## EXECUTIVE SUMMARY

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**Canonical URL:** [EXECUTIVE SUMMARY](https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020026.pdf)

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---

### Introduction and context
- MIP prepared before COVID-19 became a global pandemic; actions and timeline do not reflect implications of these developments and related policy priorities.
- MIP responds to Board-endorsed recommendations from the Independent Evaluation Office (IEO) assessment of the IMF’s Advice on Unconventional Monetary Policies (UMP).
- Many actions incorporated into departmental work plans and budgets for fiscal year FY2020; medium-term resource implications (including those related to the Comprehensive Surveillance Review (CSR)) to be discussed in the context of the FY2021–23 budget.
- Staff have begun responding to some IEO recommendations; resource implications expected to be minimal in the near term.

### MIP objectives and package of actions
- Strengthen in-house expertise on monetary policy through:
  - Establishment of a new unit in the Monetary and Capital Markets Department (MCM).
  - Continued work on the Integrated Policy Framework (IPF).
  - Ongoing changes to HR policies.
- Deepen work on UMP and related policies via a rigorous research agenda and broad consultations inside and outside the Fund.
- Further strengthen financial spillover analysis as part of the CSR and increase prominence of spillover work through high-level workshops and the Global Financial Stability Report (GFSR).
- Explore ways to enhance traction in bilateral surveillance as part of the CSR.

### IEO recommendations (summary)
- Four recommendations summarized as:
  - #1—Build a small core group of top monetary policy experts at the IMF.
  - #2—Deepen work on the costs and benefits of UMP and related policies to develop a playbook for future downturns.
  - #3—Ensure the Fund is at the forefront of financial spillover analysis and advice on dealing with capital flows.
  - #4—Draw on lessons to deepen and enrich country engagement in bilateral surveillance (longer tenure of mission chiefs, less turnover, more engagement outside Article IV cycle).

### Recommendation 1 — Build a small core group of top monetary policy experts
- Board reactions:
  - Directors saw merit in building monetary policy expertise; noted past limits to Fund advice including lack of deep applied monetary expertise and inadequate resources.
  - Directors welcomed the new MCM monetary policy modelling unit and stressed collaboration with major central banks and the BIS.
- Implementation actions and milestones:
  - New Monetary Policy Modeling Unit (MMU) in MCM fully staffed, with a goal of 6.5 FTE, as of end-2019.
  - MMU overseen by a Deputy Director with deep monetary policy expertise; staff to have expertise in monetary policy and macroeconomic modeling and practical central bank experience.
  - MMU to develop model-based frameworks for analyzing monetary policy transmission, foreign exchange intervention, interactions with macroprudential tools, UMP, and spillovers; complemented by empirical work and case studies.
  - MCM’s Monetary and Macroprudential Policies division recently hired staff with strong research and policy track records in monetary policy.
  - Regular visiting monetary policy experts to be brought in.
  - Interdepartmental Monetary Policy Advisory Group to be created by mid-2020 with MCM playing a leading role.
  - External Advisory Group (EAG) to convene outside experts; remit and composition to be published in September 2020.
  - RES toolkit (IASOC) to assess monetary policy frameworks along 5 dimensions (Independence, Accountability, Policy Strategy, Operational Framework and Communication Strategy); data and methodology paper to be published by Fall 2020.
  - Board paper on Cross-Border Implications of Digital Currencies (including Libra) scheduled for Summer 2020.
  - Broaden the Michel Camdessus Lecture into a full-day conference focused on monetary policy, UMP, and spillovers.
  - HR Strategy rollout through FY2021 to include a talent inventory and an expert track to fill expert positions.
  - Institute for Capacity Development (ICD) to:
    - Revamp courses and capacity development for country officials.
    - Increase Internal Training Seminars on monetary policy topics from two to six in 2020.
    - Gear the Open Forum Series to focus further on monetary policy–market interactions under unusual circumstances.
  - Staff briefed the Board in November 2019 on HR Strategy developments.

### Recommendation 2 — Deepen work on costs and benefits of UMP and develop a playbook
- Board reactions:
  - Directors broadly supported a playbook drawing on cross-country experience to assess macroeconomic and distributional impacts of UMP instruments and the roles of monetary, fiscal, and macroprudential policies.
  - Emphasis on avoiding over-prescriptive approaches and allowing flexibility for country-specific conditions.
  - Many Directors supported updating prior IMF papers (2013 and 2015); management will present the specific agenda in future work program discussions.
- Implementation actions and milestones:
  - MMU and Monetary and Macroprudential Policies Division to undertake extensive near-term work; outputs to feed a “recession playbook” and a Board briefing in mid-2021.
  - MMU model development work includes:
    - (i) a small open economy model capturing monetary policy transmission and foreign exchange intervention;
    - (ii) a medium-sized model incorporating macroprudential tools (e.g., for housing risk analysis);
    - (iii) a larger-scale model for analyzing UMP, including negative rates and spillovers/spillbacks.
  - RES economic modeling division to continue contributing to monetary policy analysis (e.g., quantifying impact of monetary easing on global growth).
  - April 2020 WEO Chapter 1 to present work on factors driving persistently low long-term interest rates.
  - April 2020 GFSR to include a box on effectiveness of negative interest rates.
  - Thematic Board briefing on macrofinancial and distributional impacts of monetary policy and implications for fiscal policy to be presented by May 2020 by SPR, MCM, and RES.
  - MCM to lead a Board briefing on UMP and related policies in late 2020.
  - MCM initiated a stocktaking paper on negative interest rates to be completed in mid-2020.
  - Work ongoing to transform the 1999 Code of Good Practices on Transparency in Monetary and Financial Policies into a Central Bank Transparency (CBT) code; the CBT paper to be presented to the Board in May 2020.
  - Staff intend to contribute actively to monetary policy framework reviews by the U.S. Federal Reserve, the ECB, the Bank of England, and the Bank of Canada on topics such as average inflation targeting, symmetric inflation bands, new tools to increase policy space, and improving forward guidance and communication.

### Resource and timing notes (selected milestones preserved exactly)
- end-2019 (MMU goal of 6.5 FTE fully staffed)
- November 2019 (staff Board briefing on HR Strategy)
- mid-2020 (create Monetary Policy Advisory Group; MMU stocktaking on negative interest rates completion)
- September 2020 (publish EAG remit and composition)
- Fall 2020 (RES IASOC toolkit data and methodology paper publication)
- Summer 2020 (Board paper on Cross-Border Implications of Digital Currencies)
- April 2020 (WEO Chapter 1 and GFSR box on negative rates)
- May 2020 (thematic Board briefing on macrofinancial and distributional impacts; CBT paper presentation)
- late 2020 (MCM-led Board briefing on UMP and related policies)
- mid-2021 (Board briefing on the developing “recession playbook”)

---

### 7.      Directors agreed that the Fund should be at the forefront of financial spillover analysis

### Board reactions and substantive findings
- Directors noted Fund initiatives over the past decade to:
  - assess spillovers,
  - improve financial risk assessments,
  - develop the macroprudential policy toolkit,
  - advise countries on how to deal with capital flow volatility.
- Several Directors urged greater attention to challenges facing emerging market and developing countries from financial spillovers and capital flow volatility, including additional work on the appropriate mix of policies in “source” countries (advanced or emerging market economies).
- A few Directors emphasized that all countries have responsibility to implement sound macroeconomic policies, mindful of spillover and spillback effects, and that the Fund should provide advice on handling cross-border effects and enhancing resilience.
- Many Directors regarded a code of conduct for central banks as impractical and potentially unduly constraining domestic policy implementation.
- Directors encouraged using insights from ongoing work on spillovers and the Integrated Policy Framework (IPF) as input for the CSR, including approaches to better address spillovers and options to strengthen surveillance modalities.

