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

Posted on November 7, 2011 by iMFdirect

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. This topic goes to the core of central banks’ mandates, and their role in achieving macroeconomic and financial stability. While the financial crisis triggered a fundamental rethinking of these issues, much research—both conceptual and empirical—remains to be done.

I hope this year’s IMF Annual Research Conference will contribute to expanding the frontier of knowledge on this topic.

Filed under: Economic research, Financial regulation, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , , | 8 Comments »

Lurking in the Shadows—The Risks from Nonbank Intermediation in China

Posted on November 3, 2011 by iMFdirect

One of my all-time favorite movies is “The Third Man” starring Orson Welles and Joseph Cotten. Perhaps the most striking part of the movie is the shadowy cinematography, set in post-World War II Vienna. Strangely, it springs to mind lately when I have been thinking of China.

Many China-watchers looked on in 2009 as the government’s response to the global financial crisis unfolded, causing bank lending to expand by close to 20 percentage points in less than a year. At the same time, a less visible phenomenon was also getting underway. One that, like Orson Welles’ character in the movie, resided firmly in the shadows. Various types of nonbank financial intermediaries were gearing up to provide more credit.

Talking to people in China, and looking at what numbers are available, one cannot help but have an uneasy feeling that more credit is now finding its way into the economy outside of the banking system than is actually flowing through the banks. This worries me for four broad reasons.

Filed under: Asia, Financial regulation, Financial sector supervision, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , | 24 Comments »

Resolve and Determination—How We Get Out of This Together

Posted on September 27, 2011 by iMFdirect

Coming in to the 2011 Annual Meetings of the IMF and World Bank this past weekend, I had warned of the dangerous new phase for the global economy and had called for bold and collective action. Coming out of the Meetings, I feel strongly that the global community is beginning to respond.

Why? Three reasons: a shared sense of urgency, a shared diagnosis of the problems, and a shared sense that the steps needed in the period ahead are now coming into focus.

So, looking ahead, follow through—by all concerned—is now even more important. That means taking action not in the years ahead, but in the weeks ahead. And, in that, we are all in this together and we can only get out of it together.

Filed under: Advanced Economies, Annual Meetings, Economic outlook, Emerging Markets, growth, IMF, International Monetary Fund, Low-income countries, Multilateral Cooperation | Tagged: , , , , , , , , , , , , , , , , , , , , , , | 71 Comments »

Global Recovery Strengthens, Tensions Heighten

Posted on April 11, 2011 by iMFdirect

The world economic recovery is gaining strength, but it remains unbalanced. Earlier fears of a double dip recession—which we did not share—have not materialized. And, although rising commodity prices conjure the specter of 1970s-style stagflation, they appear unlikely to derail the recovery.

However, the unbalanced recovery confronts policy makers with difficult choices. In most advanced economies, output is still far below potential. Low growth implies that unemployment will remain high for many years to come. And the problems in Europe’s periphery are particularly acute. On the other end of the spectrum, emerging market countries must avoid overheating in the face of closing output gaps and higher capital flows.

The need for careful design of macroeconomic policies at the national level, and coordination at the global level, may be as important today as they were at the peak of the crisis two years ago.

Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, International Monetary Fund, Low-income countries | Tagged: , , , , , , , , , , , , , , , , , , , | 8 Comments »

Who’s Talking About the Future of Macroeconomic Policies

Posted on April 5, 2011 by iMFdirect

Last month’s conference at the IMF spurred plenty of discussion about the future of macroeconomic policies after the global financial crisis. Economic models, policy tools, and how they are applied need to catch up with changes in the global economic and financial system.

You’ve heard here about views from the conference, but there’s been plenty of discussion going on outside the IMF. Here’s a snapshot….

Filed under: Economic research, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , | 2 Comments »

Observations on the Evolution of Economic Policies

Posted on March 25, 2011 by iMFdirect

It was a privilege to participate in the IMF conference devoted to rethinking policy frameworks in the wake of the crisis. Highly encouraging was the openness of the discussion, the range of views, the willingness to question orthodoxy, and the posture of humility.

One gets the impression that the crisis triggered the response that it should. We have embarked on a path of rethinking conceptual frameworks and policy choices in a way that will contribute to the stability of the system. Returning to old patterns, while waiting for different or more complete models to be developed and tested, would be a risky mistake.

Here, I offer five thoughts stimulated by the spirit of the conference, as a contribution to the broader discussion that we all hope might stimulate further research and policy analysis. And, ultimately, progress.

Filed under: Economic Crisis, Economic research, International Monetary Fund | Tagged: , , , , , , , , , , , | 10 Comments »

The Future of Macroeconomic Policy: Nine Tentative Conclusions

Posted on March 13, 2011 by iMFdirect

The global economic crisis taught us to question our most cherished beliefs about the way we conduct macroeconomic policy. Earlier I had put forward some ideas to help guide conversations as we reexamine these beliefs. I was heartened by the wide online debate and the excellent discussions at a conference on post-crisis macroeconomic policy here in Washington last week. At the end of the conference, I organized my concluding thoughts around nine points. Let me go through them and see whether you agree or not.

Filed under: Economic Crisis, Economic research, Financial Crisis, Financial regulation, Financial sector supervision, Fiscal policy, growth, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , , , , | 22 Comments »

iMFdirect–Must Reads on Global Finance and Budgets

Posted on January 3, 2011 by iMFdirect

The iMF Direct Blog has picked our list of must read posts covering the highs and lows of global finance and government budgets and spending.

Filed under: Advanced Economies, Economic Crisis, Economic research, Emerging Markets, Employment, Europe, Financial Crisis, Financial regulation, Financial sector supervision, Fiscal policy, Fiscal Stimulus, G-20, Globalization, growth, International Monetary Fund, Public debt, recession | Tagged: , , , , , , , | 3 Comments »

Exploring Economic Policy Frontiers After the Crisis: 2010 IMF Research Conference

Posted on November 19, 2010 by iMFdirect

The crisis has forced economists and policy makers to go back to their drawing boards. Where did they go wrong, and what implications does the crisis have for both macroeconomic theory and macroeconomic policy making? This was the topic of this year’s IMF Jacques Polak Research Conference.

The twelve papers presented at the conference provided rich fodder for discussion. Here, Olivier Blanchard shares some flavor of the major themes, including: (i) the increased attention to fiscal policy; (ii) the scope for monetary policy to lessen the adverse ‘real economy’ effects of financial disruptions; (iii) the role of international capital flows in weakening financial stability; and (iv) the prominence of regulatory issues and the interplay with the real economy.

Filed under: Advanced Economies, Economic Crisis, Financial Crisis, Financial regulation, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , | 4 Comments »

Breaking the Buck—Reducing Systemic Risks Posed by Money Market Mutual Funds

Posted on November 10, 2010 by iMFdirect

The breakdown of the short-term funding markets was one of the most striking features of the global financial crisis. Equally astonishing, and unexpected, was the central role that U.S. money market mutual funds played in contributing to this wholesale shut-down.

For the October 2010 Global Financial Stability Report Jeanne Gobat and IMF colleagues examined the issue of systemic liquidity risk, including the role of money market mutual funds in the financial crisis and some concrete recommendations on how to fix it. Here, Jeanne reflects on their findings and shares some options for addressing industry risk.

Filed under: Advanced Economies, Economic Crisis, Financial Crisis, Financial regulation, Financial sector supervision, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , | 1 Comment »

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