The Growth of Shadow Banking


By Gaston Gelos and Nico Valckx

Shadow banking has grown by leaps and bounds around the world in the last decade.  It is now worth over $70 trillion. We take a closer look at what has driven this growth to help countries figure out what policies to use to minimize the risks involved.

In our analysis, we’ve found that shadow banks are both a boon and a bane for countries. Many people are worried about institutions that provide credit intermediation, borrow and lend money like banks, but are not regulated like them and lack a formal safety net. The largest shadow banking markets are in the United States and Europe, but in emerging markets, they have also expanded very rapidly, albeit from a low base.

Continue reading

Now Is a Good Time to Invest in Infrastructure


By Abdul Abiad, Davide Furceri, and Petia Topalova

Infrastructure is the backbone of well-functioning economies. Unfortunately, that backbone is becoming increasingly brittle in a number of advanced economies. For example, there has been a decline in the overall quality of infrastructure in the United States and Germany (Figure 1; see the FT 2014 and ASCE 2013 for more in infrastructure in the U.S., and Der Speigel 2014 and Kunert and Link 2013 for Germany). In many emerging market and developing economies, the expansion of the backbone has not kept pace with the broader economy, and this is stunting the ability of these economies to grow.

Continue reading

Where Danger Lurks


blanchardBy iMFDirect

Lurking conjures up images of spies, flashers and other dodgy types.  The IMF’s chief economist Olivier Blanchard takes readers into the dark corners of the financial crisis in his latest article ‘Where Danger Lurks’  in our recent issue of Finance & Development Magazine, and looks at small shocks, sudden stops and liquidity.

Continue reading

Three Key Questions About the Slowdown in Emerging Markets


Sweta SaxenaBy Sweta Saxena

1. Are emerging markets slowing down? Yes. They have been slowing down for some time now. GDP growth has declined from 7 percent during the pre-crisis period (2003-8) to 6 percent over the post-crisis period (2010-13) to 5 percent, in our projections, over the next 5 years (2014-18).  This path is illustrated below in Chart 1. This last point stands out. Despite an uneven recovery, growth in advanced economies is projected to eventually recover. Not so for emerging markets.

EMs chart 1

Chart 1

Continue reading

What’s Lurking in the Shadows of China’s Banks


By Steven Barnett and Shaun Roache

(Versions in 中文)

“Shadow” banking: a surprisingly colorful term for our staid economics profession. Intended or not, it conjures images of dark, sinister, and even shady transactions. With a name like “shadow banking” it must be bad. This is unfair. While the profession lacks a uniform definition, the idea is financial intermediation that takes place outside of banks—and this can be good, bad, or otherwise.

Our goal here is to shine a light on shadow banking in China. We at the IMF have used many terms. Last year, we had a descriptive one, albeit a mouthful—off-balance sheet and nonbank financial intermediation. The April 2014 Global Financial Sector Report (GFSR) called it nonbank intermediation. This year our China Article IV report used the term shadow banking.

Continue reading

Why Education Policies Matter for Equality


Era Dabla-NorrisBy 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.

Continue reading

Back-to-School Blogs


By iMFDirect

As you trudge back to the office or cubie with a little sand still crunching in your backpack, you know the holiday is over. To help you catch up, here are some blogs to re-read to get you back into the swing of things.

Remember Europe? I thought so. The European Central Bank is center stage this week as inflation in Europe has hit a trough, which reminded me of our blog about deflation back in March that rattled a few cages.

Which brings us to what will or won’t happen with global interest rates, and their impact on well, pretty much everyone. We’ve analyzed the tea leaves so you don’t have to.

Continue reading

Follow

Get every new post delivered to your Inbox.

Join 804 other followers

%d bloggers like this: