Mauritius: Selected Issues
IMF Staff Country Reports, April 29, 2019
Source details
- Canonical URL
- Mauritius: Selected Issues
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Bibliographic details
- Published: April 29, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498311991.002
Overview
- Publication date: April 29, 2019
- This Selected Issues paper develops a Financial Conditions Index (FCI) for Mauritius—an instrument to gauge the operational state of the financial sector and predict real economy activity.
- The evolution of Mauritius’ financial services sector has been supported by a vibrant offshore corporate sector.
- Financial developments are broader than monetary developments depicting money supply and interest rates.
Key findings
- The FCI is a robust predictor of real GDP growth in Mauritius.
- The FCI can help inform macroprudential policy decisions, including decisions on setting the countercyclical capital buffer of Basel III.
- The FCI signaled lax financial conditions in 2009 and again in 2012 that likely contributed to:
- accelerated credit growth in 2012–2013, and
- a subsequent acceleration in nonperforming loans during 2014–2016.
- Historically, Mauritius has not experienced drastic swings in financial credit, making testing the constructed FCIs for predicting boom-bust episodes difficult.
Policy implications and recommendations
- Closely monitor domestic financial developments given strong macro-financial linkages.
- Use the FCI alongside other indicators to inform macroprudential policy, particularly in evaluating the appropriate setting of the Basel III countercyclical capital buffer.
Limitations and analytical scope
- Limited historical variation in credit cycles in Mauritius constrains the ability to test FCI performance for boom-bust prediction.
- Financial developments captured by the FCI extend beyond traditional monetary aggregates and interest rate measures.
Content in this bundle
- Mauritius: Selected Issue; IMF Country Report No. 19/109; April 4, 2019