How To Make A Graceful Exit: The Potential Perils of Ending Extraordinary Central Bank Policies

Posted on April 11, 2013 by iMFdirect

Erik Oppers MCMBy Erik Oppers

This spring monetary policy is the talk of the town.  It is everywhere you look, it’s unique, and you’ve never seen anything quite like it before: short-term interest rates at zero for several years running, and central bank balance sheets swelling with government bonds and other assets in the euro area Japan, the United Kingdom, and the United States.

But the meteoric rise of this once dusty topic can’t last.  The end of these unconventional monetary policies will come and may pose threats to financial stability because of the length and breadth of their unprecedented reign.  Policymakers should be alert to the risks and take gradual and predictable measures to address them.

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Filed under: Advanced Economies, Economic outlook, Economic research, Fiscal policy, International Monetary Fund, Investment | Tagged: , , , , , , , , , , , , , , , | 1 Comment »

Scenes From A Central Bank: A Turkish Tale in Two Acts

Posted on April 2, 2013 by iMFdirect

By Robert Tchaidze and Heiko Hesse 

In mid 2010 the Turkish central bank decided to introduce a policy that increased uncertainty in interest rates hoping that would stop foreign investors who were pouring money into the country in search of a quick buck. That’s right. ‘Keep calm and carry on’ was replaced by ‘Keep them guessing.’

The Turkish economy was overheating.  Money poured into the country from foreign investors attracted by a strong economy and high yields. A lending boom resulted in excessive growth along with an appreciating exchange rate and widening current account deficit. While evidence of success, these kinds of capital inflows are a headache policymakers would rather avoid, as they expose a country to risks that affect the economy and financial system as a whole, while undermining the objective of controlling inflation.

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Filed under: Advanced Economies, Economic research, Employment, Europe, Finance, Fiscal policy, growth, International Monetary Fund | Tagged: , , , , , , , , , , , | 1 Comment »

Time For A Spring Cleaning: The Global Economy Will Thank You

Posted on February 25, 2013 by iMFdirect

Jose Vinals

by José Viñals

Version in Español

It is still winter in the northern hemisphere, but there is never a bad time for spring cleaning. I suggest that policymakers de-clutter their to-do lists by focusing on three priorities.

These policies will help economies grow and will significantly improve financial and monetary stability in 2013 and beyond.

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Filed under: Advanced Economies, Europe, Finance, Financial Crisis, Financial regulation, Financial sector supervision, growth, IMF, International Monetary Fund, Politics | Tagged: , , , , , , | Leave a Comment »

Europe: Toward A More Perfect Union

Posted on February 15, 2013 by iMFdirect

Nemat Shafik 4

By Nemat Shafik

During the years that followed the euro’s introduction, financial integration proceeded rapidly and markets and governments hailed it as a sign of success. The widespread belief was that it would benefit both south and north—capital was finally able to flow to where it would best be used and foster real convergence.

But in fact, a lasting convergence in productivity did not materialize across the European Union. Instead, a competitiveness divide emerged. As the financial crisis gripped the euro area in 2010, these and other problems came to the fore.

Three years later, the financial symptoms of the crisis are thankfully receding with a new sense of optimism in markets. But the underlying problems—lack of convergence of productivity and the structural flaws in the architecture of the monetary union—have only been partially addressed.

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Filed under: Advanced Economies, Economic Crisis, Employment, Europe, Finance, Financial Crisis, Financial regulation, Financial sector supervision, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , | Leave a Comment »

Resolutions for the Fiscal New Year—Staying on Track Is No Easy Task

Posted on February 4, 2013 by iMFdirect

by Carlo Cottarelli and Philip Gerson

Version in Español and عربي

We’re one month into 2013, and if past experience is any guide, by now many people will have all but forgotten the promises they made about the things they planned to do over the coming year.

It’s a time-honored tradition in many countries for people to make resolutions at the New Year, usually involving things that are good for them, like achieving a healthier weight. Unfortunately, it’s also traditional that these commitments quickly fall by the wayside, only to be taken up again next year, usually with the same results.

But unlike many of these resolutions, the ones made by most advanced economies to reduce their 2012 fiscal deficits were by and large kept. The average headline deficit in these countries fell by about ¾ percent of GDP last year, bringing the cumulative deficit decline to 3 percent of GDP since budget shortfalls peaked in 2009. This is good news.

