Does Raising the Minimum Wage Hurt Employment? Evidence from China


Prakash LounganiBy Prakash Loungani

(version in 中文)

Raising the minimum wage is a polarizing issue. One side worries that raising it will lower employment. The other side downplays the impact on employment and plays up the positive impact on the living standards of the poor. Both sides are able to cling to their beliefs as the evidence, much of which comes from high-income (“advanced”) economies, is mixed.

The majority of the global labor force, however, is in the emerging markets. Moreover, for a number of these countries, instituting a minimum wage or raising it is squarely on the policy agenda. But little is known about the impacts of minimum wages on employment and living standards in emerging markets.

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A Mirage, Not An Oasis: Easy Money and Financial Markets


By Fabio Cortes, David Jones and Evan Papageorgiou

Low interest rates and other central bank policies in the United States have sent investors looking for higher returns on their investments. Money is pouring into mutual funds and exchange-traded funds, which is fueling a mispricing of credit and a build-up of risks to liquidity in the markets—the ability to trade in assets of any size, at any time, and to find a ready buyer.

Mutual funds and exchange-trade funds are the largest owners of U.S. corporate and foreign bonds (Chart 1). This means they provide a lot of credit to grease the wheels of the financial system because they have taken investors’ money and lent it to corporates.

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Aristotle & the Archbishop of Canterbury: Overheard at the IMF’s Annual Meetings


By iMFdirect editors

What a week it’s been.  Practical and existential questions on how to do good and be good for the sake of the global economy and finance dominated the seminars at the IMF’s Annual Meetings in Washington.

Our editors fanned out to cover what the panelists, moderators, and audiences said in a variety of seminars, and two big themes caught our eye.

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Smart Fiscal Policy Will Help Jobs


Vitor Gasparby Vitor Gaspar 

(version in EspañolFrançais中文Русский, and 日本語)

Unemployment remains unacceptably high in many countries. It increased dramatically during the Great Recession. Global unemployment currently exceeds 200 million people. An additional 13 million people are expected to be unemployed by 2018.

The most worrisome is youth unemployment. There are examples of advanced economies in Europe where youth unemployment surged above 50 percent. In several developing economies, job creation does not absorb the large number of young workers entering the labor force every year.

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A Tale of Two States—Bringing Back U.S. Productivity Growth


By Roberto Cardarelli and Lusine Lusinyan 

(Versión en español)

Today’s Pop Quiz: What do Oregon and New Mexico have in common? What could possibly link the spectacular vistas of Crater Lake to the glistening White Sands?

Answer: One link is these two states have the highest share of computer and electronic production in the entire United States. Think Intel in the Silicon Forest or Los Alamos. They also rank similarly in information technology usage by their businesses.

For Crater Lake: (photo: Eye Ubiquitous/Newscom)    For White Sands: (photo: Eye Ubiquitous/Newscom)

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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.

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U.S. Monetary Policy: 3-2-1, Interest Rate Liftoff!


By Francesco Columba and Jarkko Turunen

(Versión en español)

photo: Patrick H. Corkery/DoD/Sipa USA/Newscom

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.

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