### Implementation plan — key actions and timelines
- CSR (surveillance priorities for the Fund):
  - Present proposals to further strengthen spillover analysis and coverage in surveillance (see proposed action in Annex I).
  - Key CSR recommendations on spillovers include:
    - provide the Spillover Task Force (STF) an explicit mandate to periodically identify systemic spillover issues in a consistent format and timeframe to inform bilateral surveillance and commission analytical work across the institution;
    - close data gaps to better equip teams to identify spillover channels and impacts;
    - leverage the Fund’s role in enhancing dialogue between spillover-receiving and spillover-producing countries.
  - Concrete guidance to be formulated in the updated Guidance Note on Surveillance following the CSR.
- IPF (Integrated Policy Framework) development (by SPR, RES, MCM):
  - Continue to develop an analytical framework combining models, empirical analysis, and case studies to enhance understanding of interactions among monetary policy, foreign exchange intervention, macro-prudential policies, and capital flow management measures.
  - Staff updated the Board on October 7, 2019 on the IPF work program; work includes innovative models with complex financial frictions to help assess policy mix.
  - Informal Board engagements to update on IPF progress in the Spring and Summer of 2020.
  - A cross-departmental advisory group on the IPF has been formed to exchange views and coordinate advice.
- Other RES work in implementation phase:
  - a model comparison exercise on transmission of shocks to financial conditions and shocks relevant during the GFC, and the role of the zero lower bound in amplifying those shocks;
  - an analytical contribution to the next ESR on the role of stock imbalances (structure of international investment positions) as a determinant of sudden stops and external crises.
- GFSR:
  - Will continue discussing financial spillovers regularly.
  - In Fall 2020, the GFSR will include a chapter on financial spillovers from UMP (see proposed action in Annex I).
- External and internal engagement:
  - Workshops on the Institutional View (IV) in Practice with country authorities at the 2020 Spring and Annual Meetings to ensure Fund advice is well understood and to discuss trade-offs with authorities (see proposed action in Annex I).
  - Continue annual spillover workshops coordinated by RES jointly with the ECB, Bank of England, and (started in 2019) the BIS; April 2019 workshop focused on financial spillovers and policies to address them; future workshops to raise profile and regularly invite a keynote speaker.

### Institutional roles, coordination, and bodies referenced
- Spillover Task Force (STF): interdepartmental group coordinating the Fund’s work on spillovers (including the annual WEO spillover analytical chapter) and providing a forum for discussing conjunctural and longer-term spillover issues involving spillovers (and potential spillbacks) of policy actions.
- IPF: developed by SPR, RES, MCM to provide members, particularly those exposed to volatile capital flows and spillovers, with a more systematic assessment of appropriate policy mixes.
- RES, SPR, MCM, MCM’s Monetary Policy Modeling Unit (MMU), STA, and other departments to lead various elements of the work program.

### Relationship to IEO evaluation and other deliverables
- Work on managing capital flows will be informed by the forthcoming IEO evaluation of IMF advice on capital flows; the issues paper was discussed at the Board on July 23, 2019.
- The CSR will draw on ongoing work on spillovers and the IPF to inform proposed surveillance enhancements.
- Proposed follow-up items in Annex I related to Recommendation 3 include:
  - The CSR to present proposals to strengthen spillover analysis and coverage in Article IV surveillance (April 2020).
  - Update the Board on progress on the IPF (Spring and Summer 2020).
  - The GFSR will include a box or chapter on UMP financial spillovers (Fall 2020).

### Resource implications
- Commitments outlined expected to have marginal resource implications in the near term.
- Several actions already incorporated into departmental work plans and budgets for FY2020.
- Additional costs from this MIP expected to be minor in the near term as staff resources are expected to be fully sufficient absent material risks.
- Resource implications of the EAG to be clarified depending on modalities and membership; costs expected to be minimal as members may not need compensation, similar to the EAG for the CSR.
- Medium-term resource needs for prioritizing monetary policy work and building expertise, and CSR proposals on spillovers and traction, to be discussed in the context of the FY2021–23 Medium-term Budget, with changes implemented over time.

