Policy Responses to High Energy and Food Prices

New IMF paper by a team of economists (David Amaglobeli ; Mengfei Gu ; Emine Hanedar ; Gee Hee Hong ; Celine Thevenot):

The surge in energy and food prices, which was amplified by Russia’s invasion of Ukraine, has prompted a flurry of policy responses by countries during 2022. The aim of these policy responses was to mitigate social and economic impact of higher prices. In this paper we document announcements of policy measures based on the Database of Energy and Food Price Actions (DEFPA), which was developed based on two rounds of survey responses of IMF country teams conducted in March/April and June/July of 2022. The paper also provides discussion on policy trade-offs when considering appropriate policy responses both for countries with strong and weak social safety nets. Key policy message is that providing targeted support to households in the form of cash transfers is the most cost-effective way of alleviating the burden on vulnerable households and have to be preferred over broad-based mechanisms that prevent international prices to pass through to domestic consumers.

New Evidence on the Foreign Wealth of U.S. Households

Niels Johannesen, Daniel Reck, Max Risch, Joel Slemrod, John Guyton & Patrick Langetieg in this NBER paper look at foreign wealth of US households:

This paper uses account-level information, reported to the IRS by foreign financial institutions under the Foreign Account Tax Compliance Act (FATCA), to produce new evidence on the foreign financial wealth of U.S. households.

We find that U.S. taxpayers hold around $4 trillion in foreign accounts, almost half in jurisdictions usually considered tax havens. Combining the FATCA reports with other administrative tax data and tracing account ownership through partnerships, we document a steep income gradient in the propensity to hold assets in foreign financial institutions.

Specifically, more than 60% of the individuals in the top 0.01% of the income distribution own foreign accounts, the vast majority in tax havens and more than half through a partnership. We discuss the likely implications of these findings for the overall impact of FATCA on tax compliance and government revenue.

What Silicon Valley Bank and Credit Suisse tell us about financial regulations

Jon Danielsson  and Charles Goodhart in this voxeu research article draw lessons from failure of SVB and Credit Suisse:

The downfall of Silicon Valley Bank and Credit Suisse has exposed failures in how we regulate the financial system. This column argues that the problems we now see in the system have arisen because the financial authorities have been trying to do the impossible: maintain growth while keeping inflation under control and financial stability high. The best way forward would be to focus on shock absorption and moral hazard, not the current approach of buffers and risk measurements.