (MPC) out of the small gains while affluent households exhibit a higher MPC out of the large gains. The spending behaviour of low-income families is consistent with the predictions of models with borrowing constraints and uninsurable income risk whereas the consumption pattern of higher earners can be accounted for by non-homothetic preferences on non-essentials. Our results suggest that, for a given level of public spending, a fiscal transfer of smaller size paid to a larger group of low-income households stimulates aggregate consumption more than a larger transfer paid to a smaller group.
This paper examines the impact of Foreign Direct Investment (FDI) on knowledge diffusion by analyzing the effect of firm-level FDI activities on cross-border patent citations.We construct a novel firm-level panel dataset that combines worldwide utility patent and citations data with project-level greenfield FDI and crossborder mergers and acquisitions (M&A) data over the past two decades, covering firms across 60 countries.Applying a new local projection difference-indifferences methodology, our analysis reveals that FDI significantly enhances knowledge flows both from and to the investing firms.Citation flows between investing firms and host countries increase by up to around 10.6% to 13% in five years after the initial investment.These effects are stronger when host countries have higher innovation capacities or are technologically more similar to the investing firm.We also uncover knowledge spillovers beyond targeted firms and industries in host countries, which are particularly more pronounced for sectors closely connected in the technology space.
This paper examines whether inflation targeting (IT) enhances the effectiveness of macroprudential policies in reducing banks’ contribution to systemic risk measured by SRISK. Using bank-level data for 47 countries, our regime-dependent panel regressions suggest that tools such as DSTI limits, the CCyB, conservation buffers, and leverage limits are relatively more effective under IT. Loan restrictions appear less effective, while loan-to-value (LTV) caps show impact only in post-GFC samples. Liquidity and reserve requirements reduce SRISK under IT in higher-frequency estimations. Our findings lend credence to the view that IT strengthens the role of macroprudential policy in mitigating financial stability risks.
