Posted on January 16, 2014 by iMFdirect
By Alejandro Werner
(Version in Español and Português)
Some basic realities seem to be getting lost in the debate over the Fed’s “exit” from unconventional monetary policy and its impact on Latin America.
First, the still-loose stance makes sense. U.S. inflation is too low, the output gap too large, and the labor market too weak. And even during tapering, the Fed’s stance will remain highly loose. The 10-year Treasury rate, adjusted for core inflation, is about 230 basis points below its 30-year average and the inflation-adjusted Fed funds rate is 320 basis points below. These rates are likely to remain below their 30-year average for at least the next two to three years.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Emerging Markets, Español, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Latin America, Low-income countries | Tagged: capital flows, financial stability, inflation, Latin America, monetary policy, U.S., U.S. Fed | Leave a comment »
Posted on January 13, 2014 by iMFdirect
by Isabel Rial, Suchanan Tambunlertchai, and Alexander Tieman
(Version in Türk)
Turkey has received well-deserved praise for its growth performance over the last decade. Yet along with this success story has come a steady widening of the current account deficit, projected to come out at 7.4 percent of GDP in 2013. The counterpart of this deficit is a reliance on external financing, much of which is of a short-term nature, highlighting the Turkish economy’s main problem at the moment.
Filed under: Economic Crisis, Emerging Markets, Europe, Financial Crisis, growth, IMF, International Monetary Fund, Public debt | Tagged: Article IV, competitiveness, monetary policy, public financial management, Turkey | 2 Comments »
Posted on January 13, 2014 by iMFdirect
By Alexander Culiuc and Kalpana Kochhar
(Versions in Español, Русский, Português, and 中文)
A number of emerging market economies have been on a rollercoaster since the U.S. Federal Reserve announced last May the eventual tapering of its asset purchase program. This is another reminder of how susceptible these economies remain to economic conditions outside their borders.
Much of the market movements to date have been short term in nature. But emerging markets know the end-game – interest rates in advanced economies will eventually go up, reducing the cheap external financing they have benefited from until now. And this is not the only external factor weighing on the growth prospects of emerging markets.
Filed under: Advanced Economies, Economic Crisis, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Public debt | Tagged: advanced economies, capital flows, commodiity prices, emerging market economies, exchange rate, inflation, interest rates, World Economic Outlook | 3 Comments »
Posted on December 2, 2013 by iMFdirect
By Steven Barnett
(Version in 中文)
It’s the season for shopping. We have Cyber Monday in the United States and Singles Day in China (November 11 or 11/11). So, while we are pondering shopping, try to guess which consumer market is growing the fastest. The answer is…China!
China had the largest consumption increase in the world. This was true in 2011, true in 2012, and likely to be true again this year (see chart). Consumption in China is also generally thought to be weak. Indeed, the government and the IMF are calling for more consumer-based growth. How could consumption, in effect, be both weak and strong at the same time?
Filed under: Asia, Economic Crisis, Economic research, Emerging Markets, Fiscal policy, growth, IMF, International Monetary Fund | Tagged: China, consumer spending, consumption | 1 Comment »
Posted on November 19, 2013 by iMFdirect
By Olivier Blanchard
(Version in Español)
Two weeks ago, the IMF organized a major research conference, in honor of Stanley Fischer, on lessons from the crisis. Here is my take. I shall focus on what I see as the lessons for monetary policy, but before I do this, let me mention two other important conclusions.
One, having your macro house in order pays off when there is an (external) crisis. In contrast to previous episodes, wise fiscal policy before this crisis gave emerging market countries the room to pursue countercyclical fiscal policies during the crisis, and this made a substantial difference.
Second, after a financial crisis, it is essential to rapidly clean up and recapitalize the banks. This did not happen in Japan in the 1990s, and was costly. But it did happen in the US in this crisis, and it helped the recovery.
Now let me now turn to monetary policy, and touch on three issues: the implications of the liquidity trap, the provision of liquidity, and the management of capital flows.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, IMF, International Monetary Fund, Multilateral Cooperation | Tagged: capital flows, exchange rate, financial crisis, fiscal policy, IMF Annual Research Conference, IMF Jacques Polak Research Conference, inflation, monetary policy, Olivier Blanchard, Paul Krugman, stanley Fischer | 2 Comments »
Posted on November 6, 2013 by iMFdirect
By Michael Keen
(Version in Español, Français and 中文)
Last night, when you went to bed, you left $40 on the kitchen table. When you woke up this morning, you found only $30—and a note from the government saying, “Thank you very much, we took $10 as a tax payment.” This is, of course, extremely irritating. To an economist, however, it’s close to an ideal form of taxation, since there is nothing you can now do to reduce, avoid, or evade it—the holy grail of what economists call a non-distorting tax.
(This doesn’t mean that you won’t react in some way. Being worse off, you may now work a bit more, or save a bit less. But any other tax raising $1 would make you even worse off, because it would change relative prices (a tax on your earnings would make working less attractive, for instance), and so take your choices even further from those you would make in the absence of taxation.)
Filed under: Economic Crisis, Economic outlook, Economic research, Finance, Financial sector supervision, Fiscal policy, IMF, International Monetary Fund, Politics, Public debt | Tagged: capital levy, debt, Fiscal Monitor, tax cuts, tax policy, taxation | Leave a comment »
Posted on November 1, 2013 by iMFdirect
By Olivier Blanchard
Several years out from the global financial crisis, the world economy is still confronting its painful legacies. Many countries are suffering from lackluster recoveries coupled with high and persistent unemployment. Policymakers are tackling the costs stemming from the crisis, managing the transition from crisis-era policies, and trying to adapt to the associated cross-border spillovers.
Against this background, the IMF’s 14th Jacques Polak Annual Research Conference, entitled “Crises: Yesterday and Today,” to take place on November 7-8, will take stock of our understanding of past and present crises.
This year’s conference will be a special one as we shall honor Stanley Fischer’s many contributions to economic research and policy. Stan has extensively studied economic and financial crises, first as a faculty member at the Massachusetts Institute of Technology, and then as a policymaker with many hats over the years―the Chief Economist of the World Bank, the First Deputy Managing Director of the IMF, and the Governor of the Bank of Israel.
Filed under: Asia, Economic Crisis, Economic outlook, Economic research, Europe, Finance, Fiscal policy, Global Governance, IMF, International Monetary Fund, Latin America, Multilateral Cooperation | Tagged: central banks, East Asia, financial stability, fiscal policy, IMF Annual Research Conference, IMF Jacques Polak Research Conference, interest rates, Japan, Latin America, macroeconomics, Olivier Blanchard, Paul Krugman, stanley Fischer, United States | 2 Comments »
Posted on October 22, 2013 by iMFdirect
By Anoop Singh
(Versions in 中文 and Español)
Hard landing, soft landing, no landing, overheating. Pundits’ views on China’s economy bounce around—often rapidly—between these descriptions.
Just two short months ago, the dominant concern was about a sharp slowdown, below this year’s official growth target of 7½ percent. Now, these fears have retreated, pushed aside by talk of renewed momentum.
Our sense, here at the International Monetary Fund, has always been that economic growth will slightly surpass this year’s official target. But we have also cautioned that China’s economic challenges are growing, and that accelerating reform is critical for containing risks and achieving a smooth transition to sustainable growth.
The upcoming Third Plenum provides an opportunity for the new leadership to provide guidance on how they plan to meet these challenges.
Filed under: Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Finance, growth, IMF, International Monetary Fund | Tagged: China, credit, financial reform, government finances, Labor, Regional Economic Outlook: Asia | Leave a comment »
Posted on October 21, 2013 by iMFdirect
By Anoop Singh
Almost one year ago, the term Abenomics first surfaced in Japan. The idea of a coordinated policy effort to revive Japan’s economy and end deflation seemed a bold idea, but also a long-shot. Back in February, several young investment bankers told me that ending deflation within the next few years stood at most, a 20 percent chance. They noted that they had never experienced rising prices in their lifetimes. By June they had upped the chances of success to 40 percent. With Abenomics approaching the one-year mark, is the new strategy working?
Lot of policy action
The year started with a flurry of new policy initiatives: in January, the Bank of Japan (BoJ) adopted a 2 percent inflation target, followed by new fiscal stimulus, and a decision to join negotiations over the Trans-Pacific Partnership (TPP), a proposal for a free trade agreement spanning countries from Australia, Brunei, to Chile, Canada, and the U.S. Shortly after, Haruhiko Kuroda took the helm at the Bank of Japan and introduced Quantitative and Qualitative Monetary Easing—an aggressive plan to reach 2 percent inflation in about 2 years mainly through large-scale bond purchases. Just, a few days ago, the government agreed to go ahead with the consumption tax increase in 2014 and announced further fiscal stimulus to soften the growth impact. Discussions on growth reforms are next on the agenda, with a special Diet session starting this month. Plenty of action, but has this whirlwind of activity paid off?
Filed under: Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, Finance, growth, IMF, International Monetary Fund | Tagged: Abenomics, Bank of Japan, interest rates, Japan, Regional Economic Outlook: Asia | 1 Comment »
Posted on October 11, 2013 by iMFdirect
By Nemat Shafik
Europe faces a stark choice: risk stagnation or pursue integration. It can continue to muddle through, and hope that growth in the world economy will eventually pick up enough steam to pull its economy out of the doldrums. Or it can make a decisive push to revitalize its economy and complete the reforms needed to achieve a fully integrated economic and monetary union
Five years into the crisis, recovery in the euro area remains fragile. Important actions at both the national and euro-wide levels have tackled the immediate threats to the single currency. These include the European Central Bank’s announcement in 2012 that it stands ready to undertake outright monetary transactions in secondary sovereign bond markets, the completion of the European Stability Mechanism, which created a financial firewall around the euro area, and efforts to restore the health of public finances and implement structural reforms.
Filed under: Advanced Economies, Economic Crisis, Employment, Europe, Finance, Fiscal policy, growth, International Monetary Fund | Tagged: banking union, euro area, Europe, iMFdirect, Nemat Shafik, public finances, structural reforms | Leave a comment »