The Cat in the Tree and Further Observations: Rethinking Macroeconomic Policy

Posted on May 1, 2013 by iMFdirect

akerlofGuest post by George A. Akerlof
University of California, Berkeley
Senior Resident Scholar at the IMF, and co-host of the Conference on Rethinking Macro Policy II: First Steps and Early Lessons

(Versions in عربي, 中文, Français, 日本語, and Русский)

I learned a lot from the conference , and I’m very thankful to all the speakers.  Do I have an image of the whole thing?  I don’t know whether my image is going to help anybody at all, but my view is that it’s as if a cat has climbed a huge tree. It’s up there, and oh my God, we have this cat up there.  The cat, of course, is this huge crisis.

And everybody at the conference has been commenting about what we should do about this stupid cat and how do we get it down and what do we do.  What I find so wonderful about this conference is all the speakers have their own respective image of the cat, and nobody has the same opinion.  But then, occasionally, those opinions mesh.  That’s my image of what we have been accomplishing.

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Filed under: Advanced Economies, Economic Crisis, Economic research, Employment, Finance, Financial Crisis, G-20, IMF, International Monetary Fund, recession | Tagged: , , , , , , , , , , | 4 Comments »

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 »

Moving Beyond Crisis Management in the West Bank and Gaza

Posted on February 28, 2013 by iMFdirect

By Oussama Kanaan, Udo Kock, and Mariusz Sumlinski

(Versions in  عربي)

It was an early spring morning in East Jerusalem in 2011, and we were wrapping up our two-week mission with a presentation to donor representatives on the Palestinian economy’s health. Our audience appeared encouraged by our assessment of performance over the previous three years (2008–10): the economy had been recovering strongly, supported by generous aid and an easing of Israeli restrictions on movement and trade.

And the Palestinian Authority had made impressive progress in institution-building, which alongside prudent fiscal management, had enhanced public-sector efficiency, reduced wasteful expenditure, and enabled a reduction in its recurrent budget deficit from US$1.7 billion in 2008 to US$1.1 billion in 2010.

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Filed under: Debt Relief, Economic Crisis, Employment, Financial Crisis, Fiscal policy, growth, International Monetary Fund, Middle East, Politics, Public debt, عربي | 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 »

Latvia’s Economic Potential: Recovery and Reforms

Posted on January 28, 2013 by iMFdirect

david moore

by David Moore

Latvia’s economy has attracted international attention out of all proportion to its size. Many observers know that Latvia returned to strong economic growth after a severe downturn in 2008 and 2009 and a tough austerity program.  In late 2012, Latvia even repaid the IMF in full, several years early.

But the international consensus ends there. Critics of Latvia’s economic strategy point to continuing high rates of unemployment and poverty; advocates point to the benefits of frontloading spending cuts and tax increases to lay the foundations for recovery.

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Filed under: Economic Crisis, Employment, Europe, Fiscal policy, Fiscal Stimulus, growth, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , | 2 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 »

March of the Billionaires

Posted on December 1, 2012 by iMFdirect

CliftJBy Jeremy Clift

Whether combating malaria through the provision of mosquito nets or building schools and providing basic sanitation, philanthropy is helping transform the developing world. Rich donors are devoting fortunes—many of them earned through computer software, entertainment, and venture capitalism—to defeating poverty and improving lives, supplementing and in some cases surpassing official aid channels.

From billionaires Bill and Melinda Gates and Warren Buffett to Aliko Dangote and George Soros, the titans of capitalism are backing good causes with their cash. By financing new vaccines, championing maternal health, supporting learning, building libraries, or buying up Amazon rain forest to protect the environment, philanthropists are backing innovations and new approaches that are changing lives and building dreams.

The new issue of Finance & Development magazine looks at the world of targeted giving and social entrepreneurship.

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Filed under: Africa, Asia, Civil Society, Debt Relief, Emerging Markets, Employment, Finance, Global Governance, Globalization, growth, IMF, Inequality, Investment, LICs, Low-income countries, Multilateral Cooperation, Politics, Public debt | Tagged: , , , , , , , , , , , , , , , , , | 3 Comments »

Middle East and North Africa Face Historic Crossroads

Posted on November 27, 2012 by iMFdirect

By David Lipton

(Version in عربي)

Almost two years since the Arab Awakening started, the future of the Middle East and North Africa is in a flux, with fledgling democracies struggling to find their way and renewed outbreaks of violence adding to the challenges the region is facing. Some are starting to worry aloud that the revolutionary path may hit a dead end.

To me, a useful way to think about the present situation is that the region could end up taking any one of three alternative paths, as far as its economic future is concerned. We could witness either:

  • Economic deterioration, if squabbling over political power prevents stabilization, let alone reform;
  • Stabilization through a reassertion of vested business interests that would offer a respite from eroding economic conditions, but condemn the region to a return to economic stagnation or at best tepid growth;
  • Or we could see a new economy emerge, as newly elected governments gradually find a way to end economic disruptions and undertake reforms that open the way to greater economic opportunity for their people.

While the first two paths would be undesirable, they could come to pass. Needless to say, the third path of transformation would be best.

No doubt the Arab countries in transition will chart their own paths. But I strongly believe that the international community also has a role in helping them avoid the unfavorable outcomes. Let me share some thoughts on how we can provide support.

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Filed under: Africa, Economic Crisis, Economic research, Employment, Europe, Finance, Financial Crisis, Globalization, growth, IMF, Inequality, Investment, Middle East, Politics, Public debt, عربي | Tagged: , , , , , , , , , , , , , , , , , , , | 3 Comments »

Policy Interest Rates in Latin America: Moving to Neutral?

Posted on November 19, 2012 by iMFdirect

By Nicolas Magud and Evridiki Tsounta 

(Version in Español)

Many Latin American countries have strengthened their monetary policy frameworks in recent years to keep the rate of inflation in check. Some of them have adopted an inflation target and use the policy interest rate as the main tool to achieve that target.

But how do central bankers know whether monetary policy is expansionary or contractionary? Policymakers would need to know how the current policy rate compares to a benchmark or neutral rate.

The neutral interest rate is the real interest rate consistent with the economy operating at full employment and stable inflation. If the economy is operating above its potential capacity and inflation is rising, policymakers should increase the policy interest rate above the neutral level to cool down the economy. Conversely, if the economy is operating below its full employment level, interest rates may need to be lowered below the neutral level.

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Filed under: Economic research, Emerging Markets, Employment, Español, Finance, growth, Inequality, Latin America, Low-income countries, Politics, Public debt | Tagged: , , , , , , , , , , , , , , , , , | 3 Comments »

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