Posted on November 9, 2015 by iMFdirect
by John Caparusso, Yingyuan Chen, Evan Papageorgiou and Shamir Tanna
(Versions in 中文, Português, Русский, and Español)
Emerging markets have had a great run. The fifteen largest emerging market economies grew by 48% from 2009 to 2014, a period when the Group of Twenty economies collectively expanded by 6%.
How did emerging markets sustain this growth? In part, they drew upon bank lending to drive corporate credit expansion, strong earnings, and low defaults. This credit boom, combined with falling commodity prices and foreign currency borrowing, now leaves emerging market firms vulnerable and financial sectors under stress, as we discuss in the latest Global Financial Stability Report.
Filed under: Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, IMF, International Monetary Fund, Reform | Tagged: Argentina, bank lending, Brazil, China, commodiity prices, credit boom, debt, emerging markets, G20, Global Financial Stability Report, India, Indonesia, macroprudential policies, Russia, Thailand, Turkey | Leave a comment »
Posted on September 24, 2015 by iMFdirect
By Shekhar Aiyar and Anna Ilyina
Problem loans are clogging the arteries of Europe’s banking system. The global financial crisis and subsequent recession have left businesses and households in many countries with debts that they cannot repay. Nonperforming loans as a share of total loans in the EU have more than doubled since 2009, reaching €1 trillion—over 9 percent of the region’s GDP—by end-2014. These loans are particularly high in the southern part of the euro area, as well as in several Eastern and Southeastern European countries. Only a handful of countries have managed to lower their nonperforming loan ratio to below its post-crisis peak.
Filed under: Advanced Economies, Economic Crisis, Economic research, Europe, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: debt, euro area, Europe, European Central Bank, non-performing loans, recession | Leave a comment »
Posted on July 9, 2015 by iMFdirect
By Olivier Blanchard
(Versions in Deutsch, Español, Français, Italiano, ελληνικά, Русский, 中文, 日本語, عربي, and Português)
All eyes are on Greece, as the parties involved continue to strive for a lasting deal, spurring vigorous debate and some sharp criticisms, including of the IMF.
In this context, I thought some reflections on the main critiques could help clarify some key points of contention as well as shine a light on a possible way forward.
The main critiques, as I see them, fall under the following four categories:
- The 2010 program only served to raise debt and demanded excessive fiscal adjustment.
- The financing to Greece was used to repay foreign banks.
- Growth-killing structural reforms, together with fiscal austerity, have led to an economic depression.
- Creditors have learned nothing and keep repeating the same mistakes.
Filed under: Advanced Economies, Debt Relief, Economic Crisis, Economic outlook, Employment, Europe, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Politics, Public debt | Tagged: austerity, debt, debt restructuring, debt sustainability, ECB, euro, euro area, fiscal adjustment, Greece, Olivier Blanchard, VAT | 8 Comments »
Posted on June 2, 2015 by iMFdirect
By Jonathan D. Ostry and Atish R. Ghosh
Financial bailouts, stimulus spending, and lower revenues during the Great Recession have resulted in some of the highest public debt ratios seen in advanced economies in the past forty years. Recent debates have centered on the pace at which to pay down this debt, with few questions being asked about whether the debt needs to be paid down in the first place.
A radical solution for high debt is to do nothing at all—just live with it. Indeed, from a welfare economics perspective—abstracting from real world problems such as rollover risk—this would be optimal. We explore this issue in our recent work. While there are some countries where clearly debt needs to be brought down, there are others that are in a more comfortable position to fund themselves at exceptionally low interest rates, and that could indeed simply live with their debt (allowing their debt ratio to decline through growth or windfall revenues).
Filed under: Advanced Economies, Debt Relief, Economic Crisis, Economic outlook, Economic research, Finance, Fiscal policy, IMF, International Monetary Fund, Public debt, recession | Tagged: bailout, budgets, debt, fiscal policies, Great Recession, interest rates | Leave a comment »
Posted on May 29, 2015 by iMFdirect
By Petya Koeva Brooks and Gerd Schwartz
The 2008 global financial crisis and its aftermath have tested the European Union’s (EU) fiscal governance framework—the rules, regulations, and procedures that influence how budgetary policy is planned, approved, carried out, and monitored. Given the distinctive nature of EU integration, the framework aims to discipline national fiscal policies to prevent adverse spillovers to other countries and distortions to the conduct of the euro area’s common monetary policy.
The build-up of fiscal imbalances, however, revealed gaps in the framework. Public debt in the European Union soared following the crisis in 2008 to an average of around 95 percent in 2014—almost 30 percentage points above its average pre-crisis level (Chart 1).
Filed under: Advanced Economies, Europe, Finance, Fiscal policy, Global Governance, IMF, International Monetary Fund | Tagged: crisis, debt, EU, euro area, Fiscal Compact, fiscal framework, fiscal policies, imbalances, public debt, Stability and Growth Pact | Leave a comment »
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, emerging market, Fiscal Monitor, fiscal policy, fiscal stabilization, government deficits, investment, recession | Leave a comment »
Posted on February 25, 2015 by iMFdirect
By Martine Guerguil
Does the European Union need closer fiscal integration, and in particular a stronger fiscal center, to become more resilient to economic shocks? A new IMF book, Designing a European Fiscal Union: Lessons from the Experience of Fiscal Federations, published by Routledge, examines the experience of 13 federal states to help inform the debate on this issue. It analyzes in detail their practices in devolving responsibilities from the subnational to the central level, compares them to those of the European Union, and draws lessons for a possible future fiscal union in Europe.
The book sets out to answer three sets of questions: (1) What is the role of centralized fiscal policies in federations, and hence the size, features, and functions of the central budget? (2) What institutional arrangements are used to coordinate fiscal policy between the federal and subnational levels? (3) What are the links between federal and subnational debt, and how have subnational financing crises been handled, when they occurred?
Filed under: Advanced Economies, Economic research, Europe, Financial Crisis, Fiscal, Fiscal policy, growth, IMF, International Monetary Fund, Politics, Public debt | Tagged: Austria, Belgium, book launch, Brazil, Canada, debt, euro area, Europe, European Union, fiscal federation, Germany, Mexico, Spain, Switzerland, United States | Leave a comment »