Central Banks, Financial Regulators, and the Quest for Financial Stability: 2011 IMF Annual Research Conference


By Olivier Blanchard

The global financial crisis gave economists pause for thought about what should be the future of macroeconomic policy. We have devoted much of our thinking to this issue these past three years, including how the many policy instruments work together.

The interactions between monetary and macroprudential policies, in particular, remain hotly debated. And this year’s IMF Annual Research Conference is an important opportunity to take that debate another step forward.

Looking back, it is striking how many papers from last year’s conference—on post-crisis macroeconomic and financial policies—have been so immediately relevant to events on the ground. Just to give you an example: the paper on fiscal space is obviously front and center in the policy debate on the European sovereign crisis, the United States’ budget, and challenges faced by advanced country governments more generally.

This year’s topic—monetary and macroprudential policies—is equally relevant. It goes to the core of central banks’ mandates, and their role in achieving macroeconomic and financial stability. The financial crisis triggered a fundamental rethinking of these issues, but much research, both conceptual and empirical, remains to be done. The conference provides an excellent opportunity to engage with prominent academics, policymakers and private sector practitioners. I hope the conference will contribute to expanding the frontier of knowledge on this topic. Continue reading

A Spotlight on the IMF’s Technical Assistance


By Nemat Shafik

(Version in عربي)

Of the three main pillars of the IMF’s work, technical assistance has been a sort of middle child; it doesn’t get the attention of the oldest and youngest children, yet in many ways is the glue that holds the family together.

The other two pillars are well known: we lend money to countries in times of need and crisis, and conduct annual check-ups of their economies and financial systems, known as surveillance.

As countries around the world cope with the global economic crisis, the IMF’s technical assistance is a vital part of the work that we do to help countries prevent, prepare for and resolve crises.  Technical assistance also helps countries master the form and details to govern themselves in an effective and legitimate way. Continue reading

A Tale of Titans: The Too Important to Fail Conundrum


By Aditya Narain and İnci Ötker-Robe

Folklore is riddled with tales of a lone actor undoing a titan: David and Goliath; Heracles and Atlas; Jack and the Beanstalk, to name a few.

Financial institutions seen as too important to fail have become even larger and more complex since the global crisis. We need look no further than the example of investment bank Lehman Brothers to understand how one financial institution’s failure can threaten the global financial system and create devastating effects to economies around the world. Continue reading

Macroprudential Policy—Filling the Black Hole


By José Viñals

When the global financial system was thrown into crisis, many policymakers were shocked to discover a gaping hole in their policy toolkit.

They have since made significant progress in developing macroprudential policy measures aimed at containing system-wide risks in the financial sector. Yet progress has been uneven. Greater efforts are needed to transform this policy patchwork into an effective crisis-prevention toolkit. 

Given the enormous economic and human cost of the recent financial debacle, I strongly believe that we cannot afford to miss this opportunity for substantial reform. Continue reading

2010: The Year of IMF Reform


By James Boughton, IMF Historian

(Version in Español)

The year 2010 was—finally—the year of IMF reform. Dominique Strauss-Kahn, the IMF’s Managing Director, did not exaggerate when he asserted that the agreements of 2010 were “the most important reform in the governance of the institution since its creation.” What will happen now, and why is it so important?

Three major changes have been agreed to. Each one is a major reform and the culmination of years of work. Each one will be difficult to make effective. Each one should prove to be a blessing, but only if it is well implemented. Continue reading

Changing Times: Global Governance Reform and the IMF


By John Lipsky

The economic and financial crisis of the past two years has placed in high relief profound changes in global economic and financial realities. Most notably, the crisis has underscored the shift in relative economic weight in favor of dynamic emerging market economies. In response, the G-20— a grouping that includes both advanced and large emerging economies—has stepped forward as the premier political venue for addressing economic and financial policy challenges.

These changes are exerting significant influence on the evolution of global governance, and they directly involve the IMF in two concrete ways. First, new advances are taking place in multilateral economic policy cooperation, with Fund participation. Second, realignment of Fund governance has been put on a fast track, with delivery scheduled for January 2011.

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