Posted on July 1, 2015 by iMFdirect
By Stefan Laseen, Andrea Pescatori, and Jarkko Turunen
Academics and policy-makers alike have long struggled with the question of whether to use monetary policy to dampen asset price booms – whether to “lean against the wind” or not. Can officials identify emerging asset price bubbles, what are the implications of bursting them, and is monetary policy the appropriate response to potential bubbles? These questions have become even more important to the policy debate in the wake of the global financial crisis, which was preceded by an unsustainable boom in sub-prime mortgage lending and housing prices.
Given over six years of near zero policy interest rates, should the U.S. Fed now use interest rates to lean against potential financial stability risks that may have built up?
Filed under: Advanced Economies, Economic outlook, Economic research, Employment, Finance, Financial Crisis, Fiscal policy, Government, growth, IMF, International Monetary Fund, Investment, Multilateral Cooperation, Politics | Tagged: Federal Reserve, financial risks, financial stability, inflation, interest rates, investment, macroprudential policy, U.S., U.S. Fed, United States | Leave a comment »
Posted on June 25, 2015 by iMFdirect
By Ali Alichi, Douglas Laxton, Jarkko Turunen, and Hou Wang
A few weeks ago, the Fund suggested that the Federal Reserve could defer its first increase in the policy rate until it sees greater signs of wage or price inflation, with a gradual increase in the federal funds rate thereafter. Such a monetary policy strategy could help avoid the “dark corners” in which, as Olivier Blanchard has argued, small shocks can have potentially large effects. In this blog and accompanying working paper, we expand upon this idea. We also outline the potential benefits of an expanded communications toolkit.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Employment, Financial Crisis, Fiscal policy, Government, growth, IMF, International Monetary Fund, Investment, Public debt | Tagged: Federal Reserve, global economic outlook, inflation, interest rates, jobs, U.S., U.S. Fed, U.S. interest rates, U.S. monetary policy, United States | Leave a comment »
Posted on June 11, 2015 by iMFdirect
By Min Zhu and Sarwat Jahan
(Versions in Español, عربي)
Countries will start a new chapter in their development this year with the United Nation’s Sustainable Development Goals. Designed to replace the Millennium Development Goals, these new goals will broaden the vision of development to embrace economic, social, and environmental issues. To achieve these goals, two elements are critical: money and the right policies to use the money. The IMF, along with many others in the global community, will partner with countries to bring these two elements together.
Filed under: Africa, Asia, Civil Society, Economic outlook, Economic research, Emerging Markets, Finance, Fiscal policy, Global Governance, growth, IMF, International Monetary Fund, Investment, Latin America, LICs, Low-income countries, Politics | Tagged: carbon price, Cote d’Ivoire, developing countries, development financing, energy price reform, financing for development, frontier economies, Ghana, Kenya, low income countries, Millennium Development Goals, Min Zhu, Peru, senegal, sustainable development Goals, tax reform, trade, United Nations, Vietnam, Zambia | Leave a comment »
Posted on June 10, 2015 by iMFdirect
By Eugenio Cerutti, Jihad Dagher, and Giovanni Dell’Ariccia
Housing finance—considered one of the villains of the recent global financial crisis—was seen, at least until recently, as a vehicle for economic growth and social stability. Broader access to housing finance promotes home ownership, especially for younger and poorer households; which in turn is often linked to social stability, and ultimately economic growth.
But real-estate boom episodes have often ended in busts with dire economic consequences, especially when the boom was financed through fast credit growth. Several countries have seen these boom-bust patterns over the last decade, particularly in some of the hardest hit countries during the global financial crises, such as Ireland, Spain, and the United States. Despite having different mortgage market structures, these three countries saw an astonishing increase in house prices and construction on the back of risky lending which was followed by a painful adjustment period—a mortgage credit boom gone bad.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Finance, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: house prices, household debt, housing market, Ireland, monetary policy, mortgages, real estate, Spain, United States | Leave a comment »
Posted on May 12, 2015 by iMFdirect
By Nicolás Magud
(Versions in Español and Português)
Private investment has been decelerating throughout emerging markets since mid-2011, and Latin America has been no exception (see Chart 1). This trend has raised concerns not only because weaker investment has played an important role in the broader regional slowdown, but also because Latin America’s investment rates were lower than in most other regions even before the slowdown began.
This blog looks at the drivers of corporate investment and highlights the extent to which falling commodity export prices have contributed to lower capital spending. Given the poor outlook for commodity prices and what our analysis suggests, this does not bode well for countries in the region going forward unless they can tackle some of the long-standing obstacles to increase investment.
Filed under: Economic outlook, Emerging Markets, Español, IMF, International Monetary Fund, Investment | Tagged: capital inflows, Caribbean, commodities, commodity exports, domestic saving, emerging market, Latin America, private investment, regional economic outlook | Leave a comment »
Posted on May 7, 2015 by iMFdirect
By Shekhar Aiyar, Bergljot Barkbu, and Andreas (Andy) Jobst
If financing is the lifeblood of European small businesses, then the effect of the financial crisis was similar to a cardiac arrest. The flow of affordable credit from banks was choked off and small and medium-sized enterprises (SMEs) were hit hardest. Today, with bank lending still recovering from that shock, smart policy actions could open up securitization as a source of financing to help small businesses start up, flourish and grow.
SMEs are vital to the European economy. They account for 99 out of every 100 businesses, two in every three employees, and 58 cents of each euro of value added of the business sector in Europe. Improving access to finance would therefore not only revive small businesses, but also support a strong and lasting recovery for Europe as a whole.
Filed under: Advanced Economies, Economic Crisis, Economic research, Europe, Finance, Globalization, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: bank lending, bond markets, capital markets, credit, EU, Europe, France, Germany, infrastructure, Italy, private investment, Securitization, small and medium-sized enterprises, Spain | Leave a comment »
Posted on April 30, 2015 by iMFdirect
By Will Kerry and Jean Portier
A year ago our research showed Europe had an €800 billion stock of bad loans. In our latest Global Financial Stability Report we show that the problem has now grown to more than €900 billion. This stock of nonperforming loans is concentrated in the hardest hit economies, with two-thirds located in just six euro area economies. The European Central Bank’s Asset Quality Review confirmed this picture, which revealed that the majority of banks in many of these economies had high levels of nonperforming assets (see chart 1).
Filed under: Advanced Economies, Economic outlook, Economic research, Europe, Financial Crisis, growth, IMF, International Monetary Fund, Investment | Tagged: bank lending, debt overhang, euro area, European Central Bank, GFSR, Global Financial Stability Report, inflation, interest rates, liquidity, nonperforming loans | Leave a comment »