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

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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The Ties That Bond Us: What Demand For Government Debt Can Tell Us About the Risks Ahead

by Serkan Arslanalp and Takahiro Tsuda

It’s not news that emerging markets can be vulnerable to bouts of market volatility. Investors often pull sudden stops—they stop buying or start selling off their holdings of government bonds.

But what has become apparent in recent years is that advanced economy government bond markets can also experience investor outflows, and associated runs. At the same time, some traditional and new safe haven countries have seen their borrowing costs drop to historic lows as they experience rising inflows from foreign investors.

Our new research shows that advanced economies’ exposure to refinancing risk and changes in government borrowing costs depend mainly on who is holding the bonds— the demand side for government debt.

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Tokyo links — IMF-World Bank Annual Meetings

The 2012 annual meetings of the IMF and the World Bank are being held this year in Tokyo at a crucial time for the world economy. Track everything through the live events schedule  (all Tokyo times).

Key reports out this week are

banner in Tokyo

Stay up-to-date through timely reports from IMF Survey online, through iMFdirect blog, World Bank Voices, and through regular video briefings and YouTube.  Also track news and commentary through Google +.

Extensive Japanese  (日本語) language content and updates are also available.

The Meetings bring together more than 10,000 central bankers, ministers of finance and development, private sector executives, academics, and journalists to discuss global economic issues and the interconnected world.

Economics – New Links for Students from the IMF

The IMF’s well written Finance & Development magazine has recently published two helpful online compilations of articles that may be useful to students and those interested in economic issues.    They are rich collections of material that are totally free!!
1. Back to Basics — explaining some fundamental concepts in Economics and Finance
2. People in Economics — a collection of profiles of leading economists and policymakers, including 10 Nobel Prize winners.
In addition,
  • listen to regular audio podcasts with leading experts on development issues around the world–or download from iTunes.
  • and get free a neat new ipad app for IMF news and data–it lets you chart and view global economic indicators and forecasts

Jobs and Growth: Can’t Have One Without the Other?

By Min Zhu

(Version in Español, in عربي))

As Frank Sinatra crooned about love and marriage, so it seems about jobs and growth:

“This I tell ya, brother, you can’t have one without the other.”

The IMF’s latest World Economic Outlook projects global growth of 3 ½ percent this year. To the person on the street, what matters is how this growth translates into jobs and wages. The news on the jobs  front, unfortunately, remains grim.

Five years after the onset of the Great Recession, 16 million more people are likely to remain unemployed this year than in 2007. This estimate is for a set of countries for which the IMF forecasts unemployment rates; adding in some countries for which the International Labour Organization provides forecasts only boosts the number.

The bulk of this increase in unemployed people has been in the so-called advanced economies (the IMF’s term for countries with high per capita incomes), as shown in the chart below.

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Spring Is in the Air in Parts of Latin America

By Nicolás Eyzaguirre

(Version in Español)

Here in Washington D.C., Spring is showing its early signs, so we naturally feel a bit more upbeat. But spring comes in fits and starts—a day of sunshine, followed by cold rain, followed by sunshine again. So, we carry an umbrella on sunny days—but also have sunscreen ready.  It’s much the same for most of Latin America and the Caribbean, as we discuss in our Regional Economic Outlook for the Western Hemisphere. So, on a spring day, how do we see things?

Well, before explaining what I mean, let me start with a broad overview.

Most of Latin America stands out from much of the rest of the world—not for great economic performance, but for good performance in a subpar environment. Growth is generally solid, despite a slowdown late last year owing to policy tightening and global volatility. Under our baseline scenario, we expect regional growth to moderate to near 3¾ percent in 2012, down from 4½ percent last year (but modestly up from our January projections).

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Global Financial Stability: What’s Still To Be Done?

By José Viñals

(Versions in Español, عربي)

The quest for lasting financial stability is still fraught with risks. The latest Global Financial Stability Report has two key messages: policy actions have brought gains to global financial stability since our September report; but current policy efforts are not enough to achieve lasting stability, both in Europe and some other advanced economies, in particular the United States and Japan.

Much has been done

In recent months, important and unprecedented policy steps have been taken to quell the crisis in the euro area. At the national level, stronger policies are being put in place in Italy and Spain; a new agreement has been reached on Greece; and Ireland and Portugal are making good progress in implementing their respective programs. Importantly, the European Central Bank’s decisive actions have supported bank liquidity and eased funding strains, while banks are reinforcing their capital positions under the guidance of the European Banking Authority. Finally, steps have been taken to enhance economic governance, promote fiscal discipline, and buttress the “firewall” at the euro area level.

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