Posted on September 17, 2014 by iMFdirect
By Ian Parry
The time has come to end hand wringing on climate strategy, particularly controlling carbon dioxide (CO2) emissions. We need an approach that builds on national self-interest and spurs a race to the top in low-carbon energy solutions. Our findings here at the IMF—that carbon pricing is practical, raises revenue that permits tax reductions in other areas, and is often in countries’ own interests—should strike a chord at the United Nations Climate Summit in New York next week. Let me explain how.
Ever since the 1992 Earth Summit, policymakers have struggled to agree on an international regime for controlling emissions, but with limited success. Presently, only around 12 percent of global emissions are covered by pricing programs, such as taxes on the carbon content of fossil fuels or permit trading programs that put a price on emissions. Reducing CO2 emissions is widely seen as a classic “free-rider” problem. Why should an individual country suffer the cost of cutting its emissions when the benefits largely accrue to other countries and, given the long life of emissions and the gradual adjustment of the climate system, future generations?
Filed under: Advanced Economies, Economic research, Global Governance, Globalization, IMF, International Monetary Fund, Politics, Reform | Tagged: Australia, carbon pricing, carbon tax, China, Climate change, CO2 emissions, energy taxes, environment, European Union, fossil fuels, Poland, United States | Leave a comment »
Posted on September 10, 2014 by iMFdirect
By Francesco Columba and Jarkko Turunen
(Versión en español)
photo: Patrick H. Corkery/DoD/Sipa USA/Newscom
After more than five years of exceptionally low interest rates, the U.S. Fed is getting closer to the point of managing a liftoff of policy interest rates from close to zero. As of today, liftoff is expected to take place by around mid-2015.
But this is not set in stone. The Fed has repeatedly emphasized that the timing will depend on the state of the U.S. economy. If things look better, policy rates may increase earlier. Conversely, weaker than expected data may well mean that interest rates will move up later.
In our view, based on our most recent economic projections, there is some scope for policy rates to stay at zero for a little while longer than mid-2015, given the remaining slack in the labor market and still low inflation.
Filed under: Advanced Economies, Economic outlook, Employment, Fiscal policy, International Monetary Fund | Tagged: fiscal policy, IMF, interest rates, International Monetary Fund, monetary policy, unemployment, United States, US Federal Reserve | Leave a comment »
Posted on September 8, 2014 by iMFdirect
By Era Dabla-Norris
Much of the debate on inequality focuses on its deleterious social and political effects and its impact on growth. But an equally important issue is what policies play a clear role in reducing income inequality.
The results of our new study suggest that improvements in education—even more than factors such as government expenditure or financial sector development—have contributed in an important way to reducing income inequality within countries.
Filed under: Advanced Economies, Economic research, Emerging Markets, Finance, Globalization, growth, Inequality, International Monetary Fund | Tagged: education, expenditure reform, income inequality, inequality, technology, United States | Leave a comment »
Posted on August 28, 2014 by iMFdirect
By Deniz Igan
(Version in Español)
Something unusual happened this year. For the first time in almost ten years, a book by an economist made it to Amazon’s Top 10 list. Thomas Piketty’s Capital in the Twenty-First Century captured the attention of people from all walks of life because it echoed what an increasing number of Americans have been feeling: the rich keep getting richer and poverty in America is a mainstream problem.
The numbers illustrate the troubling reality. According to the U.S. Census Bureau, 1 in 6 Americans—almost 50 million people—are living in poverty. Recent research documents that nearly 40 percent of American adults will spend at least one year in poverty by the time they reach 60. During 1968–2000, the risk was less than 20 percent. More devastatingly, 1 in 5 children currently live in poverty and, during their childhood, roughly 1 in 3 Americans will spend at least one year living below the poverty line.
Filed under: Advanced Economies, Economic outlook, Economic research, Employment, Financial Crisis, Globalization, IMF, International Monetary Fund, Investment, recession, Reform, unemployment | Tagged: economic recovery, education, health care, jobs, labor market, poverty, poverty reduction, recession, rich and poor, tax, U.S., United States, wages | Leave a comment »
Posted on August 14, 2014 by iMFdirect
By Stephan Danninger
(Versions in 日本語)
Japan’s GDP declined by almost 7 percent in the second quarter, more than many had forecast including us here at the IMF. Many cite the increase in the sales tax this April for this decline. But that is not the full story.
Yes, it is true that consumer responses to major tax increases are difficult to predict, and large spending swings are not unusual. We see this pattern in many countries (see chart) including Germany’s 2007 VAT increase, which had a short-lived impact.
Filed under: Advanced Economies, Asia, Economic outlook, Economic research, Employment, Finance, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: Abenomics, Bank of Japan, consumption tax, Germany, inflation, Japan, labor market, sales tax, structural reform, VAT | Leave a comment »
Posted on August 7, 2014 by iMFdirect
By Ravi Balakrishnan
(Version in Español)
It’s not supposed to be this way. As the U.S. economy recovers, hirings increase and people are encouraged to look for jobs again. Instead, the ratio of the adult population with jobs, or looking for one—what’s called the labor force participation rate—has been falling, standing at 62.9 percent in July 2014 (Figure 1).
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Employment, Financial Crisis, growth, IMF, International Monetary Fund, unemployment | Tagged: Great Recession, job-creating growth, labor force, labor market, Macroeconomic policies, United States, youth | Leave a comment »
Posted on August 5, 2014 by iMFdirect
By Ruud de Mooij and Ikuo Saito
(Versions in 日本語)
It is no surprise that, as part of its revised growth strategy presented in June, the Japanese government has announced it will reduce the corporate income tax rate. At more than 35 percent for most businesses, the Japanese rate is one of the highest among the industrialized countries of the Organization for Economic Cooperation and Development (see Chart 1). Moreover, at a time when Japan needs to boost economic growth, the corporate income tax rate is generally seen as the country’s most growth-distortive tax.
Filed under: Advanced Economies, Asia, Economic research, Employment, Financial regulation, Globalization, growth, IMF, International Monetary Fund, Investment | Tagged: consumption tax, corporate income tax, Italy, Japan, public debt, small and medium-sized enterprises, tax cuts, tax deduction, tax incentives | Leave a comment »