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Global Dialogue 3: Macroeconomic and Financial Policy Responses to the Global Economic Crisis - Brazil, China, India, Macedonia, Mexico, South Africa

February 12, 2009                                                                    

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This dialogue addressed the impacts of the crisis and assessed the macroeconomic and financial policy responses required both to address the crisis and to manage the growth and distribution effects. Participants included senior officials from Brazil, China, India, Macedonia, Mexico and South Africa. Professor Guillermo Calvo of Columbia University, spoke in regards to macroeconomic policy challenges facing the countries, followed by Professor Patrick Honohan of Trinity College, Dublin, who discussed financial sector policies in European countries.

The global dialogue addressed the following questions:

Macroeconomic impacts and policy responses

What are the main impacts of the global financial crisis (and rise and fall of commodity prices) on the real economy:

• What is the effect on current account and financing, international reserves
• Have exports been affected through loss of access to trade finance or through falling demand?
• What is the impact on tax revenues and other fiscal effects (public debt)?
• On GDP growth?
• On Credit growth?
• Exchange rate pressures?

What macroeconomic policies have you implemented in your country and why?

• If real GDP growth is slowing down, what policies are being used to stimulate the economy, if any?
• How are fiscal pressures being contained? What are the main constraints to using fiscal policy as a discretionary tool?
• What about credit/monetary policy and exchange rates?
• Are there measures used to manage the trade balance? What about the capital account? Are these seen to be short term (when would they be removed/changed)?
• How are ongoing public investments being managed?

What are your expectations about your economy in the short, medium and longer term?

• How would your policies change depending on the duration of the crisis?
• What about the long-term prospects for food and fuel prices? Is this a concern?

Do you think better coordination amongst OECD countries in policies could have averted this crisis? What about non-OECD countries?

• What kind of coordination would have helped your country/regional situation?
• What lessons have you learned in crisis management from other developing countries?

Financial Sector Impact and Responses

Which segments of the financial market are most at risk? What is the short-term situation in your country with regard to systemic and/or institution specific risks?

In your country, what has been/will be the short-term impact of the financial sector crisis with regard to key Asset and Liability components of financial institutions’ Balance Sheet; Income Statement, and Cash Flow?  For example:

• Increase in NPLs (related to trade finance, housing loan, corporate loans, etc)
• Valuation and Credit Losses in Investment Portfolio
• Liquidity Constraints: Dollar and Domestic Currency
• Credit Demand and Lending Standards 
• Loss Provisioning and Capital Cushions
• Funding Costs, Constraints and Refinancing Risks (e.g. interbank borrowings, retail deposits, debt and equity market funding, and term structure of liabilities)

What measures have already been put in place by monetary, supervisory and fiscal authorities to help financial institutions cope with changes in their liquidity and solvency situation and with regard to ability to maintain credit intermediation?  Are additional measures planned?

• Access to central bank liquidity support?
• Changes in deposit insurance schemes?
• Changes in prudential regulations?
• Capital injection by government: Tier 1 and Tier 2?
• Support for mergers, divestitures, acquisitions, etc. ?
• Special (general or targeted) programs to maintain credit flows?

When do you expect financial markets in your country to come back to normal and when do you expect to be able to unwind temporary interventions?  As a consequence of the crisis are you expecting permanent/medium-term changes in structure of markets and behavior of market participants?

How has the current crisis altered your views on financial market development? Going forward what do see as your key challenges, priorities and concerns? Examples include:

• Application of risk based regulations --- Basle 2, risk modeling, stress testing, etc.
• Rebalancing safety and integrity, deregulation, competition and integration
• Crisis preparedness --- PCA framework, contingency planning, risk simulation etc.
• Supervisory architecture.



Professor Guillermo Calvo, Columbia University, New York
Professor Patrick Honohan, Trinity College, Dublin

Ms Katherine Hennings, Advisor to Deputy Governor for Economic Policy. Central Bank of Brazil
Mr  Eugenio Rivera,  Advisor, Central Bank of Brazil 

Mr. YANG Jinlin, Director General of the Asia Pacific Finance and Development Center
Ms Ruijun Shi, Deputy Division Director, SME Division, China Development Bank

Dr. Alok Sheel, Joint Secretary, Department of Economic Affairs, New Delhi
Mr. M. R. Anand, Economic Advisor, Department of Economic Affairs
Dr. Anil Bisen, Economic Advisor, Department of Economic Affairs
Dr. R.K. Pattnaik, Adviser, Reserve Bank of India, Mumbai
Observer:  Ms. Shashanka, Macroeconomist, National Council for Applied Economic Research, New Delhi

Zoran Jovanovski, General Director, National Bank of the Republic of Macedonia;
Ms. Anita  Angelovska Bezovska,Lead Economist,  National Bank of the Republic of Macedonia; 
Ms. Ana Mitreska, Deputy Director in Research Department, National Bank of the Republic of Macedonia;
Ms. Nikica Mojsoska, Macro Department, Ministry of Finance;
Ms. Maja Parnardzieva, Head of Public Debt Department, Ministry of Finance

Josef Draaisma, Senior Economist, Mexico

South Africa
Gert Marincowitz, Deputy Director: Directorate International Finance, National Treasury
Dr. Nicola Brink (SARB, Financial Stability Department: Safety Net)
Anton Casteleijn (SARB, Senior Economist, Monetary Policy Research Unit)

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