*Source: ppea2020026 - EXECUTIVE SUMMARY*

### EXECUTIVE SUMMARY

### EXECUTIVE SUMMARY

### Introduction and context
- This Management Implementation Plan (MIP) was prepared before COVID-19 became a global pandemic and therefore the actions and timeline do not reflect the implications of these developments and related policy priorities.
- The MIP responds to Board-endorsed recommendations from the Independent Evaluation Office (IEO) assessment of the IMF’s Advice on Unconventional Monetary Policies (UMP).
- Many actions in this MIP have already been incorporated into departmental work plans and budgets for fiscal year FY2020; medium-term resource implications (including those related to the Comprehensive Surveillance Review (CSR)) will be discussed in the context of the FY2021–23 budget.
- Staff have begun responding to some IEO recommendations; resource implications are expected to be minimal in the near term.

### MIP objectives and package of actions
- Strengthen in-house expertise on monetary policy through:
  - Establishment of a new unit in the Monetary and Capital Markets Department (MCM).
  - Continued work on the Integrated Policy Framework (IPF).
  - Ongoing changes to HR policies.
- Deepen work on UMP and related policies through a rigorous research agenda and broad consultations inside and outside the Fund.
- Further strengthen financial spillover analysis as part of the CSR and increase prominence of spillover work through high-level workshops and the Global Financial Stability Report (GFSR).
- Explore ways to enhance traction in bilateral surveillance as part of the CSR.

### IEO recommendations (summary)
- The IEO report made four recommendations to improve the influence and value added of Fund advice on monetary policy. Box 1 summarized them as:
  - #1—Build a small core group of top monetary policy experts at the IMF.
  - #2—Deepen work on the costs and benefits of UMP and related policies to develop a playbook for future downturns.
  - #3—Ensure the Fund is at the forefront of financial spillover analysis and advice on dealing with capital flows.
  - #4—Draw on lessons to deepen and enrich country engagement in bilateral surveillance (longer tenure of mission chiefs, less turnover, more engagement outside Article IV cycle).

### Recommendation 1 — Build a small core group of top monetary policy experts
- Board reactions:
  - Directors saw merit in building monetary policy expertise and noted past limits to Fund advice including lack of deep applied monetary expertise and inadequate resources.
  - Directors welcomed the new MCM monetary policy modelling unit and stressed collaboration with major central banks and the BIS.
- Implementation actions and milestones:
  - New Monetary Policy Modeling Unit (MMU) in MCM has been fully staffed, with a goal of 6.5 FTE, as of end-2019.
  - MMU overseen by a Deputy Director with deep monetary policy expertise; staff to have expertise in monetary policy and macroeconomic modeling and practical central bank experience.
  - MMU will develop model-based frameworks for analyzing monetary policy transmission, foreign exchange intervention, interactions with macroprudential tools, UMP, and spillovers; complemented by empirical work and case studies.
  - MCM’s Monetary and Macroprudential Policies division has recently hired staff with strong research and policy track records in monetary policy.
  - Regular visiting monetary policy experts to be brought in.
  - An interdepartmental Monetary Policy Advisory Group to be created by mid-2020 with MCM playing a leading role.
  - External Advisory Group (EAG) to convene outside experts; remit and composition to be published in September 2020.
  - RES toolkit (IASOC) to assess monetary policy frameworks along 5 dimensions (Independence, Accountability, Policy Strategy, Operational Framework and Communication Strategy); data and methodology paper to be published by Fall 2020.
  - Board paper on Cross-Border Implications of Digital Currencies (including Libra) scheduled for Summer 2020.
  - Broaden the Michel Camdessus Lecture into a full-day conference focused on monetary policy, UMP, and spillovers.
  - HR Strategy rollout through FY2021 to include a talent inventory and an expert track to fill expert positions.
  - Institute for Capacity Development (ICD) to:
    - Revamp courses and capacity development for country officials.
    - Increase Internal Training Seminars on monetary policy topics from two to six in 2020.
    - Gear the Open Forum Series to focus further on monetary policy–market interactions under unusual circumstances.
  - Staff briefed the Board in November 2019 on HR Strategy developments.

### Recommendation 2 — Deepen work on costs and benefits of UMP and develop a playbook
- Board reactions:
  - Directors broadly supported a playbook that draws on cross-country experience to assess macroeconomic and distributional impacts of UMP instruments and the roles of monetary, fiscal, and macroprudential policies.
  - Emphasis on avoiding over-prescriptive approaches and allowing flexibility for country-specific conditions.
  - Many Directors supported updating prior IMF papers (2013 and 2015), and management will present the specific agenda in future work program discussions.
- Implementation actions and milestones:
  - MMU and Monetary and Macroprudential Policies Division to undertake extensive near-term work; outputs to feed a “recession playbook” and a Board briefing in mid-2021.
  - MMU model development work includes:
    - (i) a small open economy model capturing monetary policy transmission and foreign exchange intervention;
    - (ii) a medium-sized model incorporating macroprudential tools (e.g., for housing risk analysis);
    - (iii) a larger-scale model for analyzing UMP, including negative rates and spillovers/spillbacks.
  - RES economic modeling division to continue contributing to monetary policy analysis (e.g., quantifying impact of monetary easing on global growth).
  - April 2020 WEO Chapter 1 to present work on factors driving persistently low long-term interest rates.
  - April 2020 GFSR to include a box on effectiveness of negative interest rates.
  - Thematic Board briefing on macrofinancial and distributional impacts of monetary policy and implications for fiscal policy to be presented by May 2020 by SPR, MCM, and RES.
  - MCM to lead a Board briefing on UMP and related policies in late 2020.
  - MCM initiated a stocktaking paper on negative interest rates to be completed in mid-2020.
  - Work ongoing to transform the 1999 Code of Good Practices on Transparency in Monetary and Financial Policies into a Central Bank Transparency (CBT) code; the CBT paper to be presented to the Board in May 2020.
  - Staff intend to contribute actively to monetary policy framework reviews by the U.S. Federal Reserve, the ECB, the Bank of England, and the Bank of Canada on topics such as average inflation targeting, symmetric inflation bands, new tools to increase policy space, and improving forward guidance and communication.

### Resource and timing notes
- Many actions incorporated into FY2020 departmental plans and budgets; medium-term resource implications to be addressed in FY2021–23 budget discussions.
- Specific dates and milestones preserved from the plan include:
  - end-2019 (MMU goal of 6.5 FTE fully staffed)
  - November 2019 (staff Board briefing on HR Strategy)
  - mid-2020 (create Monetary Policy Advisory Group; MMU stocktaking on negative interest rates completion)
  - September 2020 (publish EAG remit and composition)
  - Fall 2020 (RES IASOC toolkit data and methodology paper publication)
  - Summer 2020 (Board paper on Cross-Border Implications of Digital Currencies)
  - April 2020 (WEO Chapter 1 and GFSR box on negative rates)
  - May 2020 (thematic Board briefing on macrofinancial and distributional impacts; CBT paper presentation)
  - late 2020 (MCM-led Board briefing on UMP and related policies)
  - mid-2021 (Board briefing on the developing “recession playbook”)

*Source: ppea2020026 - EXECUTIVE SUMMARY*

### 7.      Directors agreed that the Fund should be at the forefront of financial spillover analysis

### 7.      Directors agreed that the Fund should be at the forefront of financial spillover analysis 

### Board reactions and substantive findings
- Directors noted Fund initiatives over the past decade to:
  - assess spillovers,
  - improve financial risk assessments,
  - develop the macroprudential policy toolkit,
  - advise countries on how to deal with capital flow volatility.
- Several Directors urged greater attention to challenges facing emerging market and developing countries from financial spillovers and capital flow volatility, including additional work on the appropriate mix of policies in “source” countries (advanced or emerging market economies).
- A few Directors emphasized that all countries have responsibility to implement sound macroeconomic policies, mindful of spillover and spillback effects, and that the Fund should provide advice on handling cross-border effects and enhancing resilience.
- Many Directors regarded a code of conduct for central banks as impractical and potentially unduly constraining domestic policy implementation.
- Directors encouraged using insights from ongoing work on spillovers and the Integrated Policy Framework (IPF) as input for the CSR, including approaches to better address spillovers and options to strengthen surveillance modalities.

