Contours of Macroeconomic Policy in the Future


By Olivier Blanchard

Seven years since the onset of the global financial crisis, we are still assessing how the crisis should change our views about macroeconomic policy.  To take stock, the IMF organized two conferences, the first in 2011, the second in 2013, and published the proceedings in two books, titled “In the Wake of the Crisis” and “What Have We Learned?“.

The time seems right for a third assessment. Research has continued, policies have been tried, and the debates have been intense.  But have we truly made much progress? Are we closer to a new framework?  To address these questions, Raghuram Rajan, Ken Rogoff, Larry Summers and I are organizing a third conference, “Rethinking Macro Policy III: Progress or Confusion?”  that will take place on April 15-16 at the IMF.

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Can Abenomics Succeed? Overcoming the Legacy of the Lost Decades


Changyong RheeBy Changyong Rhee

(Versions in 日本語)

Abenomics can succeed, despite recent setbacks to growth and inflation, in revitalizing Japan by making steadfast progress on all three of its arrows equally and simultaneously, as we show in our new book. This is also essential to avoid an undue weakening of the yen and ensure positive spillovers to Japan’s neighbors, its region, and the global economy.

The Legacy: Structural Changes During the Lost Decades

Most Japan followers will be familiar with the following striking statistic: in 2013, Japan’s level of nominal GDP was about 6 percent below its mid 1990s level. During this period, three important structural changes have been a brake on growth and efforts to get out of deflation: Continue reading

Making Small Beautiful Again: The Challenge of SME Problem Loans in Europe


By Yan Liu, Kenneth Kang, Dermot Monaghan, and Wolfgang Bergthaler

Six years after the global financial crisis, Europe continues to be weighed down by high levels of corporate debt and millions of nonperforming loans. Small and medium-sized enterprises (SMEs) bear a disproportionately heavy burden. Their nonperforming loan ratios are on average more than double those of their larger corporate cousins. This is worrisome. SMEs are the lifeblood of the European economy, comprising 99 percent of all businesses and employing nearly two of every three workers in Europe. Given the importance of smaller businesses to the economy, addressing their problem loans could lay the foundation for a more robust and sustainable economic recovery.

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What Advanced Economies Can Do to Rise Above the “New Mediocre”


By Era Dabla-Norris, Vikram Haksar, and Kalpana Kochhar

Global growth remains anemic more than five years after the global financial crisis. If nothing is done, the prospect of settling into a “new mediocre” will become reality, especially in advanced economies.

In many advanced economies, accommodative monetary policies, growth-friendly fiscal frameworks, and efforts to tackle private debt overhang and improve tax revenues and compliance are essential to lift economic growth in the short term.

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Fiscal Policy And Structural Reform


Vitor GasparBy Vitor Gaspar 

One of the big questions to emerge from the global financial crisis, especially in the euro area, is how to raise a country’s potential growth while restoring healthy public finances. For example, the euro area— despite some favorable news recently — faces marked-down growth prospects alongside high levels of public debt. The combination of high debt and tepid potential growth underscores the importance of improving prospects for sustained growth and safe and resilient public finances. A fundamental question then arises: what is the relation between fiscal consolidation and structural reform?

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Dams And Dikes For Public Finances


By Vitor Gaspar, Richard Hughes, and Laura Jaramillo

Fortune, wrote Machiavelli five hundred years ago in The Prince, is like a violent river. She “shows her power where virtue has not been put in order to resist her and therefore turns her impetus where she knows that dams and dikes have not been made to contain her.” Managing the ebb and flow of government’s fiscal fortunes poses similar challenges today. We need a risk-based approach to fiscal policymaking that applies a systematic analysis of potential sources of fiscal vulnerabilities. This method would help countries detect potential problems early, and would allow for institutional changes to build resilience.

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Resolving Residential Mortgage Distress: Time to Modify


By Jochen Andritzky

(Versions in Español)

In housing crises, high mortgage debt can feed a vicious circle of falling housing prices and economic slowdown. As a result, more households default on their mortgages and the crisis deepens.  A new IMF Working Paper studies the differences in the housing crises and policy responses in Iceland, Ireland, Spain, and the United States, and argues that crisis policies geared to provide temporary debt service relief for struggling households, followed by durable loan modifications, can help break this vicious circle.

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