Sweden’s Approach to Bank Resolution: Have We Learned the Right Lessons?


By Ajai Chopra

Resolving any financial crisis is no easy matter. Resolving the ongoing international crisis—with many institutions, countries, and regulators involved—is unusually challenging, both intellectually and in terms of practical policymaking.

Progress has been made thanks to the slew of measures adopted by global policymakers. But a stabilized patient is not a cured patient, particularly when stabilization largely reflects significant shifts of risk from the private financial sector to the public sector. And the early reappearance of practices thought to have played a part in fueling the crisis—sizeable bonuses, for example—is troubling.

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Monetary Policy in Europe—Boredom Suspended


By Ajai Chopra

Mervyn King, the Bank of England governor, once quipped that central bankers aim to keep monetary policy “boring”—a dull exercise in maintaining low and stable inflation. Recent months have seen quite the opposite.

Battling a sharp fall in inflation, central banks around the globe have slashed interest rates, often to close to zero. Several have also made headlines by adopting unconventional policies, including “quantitative easing” at the Bank of England (BoE) and “enhanced credit support” at the European Central Bank (ECB).

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Social Costs of Recession


By Caroline Atkinson

As I noted earlier this week, the recession seems to be easing its grip. In fits and starts, recovery is likely to get under way in coming months in most major economies. That is good news—especially compared to the gloom and fear earlier this year. But the bad news is that the social cost of the crisis is set to keep rising for some time. Unemployment—the symbol of the Great Depression—will get nowhere near the levels of the 1930s. But in advanced economies, jobless rates are already much higher than they have been for a long time.

The U.S. jobless numbers announced today give some encouragement, with a sharp decline in the number of jobs lost last month and an unexpected easing in the jobless rate. But, as a lagging indicator, unemployment worldwide is still expected to go on increasing well into 2010. The International Labor Organization thinks that as many as 50 million people could lose their jobs before this is all over. Of course, in emerging and low-income countries, where social safety nets are weak or non-existent, the human cost from unemployment is even higher.

As a lagging indicator, unemployment worldwide is still expected to go on increasing well into 2010 (photo: Sergio Perez/Reuters)

As a lagging indicator, unemployment worldwide is still expected to go on increasing well into 2010 (photo: Sergio Perez/Reuters)

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High-Stakes Choices In Next Stage of Crisis


By Caroline Atkinson

After averting a second Great Depression, what should policy makers do to foster recovery?

Economic policymakers are rarely popular. Central bank governors are notorious for removing the punch bowl at the party. Ministers of finance are traditionally the ones who say no to their colleagues’ pet spending projects.

In the upside-down world of recent months, finance ministers and central bank governors around the world seemed to have switched sides.  They became cheerleaders for expansionary policies. The IMF has argued strongly for this, as long as countries had room to take on more debt. Despite some hiccups, it seems clearer with every economic release that the extraordinary actions governments have taken have paid off, at least in halting the slide. Economic prospects may not be quite as bright as recent market moves would suggest. But the risk of spreading financial collapse has lessened markedly

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Amid Signs of Crisis Abating, IMF Invites Debate on Next Steps


By Caroline Atkinson

Welcome to iMFdirect, the International Monetary Fund’s new blog.

The global economy has pulled back from the brink.  Financial systems are beginning to function more normally. The panic that threatened to spread among depositors and savers earlier this year has receded. But enormous economic challenges remain, challenges that are often global in scope and may require a global response.

It is against that background that economists and policymakers at the International Monetary Fund are now preparing for the IMF-World Bank Annual Meetings in early October.  And as we do that, we wanted to open up our work to a broader audience. In coming weeks, senior staff and IMF management would like to discuss with you, through this blog, some of the key issues.

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