Posted on May 12, 2011 by iMFdirect
By Antonio Borges
(Versions in Español, Français, Português, Русский)
Banks―and the loans they provided in the run-up to the crisis―are at the heart of Europe’s problems today.
Yet it would be wrong to conclude that the crisis was caused by too much financial integration. In fact, the real problem may have been that there was too little financial integration.
Policies to promote deeper integration of Europe’s banks―including through cross-border merger and acquisitions―should be part of the solution. Continue reading
Filed under: Economic outlook, Europe, IMF, International Monetary Fund | Tagged: banks, capital flows, cross-border mergers and acquisitions, current account deficits, European Union, external debt, financial integration, financial sector, fixed exchange rates, foreign exchange risk, interest rates, market failures, Regional Economic Outlook: Europe, regulatory and supervisory frameworks, sovereign debt, sustainable growth, the euro | 3 Comments »
Posted on April 21, 2011 by iMFdirect
By Leslie Lipschitz and Bas Bakker
For all the talk today about capital flows into emerging economies, the topic has actually been debated for many years within the IMF.
For a decade or more, we have grappled with the idea that very large capital flows into successful emerging market countries were almost inevitable and would prove extremely difficult to manage.
And now, with capital flows becoming larger and more volatile, old policy dilemmas are resurfacing with even greater force.
Filed under: Economic Crisis, Emerging Markets, Europe, Financial Crisis, International Monetary Fund | Tagged: asset price bubbles, capital flows, credit growth, current account deficits, exchange rate, exchange rate flexibility, exchange rate regimes, external vulnerability, fixed exchange rates, foreign currency exposure, foreign exchange risk, interest rates, investment, macroprudential policies, monetary policy, rates of return, risk premiums | 1 Comment »
Posted on October 20, 2010 by iMFdirect
By Ajai Chopra
Almost unnoticed, amid the difficulties in western Europe, the other half of the continent has begun to recover from the deepest slump in its post-transition period. The emerging economies in central and eastern Europe will grow by 3¾ percent this year and next—a relief after the 6 percent decline in 2009.
Why was the crisis so severe—and how do we avoid a repeat? We consider just that question in our fall 2010 Regional Economic Outlook: Europe. While the crisis was triggered by external shocks, it is clear that domestic imbalances and policies also played a key role. Continue reading
Filed under: Economic Crisis, Emerging Markets, Europe, Financial Crisis, International Monetary Fund | Tagged: asset price bubbles, balance sheets, bank credit, boom-bust cycle, capital inflows, cooperation, credit boom, economic imbalances, economic rebalancing, emerging Europe, fiscal policy, fixed exchange rates, prudential regulation, regional economic outlook, Regional Economic Outlook: Europe | 12 Comments »
Posted on April 19, 2010 by iMFdirect
By Reza Moghadam
How time flies: only a year ago, we were in the throes of the biggest global crisis since the Great Depression. As the extent of the damage to institutions in financial centers became evident—starkly highlighted by the Lehman bankruptcy—and the crisis started to affect emerging market economies (EMs), a timely and coordinated countercyclical response was launched.
This helped stave off the worst of the crisis. The IMF supported the global response by increasing its resources and overhauling its lending framework to help those facing financing pressures. A recovery is now taking hold in many parts of the world.
Six months ago, we took a preliminary look at the design and performance of IMF-supported programs in emerging markets. In a forthcoming paper, we are casting a wider net—examining factors that determined the extent to which a broader group of EMs were affected by the crisis, the policy measures they have taken, factors shaping the ongoing recovery, and sustainability considerations over the medium term.
Filed under: Economic Crisis, Economic research, Emerging Markets, Financial Crisis, Fiscal Stimulus | Tagged: asset price bubbles, capital flows, countercyclical policies, credit boom, credit bust, external debt, external vulnerability, Fiscal Stimulus, fixed exchange rates, international reserves, monetary stimulus | 1 Comment »
Posted on February 1, 2010 by iMFdirect
By Marek Belka
The conventional wisdom is that, when the seas get rough, it’s better to be in a big boat. But being in the European Monetary Union (EMU) hasn’t exactly been smooth sailing for all its members. On the contrary, as I argued in my blog posted January 21, the crisis has highlighted that sound policy frameworks are more important than ever.
Let’s look at this experience from the perspective of the European Union’s new member states in the East, who are still outside the EMU but are set to join sooner or later. Should they accelerate or delay their applications? And what are the conditions for success, once they have gained entry?
Fixers and floaters
The answer to the first question depends in large part on the currency regime. For small and very open countries with fixed exchange rates—the three Baltic republics and Bulgaria—there is really no alternative to seeking EMU membership as fast as possible. They have been particularly hard hit by the crisis, partly because of their currency regime; in fact, Latvia had to rely on massive external support to pull through the crisis. But they all have managed to hold on to their long-standing currency pegs against the euro. Once in EMU, their economic policy frameworks would remain virtually unchanged. At the same time, euro adoption would remove residual currency and liquidity risks, which during the recent crisis have driven up borrowing costs, dented investor and consumer confidence, and contributed to their sharp output contractions. So for the peggers, joining the club is all gain and no (additional) pain.
Filed under: Economic Crisis, Europe, Fiscal Stimulus | Tagged: currency pegs, currency regime, euro, European Monetary Union, fixed exchange rates, Flexible Credit Line, labor mobility | 3 Comments »
Posted on October 8, 2009 by iMFdirect
By Caroline Atkinson
The Program of Seminars takes place outside the formal framework of the Annual Meetings. But to many people, they were the main reason for making the trip to Istanbul.
The program’s October 4 offering included a first-hand perspective of how three emerging market countries—Turkey, Slovakia, and Ukraine—have weathered the crisis. We also got a glimpse of the methodology the IMF is using to become better at sounding the alarm if it sees new vulnerabilities building up in the world economy.
More Europe, not less
Ukraine was running a high fiscal deficit at the outset of the crisis, which made it vulnerable when the global economy came unstuck, Vice Prime Minister Hryhoriy Nemyria said. The lack of progress on structural reforms had reinforced the external shock, and had brought home just how dependent the country was on just one sector, steel, which accounts for 40 percent of all export earnings. Continue reading
Filed under: Annual Meetings, Economic Crisis, Emerging Markets | Tagged: asset price bubbles, capital ratios, early warning, fixed exchange rates, foreign currency exposure, Slovakia, Turkey, Ukraine | 1 Comment »