Understanding AMRO’s Nested Outgrowth from the IMF

By Yaechan Lee

The International Monetary Fund (IMF) continues to be the focal institution in the Global Financial Safety Net (GFSN), which refers to a set of institutions and mechanisms that provide insurance against crises and financing to mitigate their impact. Yet, the IMF’s stringent conditionalities that were often perceived to ignore country-specificities, and the increasing demand for more crisis-lending, have led to the establishment of numerous bilateral and regional-level financial arrangements. One of the most prominent examples of such regional arrangements is the Chiang Mai Initiative Multilateralism (CMIM) and its surveillance unit, the ASEAN+3 Macroeconomic Research Office (AMRO), established to manage the CMIM’s lending operations.

With a total lending capacity of $240 billion, the CMIM was established to provide additional crisis-lending support to its member states which consisted of economies in the Asia-Pacific, while AMRO’s aim was to conduct independent surveillance and manage loans so that it can design loan conditionalities that better match country-specificities. While the CMIM’s potential contribution to the GFSN is clear, AMRO’s contributions have remained rather vague. This is partially because AMRO’s contributions are qualitative, given that AMRO’s primary function is surveillance, compared to the quantitative contributions of the CMIM, which refers to the reserve pool itself.

A new working paper that I coauthored with William N. Kring and William W. Grimes clarifies AMRO’s contribution to the GFSN by comparing its surveillance reports and policy recommendations to those of the IMF to identify AMRO’s added value. For this, we conduct a detailed qualitative analysis of the country/regional level surveillance reports published between 2016-2020 by AMRO and the IMF, assessing a combination of 82 Regional Economic Outlooks (REOs) and bilateral country surveillance reports.

We compared the surveillance outputs of the IMF and AMRO across three dimensions: referencing, policy recommendations and analytical approach. The three parameters sequentially capture the basic processes involved in conducting policy research: data collection, establishment of analytical framework and resulting policy recommendations. First, through the referencing parameter, we assess what data sources the two institutions use and refer to. Through this, we gauge the inter-linkage between the two institutions by tracking how often their reports cross-reference.

A mutually equal level of cross-referencing would show that AMRO is, indeed, beginning to grow out of the IMF’s ‘nest.’ On the other hand, a unilateral referencing from either institution may show an institution’s dependence. Second, the analytical approach parameter captures how the two institutions analyze and interpret their acquired data. Through this we identify differences in the two institutions’ methodological approach and perspective. Lastly, the policy recommendations parameter assesses the two institutions’ approaches to policy in three major discussions in the reports: trade liberalization, macroprudential policy and usage of fiscal capacity. Through this, we capture the output of the two institutions’ data collection and analysis.

From this analysis we can draw the following conclusions. First, in terms of referencing, our analysis finds that AMRO is still heavily reliant on the IMF for data and analytic insights. Every surveillance report observed made extensive references to IMF data and reports and often directly used the analytic frameworks employed by IMF surveillance reports. The data from the IMF is compilation of data collected from government authorities, which AMRO uses through the IMF. AMRO does collect its own data through consultations but at a limited level.

Nevertheless, the datasets and insights employed by AMRO surveillance reports are not simply echoes of the IMF. In searching for ways that AMRO can complement the IMF, AMRO has been directly referencing the views of the member states’ policy perspectives, serving as a platform for candid policy discussions with member state policymakers. The IMF also leaves space for government authorities to voice their responses to the recommendations made by the IMF, but AMRO provides a larger space for authorities to not only simply ‘respond’, but also showcase new policy changes that they are making beyond the recommendations.

Second, we then find that AMRO’s policy recommendations are closely aligned with the IMF across three main policy areas analyzed: trade, capital flow and fiscal policy. How they justify their recommendations, however, is different. AMRO makes extensive use of country-specific case studies to provide evidence for policy recommendations, but the IMF mostly uses a broader quantitative approach to accomplish the same task.

Third, the IMF and AMRO differ in terms of their analytical approach with regards to their methodology and perspective in assessing policy issues.

AMRO’s methodological approach involves a more case-based, historically oriented approach while the IMF takes a more topic-based, current issue-focused approach. In trade, for instance, AMRO’s REO in 2019 conducts a detailed case study on the US-China trade dispute to specifically assess the spillovers of the dispute on the regional economy. On the other hand, the IMF generalizes it as an increase in protectionism and observes macroeconomic indicators to quantitatively gauge the impact of trade protectionism. This does not imply that the institutions solely employ these respective approaches but rather that there is a higher frequency of such approaches in the reports observed.

Our findings suggest that AMRO has been able to achieve a ‘nested outgrowth’ from the IMF, since it remains nested within the IMF in terms of its policy directions and data reference but also demonstrates important differences in how it approaches and interprets key policy issues. For instance, by directly providing space for regional policymakers to not only respond to the recommendations made in the surveillance reports but also use the reports as a platform to showcase their new policy innovations, AMRO serves as a platform for a candid discussion on new policy issues and directions. AMRO’s case-based and inside-out approach presents an in-depth insider’s take on key policy issues in the region, complementing the topical and outside-in approach of IMF surveillance. While AMRO functionally remains nested in the IMF, it allows for more candid policy discussions and focuses on country-specific examples to justify the same policy recommendations.

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