Latin America—Taking the Helm


By Christine Lagarde

Managing Director of the International Monetary Fund

(Version in Español)

The eyes of the world are locked on Europe these days. This is understandable. After all, the storm in the euro area casts a long shadow over the entire global economy.

But the IMF has 187 members, and my job is to serve each and every one of them as effectively as possible. For this reason, I am making it a point to visit the different regions of the world—to discuss, to listen, to learn.

This week, I am visiting three important countries in Latin America—Brazil, Mexico, and Peru—a trip coinciding with the transfer of leadership in the Group of 20 to Mexico. Like so many in the region, these countries have done remarkably well over the past few years. They have harvested the fruits of strong fundamentals, sound policy frameworks, and prudent macroeconomic policies and are now enjoying sustained growth with reduced vulnerabilities—an enviable sweet spot.

Continue reading

Bringing the Informal Sector into the Fold


By Masood Ahmed

(Version in عربي)

Unemployment rates in the Middle East and North Africa have remained above 10 percent over the past decade, the highest in the world. For the young the rates are even more daunting, at a persistent 25 percent: one in four of the region’s young people are without work. Many people who cannot find jobs in the formal economy are relegated to working in the informal sector, for lower wages and without the protections and opportunities that workers enjoy in the formal economy.

The informal economy is large and pervasive—and, often, ignored; however, the experience of those who work in the informal sector came under the media spotlight when Tunisian street vendor Mohamed Bouazizi set himself on fire that fateful day in December last year, sparking the Arab Spring protests.

Estimates indicate that the informal economy in the oil-importing countries of the Middle East and North Africa is substantially larger than in several Asian and Latin American countries. In Morocco, for example, the informal economy is estimated at 44 percent of officially measured GDP. In most other oil importers, it is estimated at close to one-third.

Continue reading

U.S. Housing and Labor Pains—Central America and the Caribbean Feeling the Pinch Too


By Evridiki Tsounta

(Version in Español)

If housing and labor market woes aren’t bad enough in the United States, they’re hurting Central America and the Caribbean too.

It has been five years since the U.S. housing bubble burst and three years since the onset of the global financial crisis. And still, in the world’s largest economy—which in the past quickly and vigorously recovered from downturns—jobs and output are barely growing. In fact, output is just 1.6 percent higher than a year ago, and almost 14 million people remain unemployed.

True, some of this lackluster economic performance reflects global factors, particularly the uncertainty surrounding the lingering European crisis, but also temporary factors related to the Japanese earthquake. However, on the domestic front, fragile household balance sheets and stubbornly high unemployment have been major factors impeding growth. This latter development is having negative spillovers on many Central American and Caribbean countries, where remittances and tourism flows from workers in the United States are important for their economies (see our most recent Regional Economic Outlook for Western Hemisphere).

Continue reading

Central Banks, Financial Regulators, and the Quest for Financial Stability: 2011 IMF Annual Research Conference


By Olivier Blanchard

The global financial crisis gave economists pause for thought about what should be the future of macroeconomic policy. We have devoted much of our thinking to this issue these past three years, including how the many policy instruments work together.

The interactions between monetary and macroprudential policies, in particular, remain hotly debated. And this year’s IMF Annual Research Conference is an important opportunity to take that debate another step forward.

Looking back, it is striking how many papers from last year’s conference—on post-crisis macroeconomic and financial policies—have been so immediately relevant to events on the ground. Just to give you an example: the paper on fiscal space is obviously front and center in the policy debate on the European sovereign crisis, the United States’ budget, and challenges faced by advanced country governments more generally.

This year’s topic—monetary and macroprudential policies—is equally relevant. It goes to the core of central banks’ mandates, and their role in achieving macroeconomic and financial stability. The financial crisis triggered a fundamental rethinking of these issues, but much research, both conceptual and empirical, remains to be done. The conference provides an excellent opportunity to engage with prominent academics, policymakers and private sector practitioners. I hope the conference will contribute to expanding the frontier of knowledge on this topic. Continue reading

Lurking in the Shadows—The Risks from Nonbank Intermediation in China


By Nigel Chalk

(Version in 中文)

One of my all-time favorite movies is “The Third Man” starring Orson Welles and Joseph Cotten. It is a British film noir from the 1940s. Perhaps the most striking part of the movie is the shadowy cinematography, set in post-World War II Vienna. Strangely, it springs to mind lately when I have been thinking of China.

Many China-watchers looked on in awe in 2009 as the government’s response to the global financial crisis unfolded, causing bank lending as a share of the economy to expand by close to 20 percentage points in less than a year. This, subsequently, led to a lot of hand-wringing about the consequences of those actions and the eventual credit quality problems that China would have to confront and manage.

However, around the same time, a less visible phenomenon was also getting underway. One that, like Orson Welles’ character in the movie, resided firmly in the shadows. Various types of nonbank financial intermediaries—some new, some old—were gearing up to provide a conduit through which China’s high savings would be tapped to finance the corporate sector. The available data on this is terrible—the central bank’s numbers on social financing are the only credible and comprehensive public source, but even that gives only a partial picture.

Talking to people in China, and looking at what numbers are available, one cannot help but have an uneasy feeling that more credit is now finding its way into the economy outside of the banking system than is actually flowing through the banks. Continue reading

Latin America’s Commodity Dependence: What if the Boom Turns to Bust?


By Gustavo Adler and Sebastián Sosa

(Version in Español)

As a commodity exporting region, Latin America has greatly benefited from the commodity price boom of the past decade. But with talk of a new global recession, what will happen to the region if the boom turns to bust?

The IMF’s latest Regional Economic Outlook: Western Hemisphere sheds light on Latin America’s reliance on commodities from a historical perspective. Our study also looks at the effect of a sharp decline in commodity prices on emerging market economies and on the policies that could shield countries from that shock.

More dependent but also more diversified

The reliance on commodity exports can be looked at as a share of GDP (commodity dependence) as well as relative to total exports of goods and services (export diversification). Continue reading

Follow

Get every new post delivered to your Inbox.

Join 826 other followers

%d bloggers like this: