A Problem Shared Is a Problem Halved: The G-20’s “Mutual Assessment Process”


By Olivier Blanchard 1

The Group of Twenty industrialized and emerging market economies (G-20) has broken new ground over the past year or two. It has embraced the type of collaborative approach to policy design and review that is well suited to today’s interdependent world, where policies in one country can often have far-reaching effects on others.

Collective action by the G-20 in response to the recent crisis was critical in avoiding a catastrophic financial meltdown and a potential second Great Depression. Exceptional policy responses around the globe—including macroeconomic stimulus and financial sector intervention—indeed helped avoid the worst. These actions were notable, both for their scale and force, but also for their consistency and coherence.

Keen to build on this success, G-20 Leaders pledged at their 2009 Pittsburgh Summit to adopt policies that would ensure a lasting recovery and a brighter economic future. To meet this goal, they launched the “Framework for Strong, Sustainable, and Balanced Growth.” The backbone of this framework is a multilateral process, where G-20 countries together set out objectives and the policies needed to get there. And, most importantly, they undertake a “mutual assessment” of their progress toward meeting those shared objectives. With this, the G-20 Mutual Assessment Process or the “MAP” was born.

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A Marriage Made in Heaven or Hell: Monetary and Financial Stability


By José Viñals

Monetary stability seems almost a given today, even taken for granted. It wasn’t always like that. Not so long ago, high and volatile inflation routinely raised its ugly head and threatened living standards. Some of us even remember those days! It wasn’t pleasant. But since then, an effective antidote has pretty much wiped out rampant price instability. Over the past three decades, better monetary frameworks have caused the level and volatility of inflation to fall sharply. These frameworks enshrined price stability as the main monetary policy objective, and provided independence and constrained discretion in the pursuit of this objective, often set out through formal inflation targets.

As I said, it worked out well. Or did it? In reality, there was a gaping hole in the system. While monetary policy frameworks fortified the castle against inflation at the front, they didn’t pay much attention to back door vulnerabilities. I’m talking about financial stability.

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