Posted on September 30, 2013 by iMFdirect
By: John Simon
The winds may fell the massive oak, but bamboo, bent even to the ground, will spring upright after the passage of the storm.
- Japanese Proverb
Capital flows to emerging market economies are a source of particular and enduring concern to many policymakers. As seen in the 1997-98 Asian crisis, surging inflows can fuel excessive credit growth, expanded current account deficits, appreciated exchange rates and a loss of competitiveness—followed by painful adjustment when the inflows reverse. Countries often fight these buffeting winds with tight controls on exchange rates, capital flow management and aggressive interest rate movements. While these sometimes work, and are sometimes the best response to a crisis, all too often countries can find themselves felled by the wind like the massive oak.
In the most recent World Economic Outlook we discuss an approach to dealing with volatile international capital flows that emphasizes the soft and flexible response to capital flows rather than the hard and oak-like. Instead of trying to resist foreign inflows, countries can bend. We find that the countries that proved to be more resilient to the turbulent gusts of international capital flows were not necessarily those that controlled the inflows, but those where foreign inflows were balanced by offsetting resident outflows.
Filed under: Advanced Economies, Economic research, Emerging Markets, Finance, growth, IMF, International Monetary Fund, Public debt | Tagged: capital flows, foreign exchange, WEO, World Economic Outlook | Leave a Comment »
Posted on September 25, 2013 by iMFdirect
By Helge Berger and Justin Tyson
Sooner or later, and one way or the other, government debt in advanced economies will have to come down from the record levels reached in the wake of the global economic and euro area crises. There is no magic number for how much sovereign debt an economy can shoulder. And, as bringing down debt by cutting government spending or raising taxes comes at the risk of reducing growth and employment in the short term, there are arguments to not proceed too hastily. But eventually debt will have to be put back on a downward path in many countries. This will help rebuild fiscal buffers and cope with the costs of aging. So, what should governments do?
Our new analysis takes a closer look at the historical record and key trade-offs. The bottom line: it is possible to reduce debt when growth is low. Ultimately perseverance should pay off.
Filed under: Economic research, Employment, Finance, Financial Crisis, Financial regulation, Financial sector supervision, Fiscal policy, growth, IMF, International Monetary Fund, Public debt | Tagged: debt, euro, Europe, fiscal consolidation, GDP, government budgets, government debt | Leave a Comment »
Posted on September 23, 2013 by iMFdirect
(Versions in Español and عربي)
Hot off the press: a new study out today from our economists pointing to the striking economic benefits that could come from increased female participation in the work force.
IMF Chief Christine Lagarde, calling attention to the findings of the paper, “Women, Work, and the Economy,” made the case for policymakers to shift into high gear and give women equal opportunities to participate in the work force.
Filed under: Advanced Economies, Economic research, Emerging Markets, Employment, Globalization, IMF, Inequality, International Monetary Fund | Tagged: Christine Lagarde, employment, empowering women, income, income inequality, research, tax, women | 1 Comment »