Challenges and Successes in Treasury

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3 Δεκ 2013 (πριν από 3 χρόνια και 7 μήνες)

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Challenges and Successes in Treasury
Engagement on Monetary Policy



John B. Taylor

Under Secretary for International Affairs

United States Treasury


Central Bank of Peru


Lima, Peru

September 6, 2004

Iraqi Monetary Policy

Iraq faced variety of monetary problems at end of war:



Legacy of monetary policy mismanagement and inflation


Lack of central bank independence


Lack of unified, stable currency:


2 currencies in circulation, with limited denominations


Absence of security features on “Saddam” dinar


Sharp depreciation of “Saddam” dinar relative to
“Swiss” dinar



Monetary Policy Achievements

Post
-
War:


Established independent central bank


Conducted currency exchange:


Ran from October 15, 2003 to January 15, 2004


Introduced new currency with 6 denominations, based on
designs from old Iraqi dinars


Exchange went remarkably well


Value appreciated about 25%


Provided technical assistance to:


Develop daily currency auction


Establish new central bank law


Create monetary framework


Introduce new monetary instruments


Produce necessary monetary data

New Iraqi Dinar



New Iraqi Dinar Exchange Rate
October 2003-August 2004
0
500
1000
1500
2000
2500
10/15/2003
11/15/2003
12/15/2003
1/15/2004
2/15/2004
3/15/2004
4/15/2004
5/15/2004
6/15/2004
7/15/2004
8/15/2004
NID/US Dollar


Waiting to Exchange Dinar

Exchanging Old Dinar

Destroying Old Dinar

Afghanistan

Initial Currencies:



Official Afghani


Duplicate Afghanis
from Government in
Exile


Warlord
-
Issued
Counterfeits


Foreign Currencies




Finance Minister Ashraf Ghani, Treasury President Ehsan Assadi, U/S
Taylor and Amb. Paul Speltz. Explaining existing manual payroll
procedures at the Finance Ministry
.


Monetary Policy Issues


Choice of Currency



Objective


Price Stability



Exchange Rate Regime



Monetary Target





Touring Da Afghanistan Bank (the central bank).

Argentina: Quasi
-
Currencies



Origins


Fiscal constraints = resort to creative financing


12 of 24 provinces issued own currencies; federal government issued its
own quasi
-
currency (
lecop
)


At peak, quasi
-
currencies were 1/2 of all currency in circulation and 1/3 of
monetary base


Consequences


Central bank loses ability to control entire monetary supply


Demand for official currency that central bank does control because
unpredictable. Interest rates and exchange rates become unpredictable.


Fragmentation of monetary space = fragmentation of market for goods/
services. Fluctuating internal ex
-
rates. No reliable medium of exchange


Difficulty in launching IMF program as difficult to predict money demand and
set monetary targets


Solving the Problem


IMF transitional program launched in January 2003


Argentine government initiates buyback that virtually eliminate quasi
-
currency stock by end
-
2003


2003 inflation is 4% vs. 2002 inflation of 42%




Argentina: Quasi-Currency Evolution
0
2,000
4,000
6,000
8,000
10,000
Sep-01
Nov-01
Jan-02
Mar-02
May-02
Jun-02
Aug-02
Oct-02
Dec-02
Feb-03
Apr-03
Jun-03
Aug-03
Oct-03
Dec-03
Feb-04
Apr-04
Jun-04
Aug-04
quasi-currencies
Per Peso
Nov-02
Mar-03
Lecops
0.99
0.99
Buenos Aires
0.99
0.99
Catamarca
-
0.99
Chaco
-
0.85
Cordoba
0.90
0.96
Corrientes
0.39
0.52
Entre Rios
0.53
0.72
Formosa
0.70
0.70
Mendoza
0.95
0.90
La Rioja
1.00
1.00
San Luis
1.00
1.00
Tucuman
-
0.85
Quasi-Money Exchange Rates
Uruguay: Run on Dollar Deposits


Context


90% dollarized financial system


History of macro stability, offshore banking sector


Crisis


Inflows of deposits from Argentina. Inadequate reserve backing


Withdrawals by Argentine depositors after imposition of deposit freeze in
Argentina. Spread to non
-
residents, given concerns about inadequate dollar
reserves & questions about government fiscal sustainability


Policy Response


IMF loans to build reserves in spring/early summer insufficient to stop run


Mobilization of IMF/WB/IDB money to provide full backing for certain
categories of deposits. USG short
-
term bridge loan to re
-
open banks.


Results


Guarantee stopped run and prevented collapse of payment system


Fiscal measures restored confidence in government finances


Return to robust economic growth



Uruguay: Financial System Dollarization
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
Dec-00
Mar-01
Jun-01
Sep-01
Dec-01
Mar-02
Jun-02
Sep-02
Dec-02
Mar-03
Jun-03
Sep-03
Dec-03
Mar-04
Millions US$
Total US$ Deposits
Non-Resident
Resident