Posted on October 16, 2014 by iMFdirect
By Luis Brandão-Marques, Gaston Gelos, and Erik Oppers
The global financial crisis reminded us that banks often take risks that are excessive from society’s point of view and can damage the economy. In part, this is the result of the incentives embedded in compensation practices and of inadequate monitoring by stakeholders. Our analysis found the right policies could reduce banks risky behavior.
In our latest Global Financial Stability Report we take stock of recent developments in executive pay, corporate governance, and bank risk taking, and conduct a novel empirical analysis.
Filed under: Advanced Economies, Annual Meetings, Economic outlook, Economic research, Finance, Financial regulation, Fiscal policy, IMF, International Monetary Fund, Investment, Reform | Tagged: bank capital, banking sector, banks, financial system, Global Financial Stability Report, investment, policymakers, risk management, shareholders, United States | Leave a comment »
Posted on October 10, 2014 by iMFdirect
By Serkan Arslanalp, David Jones, and Sanjay Hazarika
Six years after the start of the global financial crisis, low interest rates and other central bank policies in the United States remain critical to encourage economic risk-taking—increased consumption by households, and greater willingness to invest and hire by businesses. However, this prolonged monetary ease also may have encouraged excessive financial risk-taking. Our analysis in the latest Global Financial Stability Report suggests that although economic benefits are becoming more evident, U.S. officials should remain alert to excessive financial risk-taking, particularly in lower-rated corporate debt markets.
Bullish financial risk-taking bears monitoring
Persistently low global interest rates have prompted investors to search for higher returns in a wide range of markets, such as stocks, and investment-grade and high-yield bonds. This has resulted in escalating asset prices, and enabled issuers to sell assets with a reduced degree of protection for investors (we give you an example below). The combined trends of more expensive assets and a weakening quality of issuance could pose risks to stability.
Filed under: Advanced Economies, Annual Meetings, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Finance, Financial Crisis, Fiscal policy, Globalization, IMF, International Monetary Fund, Investment | Tagged: banking system, corporate debt, emerging market, Global Financial Stability Report, interest rates, U.S. Fed, United States | Leave a comment »
Posted on October 8, 2014 by iMFdirect
by Vitor Gaspar
(version in Español, Français, 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.
Filed under: Advanced Economies, Asia, Debt Relief, Economic outlook, Economic research, Emerging Markets, Employment, Europe, Finance, Fiscal, growth, IMF, International Monetary Fund, Reform, unemployment | Tagged: bond markets, economic reform, Fiscal Monitor, fiscal policy, Great Recession, inflation, interest rates, labor market, public investment, structural policies, unemployment, youth unemployment | 2 Comments »
Posted on October 8, 2014 by iMFdirect
By José Viñals
(Versions in Español, 中文)
I have three key messages for you today:
1. Policymakers are facing a new global imbalance: not enough economic risk-taking in support of growth, but increasing excesses in financial risk-taking posing stability challenges.
2. Banks are safer but may not be strong enough to vigorously support the recovery. And risks are shifting to the shadow banking system in the form of rising market and liquidity risks. If left unaddressed, these risks could compromise global financial stability.
3. In order to address this new global imbalance, we must promote economic risk-taking by improving the transmission of monetary policy to the real economy. And we must address financial excesses through better micro- and macroprudential policies.
Filed under: Advanced Economies, Asia, Emerging Markets, Europe, Finance, Financial Crisis, IMF, International Monetary Fund, Investment, Politics, Reform | Tagged: bank credit, banking sector, economic recovery, Europe, GFSR, Global Financial Stability Report, Japan, José Viñals, liquidity, macroprudential policies, monetary policy, shadow banking, United States | Leave a comment »
Posted on October 3, 2014 by iMFdirect
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.
Filed under: Advanced Economies, Economic outlook, Economic research, Emerging Markets, Europe, Finance, Financial Crisis, Financial regulation, growth, International Monetary Fund, Investment, Politics | Tagged: banks, euro area, Financial Stability Board, GFSR, Global Financial Stability Report, interest rates, investment, shadow banking, United States | Leave a comment »
Posted on September 18, 2014 by iMFdirect
By 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.
Filed under: Advanced Economies, Asia, Economic research, Emerging Markets, Finance, Globalization, growth, IMF, International Monetary Fund, Latin America | Tagged: Brazil, Central America, China, commodiity prices, emerging market economies, global trade, Russia, spillover effects, spillover reports, structural reform, Venezuela | Leave a comment »
Posted on September 15, 2014 by iMFdirect
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.
Filed under: Asia, Economic research, Emerging Markets, Finance, Globalization, growth, IMF, International Monetary Fund | Tagged: bank credit, China, corporate bonds, emerging economies, Global Financial Stability Report, loans, shadow banking | Leave a comment »