Challenges Ahead: Managing Spillovers


By Olivier Blanchard, Luc Laeven, and Esteban Vesperoni

The last five years have been a reminder of the importance of interconnections and risks in the global economy. They have triggered intense discussions on the optimal way to combine fiscal, monetary, and financial policies to deal with spillovers, and on the need and the scope for coordination of such policies.

The IMF’s 15th Jacques Polak Annual Research Conference, which took place in Washington DC on November 13 and 14, 2014, focused on Cross-Border Spillovers, and took stock of what we know and do not know.  The summary below picks and chooses some papers, and does not do justice to the full set of papers presented and discussed at the conference.  They can all be downloaded, and videos of each session are available, at www.imf.org/external/np/res/seminars/2014/arc.

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Growth: An Essential Part of a Cure for Unemployment


By Davide Furceri and Prakash Loungani

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

Unemployment is a global problem. If the unemployed formed their own country, it would be the fifth largest in the world. Of the nearly 200 million people around the world looking for work, half are in emerging markets and about a quarter in advanced economies, reflecting the growing weight of emerging markets in the global labor force (Figure 1).

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Understanding Spillovers


By Olivier Blanchard, Luc Laeven and Esteban Vesperoni

The global crisis—which challenged paradigms about the functioning of financial markets and had significant consequences in other markets—and the sluggish recovery since 2009, are a reminder of the importance of understanding interconnections and risks in the global economy. The increasing trend in global trade, and even more significant, in cross-border financial activities, suggests that spillovers can take many different forms.

The understanding of transmission channels of spillovers has become essential, not only from an academic perspective, but also policymaking. The challenges faced by policy coordination after the initial response to the crisis in 2009—illustrated by the debate on the impact of unconventional monetary policy in emerging economies—raise wide ranging issues on fiscal, monetary, and financial policies.

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Mind the Dragon: Latin America’s Exposure to China


By Bertrand Gruss and Fabiano Rodrigues Bastos 

(version in Español and Português)

China is still a distant and exotic country in the mind of many people in Latin America. Yet, with the Asian giant rapidly expanding its ties with the region (the share of exports going to China is now ten times larger than in 2000), their economic fates seem to be increasingly connected. And in fact, a sharper slowdown in China now represents one of the key risks Latin Americans should be worried about—and prepare for. So, what is at stake? How much do shocks to China matter for economies in Latin America?

In an earlier study presented in our April 2014 Regional Economic Outlook, we analyzed growth spillovers in a large model of the global economy, focusing on the link through commodity prices. Here, we complement that analysis by using a simple yet novel approach that exploits the reaction of financial markets to the release of economic data. We find that growth surprises in China have a significant effect on market views about Latin American economies.

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25 Years of Transition


By iMFdirect

What a difference 25 years can make. The fall of the Berlin Wall on November 9, 1989 was  a day that changed world history and transformed Europe.

Central and Eastern Europe embarked on a historic transition from communism to capitalism and democracy. We thought this landmark anniversary was a good time to look back at the achievements and also forward to the future, as we do in a new IMF report on 25 Years of Transition. The IMF’s First Deputy Managing Director David Lipton also gave a recent speech in Warsaw, Poland on this important chapter in history.

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Infrastructure Investment: Part of Africa’s Solution


Antoinette SayehBy Antoinette M. Sayeh

Tremendous efforts are under way to upgrade sub-Saharan Africa’s infrastructure. But the needs on the ground are still immense as evidenced by the frequent electricity blackouts, poor roads, and insufficient access to clean water in many countries.

Infrastructure is one of the key challenges facing policymakers in the region—I experienced it first hand when I was finance minister of Liberia before coming to the IMF. The benefits are fairly clear: with improved infrastructure, new growth opportunities in the manufacturing and services sector can be generated, barriers to intraregional trade can be reduced, and economies will be better positioned to transition from low to higher productivity activities. Without improved infrastructure, I fear the increase in productivity and greater economic diversification necessary to sustain Africa’s current growth momentum will not materialize.

In this spirit, in the latest Regional Economic Outlook: Sub-Saharan Africa economists from the IMF’s African Department looked at progress so far in addressing the infrastructure deficit and discussed policies needed going forward.

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Natural Gas: The New Gold


Rabah ArezkiBy Rabah Arezki

(version in Español)

Natural gas is creating a new reality for economies around the world.  Three major developments of the past few years have thrust natural gas into the spotlight: the shale gas revolution in the United States, the reduction in nuclear power supply following the Fukushima disaster in Japan, and geopolitical tensions between Russia and Ukraine.

What’s cooking

Over the last decade, the discovery of massive quantities of unconventional gas resources around the world has transformed global energy markets, and reshaped the geography of global energy trade (see map). Consumption of natural gas now accounts for nearly 25 percent of global primary energy consumption. Meanwhile, the share of oil has declined from 50 percent in 1970 to about 30 percent today.

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