### Implementation plan — key actions and timelines
- CSR (surveillance priorities for the Fund):
  - Present proposals to further strengthen spillover analysis and coverage in surveillance (see proposed action in Annex I).
  - Key CSR recommendations on spillovers include:
    - provide the Spillover Task Force (STF) an explicit mandate to periodically identify systemic spillover issues in a consistent format and timeframe to inform bilateral surveillance and commission analytical work across the institution;
    - close data gaps to better equip teams to identify spillover channels and impacts;
    - leverage the Fund’s role in enhancing dialogue between spillover-receiving and spillover-producing countries.
  - Concrete guidance to be formulated in the updated Guidance Note on Surveillance following the CSR.
- IPF (Integrated Policy Framework) development (by SPR, RES, MCM):
  - Continue to develop an analytical framework combining models, empirical analysis, and case studies to enhance understanding of interactions among monetary policy, foreign exchange intervention, macro-prudential policies, and capital flow management measures.
  - Staff updated the Board on October 7, 2019 on the IPF work program; work includes innovative models with complex financial frictions to help assess policy mix.
  - Informal Board engagements to update on IPF progress in the Spring and Summer of 2020.
  - A cross-departmental advisory group on the IPF has been formed to exchange views and coordinate advice.
- Other RES work in implementation phase:
  - a model comparison exercise on transmission of shocks to financial conditions and shocks relevant during the GFC, and the role of the zero lower bound in amplifying those shocks;
  - an analytical contribution to the next ESR on the role of stock imbalances (structure of international investment positions) as a determinant of sudden stops and external crises.
- GFSR:
  - Will continue discussing financial spillovers regularly.
  - In Fall 2020, the GFSR will include a chapter on financial spillovers from UMP (see proposed action in Annex I).
- External and internal engagement:
  - Workshops on the Institutional View (IV) in Practice with country authorities at the 2020 Spring and Annual Meetings to ensure Fund advice is well understood and to discuss trade-offs with authorities (see proposed action in Annex I).
  - Continue annual spillover workshops coordinated by RES jointly with the ECB, Bank of England, and (started in 2019) the BIS; April 2019 workshop focused on financial spillovers and policies to address them; future workshops to raise profile and regularly invite a keynote speaker.

### Institutional roles, coordination, and bodies referenced
- Spillover Task Force (STF): an interdepartmental group that coordinates the Fund’s work on spillovers (including the annual WEO spillover analytical chapter) and provides a forum for discussing conjunctural and longer-term spillover issues involving spillovers (and potential spillbacks) of policy actions.
- IPF: developed by SPR, RES, MCM to provide members, particularly those exposed to volatile capital flows and spillovers, with a more systematic assessment of appropriate policy mixes.
- RES, SPR, MCM, MCM’s Monetary Policy Modeling Unit (MMU), STA, and other departments to lead various elements of the work program.

### Relationship to IEO evaluation and other deliverables
- Work on managing capital flows will be informed by the forthcoming IEO evaluation of IMF advice on capital flows, which will lead to concrete steps to be implemented. The issues paper was discussed at the Board on July 23, 2019.
- The CSR will draw on ongoing work on spillovers and the IPF to inform proposed surveillance enhancements.
- Proposed follow-up items in Annex I related to Recommendation 3 include:
  - The CSR to present proposals to strengthen spillover analysis and coverage in Article IV surveillance (April 2020).
  - Update the Board on progress on the IPF (Spring and Summer 2020).
  - The GFSR will include a box or chapter on UMP financial spillovers (Fall 2020).

### Resource implications
- Commitments outlined are expected to have marginal resource implications in the near term.
- Several actions in this MIP have already been incorporated into departmental work plans and budgets for FY2020.
- Additional costs from this MIP are expected to be minor in the near term as staff resources are expected to be fully sufficient absent material risks.
- Resource implications of the EAG will be clarified depending on modalities and membership; costs expected to be minimal as members may not need compensation, similar to the EAG for the CSR.
- Medium-term resource needs for prioritizing monetary policy work and building expertise, and CSR proposals on spillovers and traction, will be discussed in the context of the FY2021–23 Medium-term Budget, with changes implemented over time.

*Source: ppea2020026 - 7.      Directors agreed that the Fund should be at the forefront of financial spillover analysis*

---


_Source: https://www.imf.org/-/media/files/publications/pp/2020/english/ppea2020026.pdf_