Posted on April 8, 2015 by iMFdirect
By Xavier Debrun
(Versions in عربي, 中文, Français, Русский, 日本語and Español)
Anyone can easily picture an economy where instability, stagnation and runaway government deficits converge into a perfect storm. Yet the simple mirror image of stability, growth, and balanced budgets currently seems odd to many. And with monetary policy looking breathless, some even wonder whether sacrificing fiscal sanity for short-term growth might not be worth a try.
In any economic debate, looking at the data is always a good starting point. And the latest issue of the Fiscal Monitor does exactly that. Our study looks at the experience with fiscal stabilization during the past three decades in a broad sample of 85 advanced, emerging market, and developing economies. The message is loud and clear: governments can use fiscal policy to smooth fluctuations in economic activity, and this can lead to higher medium-term growth. This essentially means governments need to save in good times so that they can use the budget to stabilize output in bad times. In advanced economies, making fiscal policies more stabilizing could cut output volatility by about 15 percent, with a growth dividend of about 0.3 percentage point annually.
Filed under: Annual Meetings, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Public debt, Reform | Tagged: debt, recession, fiscal policy, government deficits, emerging market, investment, Fiscal Monitor, fiscal stabilization | Leave a comment »
Posted on April 7, 2015 by iMFdirect
By Aqib Aslam, Daniel Leigh, and Seok Gil Park
(Versions in عربي, 中文, Français, 日本語, Русский, and Español)
The debate continues on why businesses aren’t investing more in machinery, equipment and plants. In advanced economies, business investment—the largest component of private investment—has contracted much more since the global financial crisis than after previous recession. And there are worrying signs that this has eroded long-term economic growth.
Getting the diagnosis right is critical for devising policies to encourage firms to invest more. If low investment is merely a symptom of a weak economic environment, with firms responding to weak sales, then calls for expanding overall economic activity could be justified. If, on the other hand, special impediments are mainly to blame, such as policy uncertainty or financial sector weaknesses, as some suggest, then these must be removed before investment can rise.
Filed under: Advanced Economies, Annual Meetings, Economic Crisis, Economic outlook, Economic research, Financial Crisis, Globalization, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: euro area, fiscal policy, infrastructure, infrastructure investment, investment, monetary policy, sovereign debt, WEO, World Economic Outlook | Leave a comment »
Posted on April 6, 2015 by iMFdirect
By Mohamed Norat, Marco Pinon and Zeine Zeidane
(Versions in عربي)
Since the global financial crisis, policymakers have sought to press the “reset” button to strengthen financial intermediation that is performed by conventional banks and non-bank financial institutions. The aim has been to address the fault lines that helped trigger one of the most devastating financial crises in a century, and to enable a more inclusive, stable financial system that promotes stability as well as economic development and growth.
Islamic finance offers several features that are consistent with these objectives. Islamic finance refers to financial services that conform with Islamic jurisprudence, or Shari’ah, which bans interest, speculation, gambling and short-sales; requires fair treatment; and institutes sanctity of contracts. And these principles hold the promise of supporting financial stability, since a key tenet of Islamic finance is that lenders should share in both the risks and rewards of the projects and loans they finance.
Filed under: Asia, Economic research, Emerging Markets, Financial regulation, Fiscal policy, Globalization, Government, growth, IMF, International Monetary Fund, Investment, Middle East | Tagged: Asia, financial crisis, Hong Kong, Islamic banking, islamic finance, Luxembourg, Middle East, real estate, senegal, Shariah, South Africa, sukuk, tax, United Kingdom | Leave a comment »
Posted on April 2, 2015 by iMFdirect
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.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, Globalization, growth, IMF, International Monetary Fund, Investment, Multilateral Cooperation | Tagged: capital inflows, central banks, exchange rate, financial system, fiscal policy, IMF Annual Research Conference, macroeconomic policy, macroprudential policy, monetary policy, Olivier Blanchard | 1 Comment »
Posted on April 1, 2015 by iMFdirect
By 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
Filed under: Advanced Economies, Asia, Economic research, Employment, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: Abenomics, Bank of Japan, deflation, deleveraging, inflation, investment, Japan, labor market, small and medium-sized enterprises, structural changes, structural reform, subsidiaries | Leave a comment »
Posted on March 31, 2015 by iMFdirect
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.
Filed under: Advanced Economies, Economic Crisis, Economic research, Europe, Financial Crisis, Fiscal policy, Government, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: Cyprus, euro zone, Europe, European Central Bank, Greece, Ireland, non-performing loans, nonperforming loans, small and medium-sized enterprises | Leave a comment »
Posted on March 30, 2015 by iMFdirect
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.
Filed under: Advanced Economies, Employment, Europe, Financial Crisis, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: advanced economies, balance sheets, France, infrastructure, Italy, Japan, jobs, labor force, monetary policy, Portugal, reforms, women | Leave a comment »