Saving Latin America’s Unprecedented Income Windfall

Posted on May 20, 2013 by iMFdirect

by Gustavo Adler and Nicolás Magud

(Versions in Español and Português)

Commodity exporting countries in Latin America have benefited strongly from the commodity price boom that began around 2002. And the accompanying improvements in public and external balance sheets have fed a sense that this time the macroeconomic response to the terms-of-trade boom has been different (and more prudent) than in past episodes. But, has it?

In our recent work, we analyze the history of Latin America’s terms-of-trade booms during 1970–2012 and quantify the associated income windfall (i.e., the extra income arising from improved terms-of-trade). We also document saving patterns during these episodes and assess the extent of the “effort” to save the income windfall.

Our findings suggest that, although the additional income shock associated to the recent terms-of-trade boom is unprecedented in magnitude, the effort to save it has been lower than in past episodes.

(more…)

Filed under: Economic Crisis, Emerging Markets, Fiscal policy, growth, IMF, International Monetary Fund, Latin America | Tagged: , , , , , , , , , , , , , | 1 Comment »

Preventing The Next Catastrophe: Where Do We Stand?

Posted on May 3, 2013 by iMFdirect

David RomerGuest post by David Romer
University of California, Berkeley, and co-host of Rethinking Macro II: First Steps and Early Lessons

(Versions in 中文, 日本語, and Русский)

As I listened to the presentations and discussions, I found myself thinking about the conference from two perspectives. One is intellectual: Are we asking provocative questions? Are interesting ideas being proposed? Are we talking about important issues? By that standard, the conference was very successful: the discussion was extremely stimulating, and I learned a great deal.

The second perspective is practical: Where do we stand in terms of averting another financial and macroeconomic disaster? By that standard, unfortunately, I fear we are not doing nearly as well. As I will describe, my reading of the evidence is that the events of the past few years are not an aberration, but just the most extreme manifestation of a broader pattern. And the relatively modest changes of the type discussed at the conference, and that in some cases policymakers are putting into place, are helpful but unlikely to be enough to prevent future financial shocks from inflicting large economic harms.

Thus, I believe we should be asking whether there are deeper reforms that might have a large effect on the size of the shocks emanating from the financial sector, or on the ability of the economy to withstand those shocks. But there has been relatively little serious consideration of ideas for such reforms, not just at this conference but in the broader academic and policy communities.

(more…)

Filed under: Advanced Economies, Economic Crisis, Economic research, Emerging Markets, Europe, Finance, Financial Crisis, Financial regulation, Fiscal policy, growth, IMF, International Monetary Fund, Latin America, Public debt | Tagged: , , , , , , , , , , , , , , , , , , , | 5 Comments »

Rethinking Macroeconomic Policy

Posted on April 29, 2013 by iMFdirect

blanchBy Olivier Blanchard

(Versions in عربي, 中文, Français, Русский, and Español)

The IMF has just hosted a second conference devoted to rethinking macroeconomic policy in the wake of the crisis. After two days of fascinating presentations and discussions, I am certain of one thing:  this is unlikely to be our last conference on the subject.

Rethinking and reforms are both taking place.  But we still do not know the final destination, be it for the redefinition of monetary policy, or the contours of financial regulation, or the role of macroprudential tools. We have a general sense of direction, but we are largely navigating by sight.

(more…)

Filed under: Advanced Economies, Asia, Debt Relief, Economic research, Europe, Finance, Financial Crisis, Financial regulation, Financial sector supervision, Fiscal policy, IMF, International Monetary Fund, Politics, Public debt | Tagged: , , , , , , , , , , , , , , | 7 Comments »

The World’s Three-Speed Economic Recovery

Posted on April 16, 2013 by iMFdirect

WEOBy Olivier Blanchard

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

The main theme of our latest outlook is one that you have now heard for a few days: we have moved from a two-speed recovery to a three-speed recovery.

Emerging market and developing economies are still going strong, but in advanced economies, there appears to be a growing bifurcation between the United States on the one hand, and the Euro area on the other.

This is reflected in our forecasts. Growth in emerging market and developing economies is forecast to reach 5.3% in 2013, and 5.7% in 2014. Growth in the United States is forecast to be 1.9% in 2013, and 3.0% in 2014. In contrast, growth in the Euro area is forecast to be -0.3% in 2013, and only 1.1% in 2014.

(more…)

Filed under: Advanced Economies, Asia, Debt Relief, Economic Crisis, Economic outlook, Emerging Markets, Europe, Fiscal policy, growth, Low-income countries | Tagged: , , , , , , , , , , , , , , , | 1 Comment »

The Fiscal Milestone: Achievements, Fatigue, and Prospects

Posted on April 16, 2013 by iMFdirect

Fiscal Monitor

By Carlo Cottarelli

(Versions in عربي , 中文, 日本語, and Español)

The 2008–09 global economic crisis pushed public debt ratios of advanced economies to levels never seen before during peacetime. These high debt levels expose countries to a loss of market confidence and, ultimately, damage long-term growth prospects.  Since 2010 advanced economies have been on a journey: the goal is to bring their public finances back to safer territory. They are in it for the long haul, not a sprint, and, as a redress of the large fiscal imbalances created by the crisis, without derailing the still fragile economic recovery, it requires a steady and gradual pace of adjustment—at least for countries not subject to market pressures.

This year we see the process of gradual fiscal adjustment reaching two symbolic milestones. First, the average deficit of advanced economies as a share of GDP will fall to half of its 2009 level at the peak of the crisis. Second, the average debt ratio will stop rising, after increasing steadily since 2007. Indeed, it will actually decline slightly.

(more…)

Filed under: Advanced Economies, Economic Crisis, Europe, Financial Crisis, Fiscal policy, International Monetary Fund | Tagged: , , , , , , , | Leave a Comment »

How To Make A Graceful Exit: The Potential Perils of Ending Extraordinary Central Bank Policies

Posted on April 11, 2013 by iMFdirect

Erik Oppers MCMBy Erik Oppers

This spring monetary policy is the talk of the town.  It is everywhere you look, it’s unique, and you’ve never seen anything quite like it before: short-term interest rates at zero for several years running, and central bank balance sheets swelling with government bonds and other assets in the euro area Japan, the United Kingdom, and the United States.

But the meteoric rise of this once dusty topic can’t last.  The end of these unconventional monetary policies will come and may pose threats to financial stability because of the length and breadth of their unprecedented reign.  Policymakers should be alert to the risks and take gradual and predictable measures to address them.

(more…)

Filed under: Advanced Economies, Economic outlook, Economic research, Fiscal policy, International Monetary Fund, Investment | Tagged: , , , , , , , , , , , , , , , | 1 Comment »

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.

(more…)

Filed under: Advanced Economies, Economic research, Employment, Europe, Finance, Fiscal policy, growth, International Monetary Fund | Tagged: , , , , , , , , , , , | 1 Comment »

Time for Change—Shifting Energy Spending in Africa

Posted on March 28, 2013 by iMFdirect

Antoinette SayehBy Antoinette M. Sayeh

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

For many years, countries in sub-Saharan Africa have spent large amounts on subsidizing fuel and electricity. For both sources of energy combined, this averages around 3-4 percent of GDP. That’s about the same magnitude as public spending on health in many countries. Now we need to ask some important questions. Is this a good use of scarce resources?  Where does this money go? Is it helping to support the livelihood of the poorest in African economies?  Is it helping to boost the country’s competitiveness? The answers are largely, no. I believe this money can and must be used better to invest in the critical physical and social infrastructure required to sustain growth in sub-Saharan Africa. A recent IMF paper backs this up.

(more…)

Filed under: Africa, Emerging Markets, Finance, Fiscal policy, Français, growth, International Monetary Fund, Low-income countries, Politics | 1 Comment »

Subsidizing Energy Consumption: Why it’s Wrong and What Can Be Done About it

Posted on March 27, 2013 by iMFdirect

Carlo CottarelliBy Carlo Cottarelli

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

Let’s face it. Everybody loves cheap energy. Almost all human activities require energy consumption and, if something is so basic, it seems pretty obvious that it should not be denied to anyone and government should make it as cheap as possible to both households and companies, including through subsidies. This can help households avoid paying exorbitant energy bills at the end of the month, something that the poor may not be able to afford even for basic needs like heating and cooking.

Companies may also need energy subsidies to help them stay competitive. Energy subsidies appear even more appropriate, and even the obvious thing to do, in countries that have a large supply of energy, like oil producers. After all, this natural wealth in the form of energy belongs to the people; why shouldn’t it be cheap?

(more…)

Filed under: Africa, Economic research, Español, Finance, Financial Crisis, Fiscal policy, Français, growth, Inequality, International Monetary Fund, Low-income countries, Middle East, Politics, عربي | Tagged: , , , , , , , | Leave a Comment »

Support the People, Not Energy in the Middle East and North Africa

Posted on March 27, 2013 by iMFdirect

Masood AhmedBy Masood Ahmed

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

Of all the regions in the world, the Middle East and North Africa region stands out as the one that relies the most on generalized energy subsidies. In energy-rich countries, governments provide subsidies to their populations as a way of sharing the natural resource wealth. In the region’s energy-importing countries, governments use subsidies to offer people some relief from high commodity prices, especially since social safety nets are often weak.

The question is: does this well-intended social protection policy represent the most efficient way to channel aid to the most vulnerable? The answer is no!

(more…)

Filed under: Emerging Markets, Finance, Fiscal policy, growth, IMF, Investment, Middle East, Politics, عربي | Tagged: , , , , , , , , | Leave a Comment »

Next Page »
Follow

Get every new post delivered to your Inbox.

Join 463 other followers

%d bloggers like this: