A Balanced Debate About Reforming Macroeconomics


Guest post by Joseph E. Stiglitz, Columbia University, and
co-host of the Conference on Macro and Growth Policies in the Wake of the Crisis

The most remarkable aspect of the recent conference at the IMF was the broad consensus that the macroeconomic models that had been relied upon in the past and had informed major aspects of monetary and macro-policy had failed. They failed to predict the crisis; standard models even said bubbles couldn’t exist—markets were efficient. Even after the bubble broke, they said the effects would be contained. Even after it was clear that the effects were not “contained,” they provided limited guidance on how the economy should respond. Maintaining low and stable inflation did not ensure real economic stability. The crisis was “man-made.” While in standard models, shocks were exogenous, here, they were endogenous. Continue reading

All Eyes on Paris and the G-20


By iMFdirect

Certainly the world did not end in 2008 with the collapse of Lehman and the crisis that followed. But, it didn’t mostly—perhaps only—because extraordinary international policy cooperation helped avert a far worse outcome.
Dominique Strauss-Kahn

… the G-20 has now to adapt to a new economic environment. It must prove that it is able to coordinate the economic policies of major economies on an ongoing basis.
French G-20 Presidency

G-20 Finance Ministers and Central Bank Governors gather in Paris for their first ministerial level meeting of France’s G-20 presidency at a critical juncture Continue reading

Two-speed Global Recovery Continues


By Olivier Blanchard

(Version in Español | Français | Русский | عربي| 中文 | 日本語 )

The world economic recovery continues. But it remains a two-speed recovery: slow in advanced countries, and much faster in emerging and developing economies. As a result, tensions and risks are emerging, which require strong policy responses.

The outlook

For some time, global activity was led by fiscal stimulus and the restocking of inventories. This process is now essentially over, which means that global growth is set to slow over the coming year. Fortunately, underlying private demand is improving, so we expect the slowdown to be modest, with global growth remaining at 4.4 percent in 2011, down from 5 percent in 2010. Continue reading

How to Bake a (Cr)edible Medium-term Fiscal Pie


By Olivier Blanchard and Carlo Cottarelli

(Version in عربي | 中文 | Español | Français | Русский )

How can governments have their cake and eat it too? How can fiscal policy provide sufficient support to economic activity, and reassure markets that fiscal solvency is not at risk? The poor state of fiscal accounts of most advanced countries calls for austere fiscal policies, before the confidence crisis that is now hitting a few small advanced economies spreads to the larger ones. But not right now: a frontloaded adjustment—that is a tightening that is not gradual but falls disproportionately early in the adjustment phase—could destabilize the recovery.

But can countries limit frontloading and still achieve credibility? Yes, but baking the right fiscal pie is likely to require a number of ingredients. While the exact recipe depends on country circumstances, here are our suggested ingredients. Continue reading

Sustaining Asia’s Recovery


By Anoop Singh

I am in Asia this week to launch our October 2010 Regional Economic Outlook: Asia and Pacific (REO) in Jakarta and Singapore. As I have inevitably found during visits to Asia over so many years, the mood here is confident about future economic prospects. Yet it is also watchful for risks that may be lurking over the horizon. This mood matches closely the main messages of our current assessment of the outlook for the region. Continue reading

Financial System Fragilities – Achilles’ Heel of Economic Recovery


By José Viñals

It would be unfair for any assessment of global economic and financial stability not to acknowledge that tremendous progress has been made in repairing and strengthening the financial system since the onset of the global crisis.

Still, the key message from the IMF’s October 2010 Global Financial Stability Report (GFSR) is clear. Progress toward global financial stability has suffered a setback over the past six months—the financial system remains the Achilles’ heel of the economic recovery. Continue reading

Making up for Lost Time: Getting Back on Track to the Millennium Development Goals


By Hugh Bredenkamp and Catherine Pattillo

Many of the world’s macroeconomists—including here in the IMF—are currently busy reading the daily tea-leaves, attempting to divine whether the sputtering recovery in the advanced economies will hold, and gradually pick up steam, or fall back into the notorious “double dip.”

There is a huge amount at stake here, not only for the millions of unemployed in the developed world, but also for the many hundreds of millions of our fellow global citizens in developing countries who live in dire poverty, without access to proper health, education, or sanitation. The world’s economies are now closely interconnected, and the fate of those in poor countries is tied, increasingly, to that of the richest. Continue reading

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