Growth: An Essential Part of a Cure for Unemployment


By Davide Furceri and Prakash Loungani

(version in EspañolFrançais中文Русский,  عربي,  日本語)

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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Building a Camaraderie of Central Bankers: How Monetary Policymakers in the Caucasus and Central Asia Can Learn From Each Other


Min ZhuBy Min Zhu

(Versions in 中文Русский)

The world’s central bankers are certainly in the news these days. Not a week goes by without the Fed, the European Central Bank or the Bank of Japan taking big and often unprecedented actions to fight deflation, preserve financial stability, or address mediocre growth. We tend to forget, however, that these are not the only central banks that are struggling to adapt their policies to changing circumstances in our connected world.

Take the Caucasus and Central Asia — Armenia, Azerbaijan, Georgia, Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan. Central banking in these former Soviet republics rarely makes international headlines. But figuring out how best to design and run monetary policy is no less a challenge than in the United States or the euro zone.

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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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A Downturn Without Layoffs? Reconciling Growth And Labor Markets In Latin America


Bertrand Gruss 2By Bertrand Gruss 

(version in Español and Português)

It looks as if labor markets in Latin America have not been following the economic news—literally! Economic activity has slowed markedly in the last three years, with some South American countries slipping into outright recession more recently. Yet, labor markets still appear remarkably strong, with unemployment rates, in particular, hovering at record-low levels in most countries (Figure 1). So, what is going on? Has the region discovered how to defy the law of gravity?

ENG.WHD REO Fall.Chart 1

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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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Does Raising the Minimum Wage Hurt Employment? Evidence from China


Prakash LounganiBy Prakash Loungani

(version in 中文)

Raising the minimum wage is a polarizing issue. One side worries that raising it will lower employment. The other side downplays the impact on employment and plays up the positive impact on the living standards of the poor. Both sides are able to cling to their beliefs as the evidence, much of which comes from high-income (“advanced”) economies, is mixed.

The majority of the global labor force, however, is in the emerging markets. Moreover, for a number of these countries, instituting a minimum wage or raising it is squarely on the policy agenda. But little is known about the impacts of minimum wages on employment and living standards in emerging markets.

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