Posted on June 25, 2014 by iMFdirect
By Michael Keen
It’s hard to pick up a newspaper these days (or, more likely for readers of blogs, to skim one online) without finding another story about some multinational corporation managing, as if by magic, to pay little corporate tax. What lets them do this, of course, are the tax rules that countries themselves set. A new paper takes a closer look at this issue, which is at the heart of the IMF’s mandate: the way tax rules spill over national boundaries, and what this means for macroeconomic performance and economic development. These effects, the paper argues, are pretty powerful and need to be discussed on a global level.
Follow the money
Take, for instance, international capital movements. Though tax is not the only explanation, the foreign direct investment (FDI) positions shown in Table 1 are hard to understand without also knowing that tax arrangements in several of these countries make them attractive conduits through which to route investments. In its share of the world’s FDI, for example, the Netherlands leads the world; and tiny Mauritius is home to FDI 25 times the size of its economy.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Finance, Financial regulation, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: corporate income tax, Cyprus, foreign direct investment, Hong Kong SAR, Luxembourg, Mauritius, Netherlands, spillover, tax, Tax Treaties | Leave a comment »
Posted on June 9, 2014 by iMFdirect
By Sanjeev Gupta and Enrique Flores
(Versions in Español)
The Finance Minister answers her mobile. On the line is the Minister of Energy, who informs her that the country has struck oil and that he expects revenues from its sale to start flowing into the budget in the coming four years. While excited by the prospects of higher revenues—indeed the average resource-rich country gets more than 15 percent of GDP in resource revenues—she starts to ponder how to use these revenues for her country’s development. She is aware that only in rare cases have natural resources served as a catalyst for development; too often they have led to economic instability, corruption, and conflict or what has been termed as “the resource curse.”
Filed under: Economic research, Finance, Financial regulation, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: Alaska, budget, energy, income, income distribution, macroeconomics, natural resources, Nigeria, oil, resource wealth, subsidies, wealth | Leave a comment »
Posted on May 21, 2014 by iMFdirect
By Serkan Arslanalp and Yingyuan Chen
As the financial market turbulence of May 2013 demonstrated, the timing and management of the U.S. Fed exit from unconventional monetary policy is critical. Our analysis in the latest Global Financial Stability Report suggests that if the U.S. exit is bumpy (Figure 1), although this is a tail risk and not our prediction, the result could lead to a faster rise in U.S long-term Treasury rates that impacts other bond markets. This could have implications not only for emerging markets, as widely discussed, but, also for other advanced economies.
Indeed, historical episodes show that sharp rises in US treasury rates lead to increases in government bond yields across other major advanced economies.
Filed under: Advanced Economies, Finance, Financial regulation, growth, International Monetary Fund | Tagged: banks, IMF, interest rates, International Monetary Fund, U.S. Treasury, United States | 2 Comments »
Posted on May 14, 2014 by iMFdirect
By Luc Laeven, Lev Ratnovski, and Hui Tong
Large banks were at the center of the recent financial crisis. The public dismay at costly but necessary bailouts of “too-big-to-fail” banks has triggered an active debate on the optimal size and range of activities of banks.
But this debate remains inconclusive, in part because the economics of an “optimal” bank size is far from clear. Our recent study tries to fill this gap by summarizing what we know about large banks using data for a large cross-section of banking firms in 52 countries.
We find that while large banks are riskier, and create most of the systemic risk in the financial system, it is difficult to determine an “optimal” bank size. In this setting, we find that the best policy option may not be outright restrictions on bank size, but capital—requiring large banks to hold more capital—and better bank resolution and governance.
Filed under: Economic research, Finance, Financial Crisis, Financial regulation, Fiscal, Fiscal policy, Government, International Monetary Fund, Reform | Tagged: banking regulation, banks, big banks, financial markets, Financial regulation, financial stability, Global Financial Stability Report, IMF, iMFdirect, iMFdirect blog, International Monetary Fund, monetary policy | Leave a comment »
Posted on February 26, 2014 by iMFdirect
By Jonathan D. Ostry and Andrew Berg
(Version in Español, Français, Português, Русский, 中文)
Rising income inequality looms high on the global policy agenda, reflecting not only fears of its pernicious social and political effects, (including questions about the consistency of extreme inequality with democratic governance), but also the economic implications. While positive incentives are surely needed to reward work and innovation, excessive inequality is likely to undercut growth, for example by undermining access to health and education, causing investment-reducing political and economic instability, and thwarting the social consensus required to adjust in the face of major shocks.
Understandably, economists have been trying to understand better the links between rising inequality and the fragility of economic growth. Recent narratives include how inequality intensified the leverage and financial cycle, sowing the seeds of crisis; or how political-economy factors, especially the influence of the rich, allowed financial excess to balloon ahead of the crisis.
Filed under: Economic research, Employment, Financial Crisis, Financial regulation, Fiscal policy, growth, IMF, Inequality, International Monetary Fund | Tagged: education, income inequality, inequality, investment, research | 5 Comments »
Posted on December 18, 2013 by iMFdirect
By Era Dabla-Norris and Kalpana Kochar
(Version in Español)
The era of remarkable growth in many emerging market economies fueled by cheap money and high commodity prices may very well be coming to an end.
The slowdown reflects not just inadequate global demand, but also structural factors that are rendering previous growth engines less effective, and the fact that economic “good times” reduced the incentives to implement further reforms to enhance productivity. With the end of the period of favorable global financing and trade conditions, the time is nigh for governments to make strong efforts to increase productivity—the essential foundation of sustainable growth and rising living standards. Continue reading
Filed under: Asia, Economic research, Emerging Markets, Employment, Finance, Financial regulation, growth, IMF, International Monetary Fund, Latin America | Tagged: emerging markets, employment, financial markets, Financial regulation, financial supervision, growth, iMFdirect, infrastructure, International Monetary Fund, Labor, productivity | 1 Comment »