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Filed under: Advanced Economies, Economic Crisis, Emerging Markets, Europe, Fiscal policy, growth, IMF, International Monetary Fund, Public debt | Tagged: , , , , , , , , , , , | 2 Comments »

We May Have Avoided the Cliffs, But We Still Face High Mountains

Posted on January 23, 2013 by iMFdirect

WEO

by Olivier Blanchard

Version in Español  and عربي

Optimism is in the air, particularly in financial markets. And some cautious optimism may indeed be justified.

Compared to where we were at the same time last year, acute risks have decreased. The United States has avoided the fiscal cliff, and the euro explosion in Europe did not occur. And uncertainty is lower.

But we should be under no illusion. There remain considerable challenges ahead. And the recovery continues to be slow, indeed much too slow.

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Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Europe, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 5 Comments »

The Ties That Bond Us: What Demand For Government Debt Can Tell Us About the Risks Ahead

Posted on January 17, 2013 by iMFdirect

by Serkan Arslanalp and Takahiro Tsuda

It’s not news that emerging markets can be vulnerable to bouts of market volatility. Investors often pull sudden stops—they stop buying or start selling off their holdings of government bonds.

But what has become apparent in recent years is that advanced economy government bond markets can also experience investor outflows, and associated runs. At the same time, some traditional and new safe haven countries have seen their borrowing costs drop to historic lows as they experience rising inflows from foreign investors.

Our new research shows that advanced economies’ exposure to refinancing risk and changes in government borrowing costs depend mainly on who is holding the bonds— the demand side for government debt.

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Filed under: Advanced Economies, Asia, Emerging Markets, Europe, Finance, Financial Crisis, Financial regulation, Financial sector supervision, G-20, growth, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 4 Comments »

The Power of Cooperation

Posted on December 21, 2012 by iMFdirect

by iMFdirect

The planet’s most successful species are the great cooperators: ants, bees, termites, and humans.

In an article in the new issue of Finance & Development magazine, President Bill Clinton shares his experience working with governments, business, and civil society as part of his Clinton Global Initiative.

He says they are making the most progress in places where people have formed networks of creative cooperation where stakeholders come together to do things better, faster and cheaper than any could alone.

Filed under: Advanced Economies, Africa, Asia, Civil Society, Debt Relief, Economic Crisis, Emerging Markets, Employment, Europe, Finance, Fiscal policy, Globalization, growth, IMF, Inequality, International Monetary Fund, Latin America, Middle East, Multilateral Cooperation | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 4 Comments »

IMF’s Christine Lagarde on the U.S. Fiscal Cliff

Posted on December 11, 2012 by iMFdirect

by iMFdirect

The head of the IMF Christine Lagarde has weighed in on the ongoing U.S. fiscal cliff debate. Three weeks before a series of automatic tax increases and spending cuts are due to kick in if lawmakers don’t reach a new deal, Lagarde said she favors a comprehensive fix, rather than a quick one.

“My view is that the best way forward is to have a balanced approached that takes into account both increasing revenues and cutting spending as well.”

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Filed under: Advanced Economies, Economic Crisis, Employment, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , | 7 Comments »

Jobs. Jobs. Jobs. Getting the Labor Markets Working Again

Posted on November 7, 2012 by iMFdirect

By Olivier Blanchard

The sharp and persistent rise in unemployment in advanced economies since the 2008-09 financial crisis is a hotly debated policy issue.  Rightly so:  High persistent unemployment has major human and economic costs, from loss of morale to loss of skills.  More broadly, it seems to undermine the very fabric of society.

Against this backdrop, the theme for the IMF’s 13th Jacques Polak Annual Research Conference, “Labor Markets through the Lens of the Great Recession,” could not be timelier. This year’s conference program weaves together a number of contributions by researchers both inside and outside the IMF, aiming to shed light on those labor market issues that are central to the current economic and social landscape.

Cyclical vs. structural

Peter Diamond, Nobel Prize winner in Economics and Professor of Economics at MIT, will give the keynote Mundell-Fleming lecture on the controversial issue of cyclical vs. structural unemployment.

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Filed under: Advanced Economies, Asia, Economic Crisis, Economic outlook, Economic research, Employment, Europe, Financial Crisis, Globalization, growth, IMF, Inequality, Investment, Politics | Tagged: , , , , , , , , , , , , , , , , | 4 Comments »

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