How to Sustain Recent Financial Gains: Fix Old Risks and Meet New Challenges

Posted on April 17, 2013 by iMFdirect

GFSRBy José Viñals

(Versions in  عربي ,日本語, Español)

Policymakers’ decisive actions  since our last report in October have increased global financial stability by reducing acute risks.

  • In the euro area, policymakers averted a financial cliff.
  • In the United States, the worst fears of the fiscal cliff had been averted, while balance sheet repair and continued monetary easing have supported financial markets and the recovery.
  • In Japan, new policy initiatives have caught the imagination of global markets that Japan may finally leave its deflation valley.

But our latest Global Financial Stability Report concludes that improved financial markets and gains in financial stability will not be sustained—and new risks are likely to emerge—unless policymakers address key underlying vulnerabilities.

(more…)

Filed under: Economic Crisis, Europe, Finance, Financial Crisis, growth, International Monetary Fund | Tagged: , , , , , , , , , | Leave a Comment »

How To Make A Graceful Exit: The Potential Perils of Ending Extraordinary Central Bank Policies

Posted on April 11, 2013 by iMFdirect

Erik Oppers MCMBy Erik Oppers

This spring monetary policy is the talk of the town.  It is everywhere you look, it’s unique, and you’ve never seen anything quite like it before: short-term interest rates at zero for several years running, and central bank balance sheets swelling with government bonds and other assets in the euro area Japan, the United Kingdom, and the United States.

But the meteoric rise of this once dusty topic can’t last.  The end of these unconventional monetary policies will come and may pose threats to financial stability because of the length and breadth of their unprecedented reign.  Policymakers should be alert to the risks and take gradual and predictable measures to address them.

(more…)

Filed under: Advanced Economies, Economic outlook, Economic research, Fiscal policy, International Monetary Fund, Investment | Tagged: , , , , , , , , , , , , , , , | 1 Comment »

Time Not On Our Side: Tough Decisions Needed to Strengthen Financial Stability

Posted on October 10, 2012 by iMFdirect

By José Viñals

(Versions in  عربي, 中文, Español, Français, Русский, 日本語)

Recent policy actions in Europe, the United States, in emerging markets, and here in Japan, where I’m attending the IMF-World Bank annual meetings, have improved investor sentiment and helped markets rebound in recent months.

Yet our latest assessment is that confidence is still very fragile and risks have increased, when compared to the IMF’s last report in April. Policymakers need to do more to gain lasting stability.

The principal risk remains the euro area. The forces of financial and economic fragmentation have widened the divide between countries at the core and the “periphery” of the euro zone. Faltering confidence and policy uncertainty have led to a pullback of cross-border private capital flows from the periphery—quite an extraordinary phenomenon within a currency union.

This has driven up funding costs to governments and banks, as well as for companies and households, and, in turn, threatening a vicious downward economic spiral.

(more…)

Filed under: Advanced Economies, Annual Meetings, Asia, Economic Crisis, Economic research, Emerging Markets, Europe, Finance, Financial Crisis, Financial regulation, Globalization, IMF, International Monetary Fund, Politics, Public debt | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 3 Comments »

Tokyo links — IMF-World Bank Annual Meetings

Posted on October 7, 2012 by iMFdirect

The 2012 annual meetings of the IMF and the World Bank are being held this year in Tokyo at a crucial time for the world economy. Track everything through the live events schedule  (all Tokyo times).

Key reports out this week are

banner in Tokyo

Stay up-to-date through timely reports from IMF Survey online, through iMFdirect blog, World Bank Voices, and through regular video briefings and YouTube.  Also track news and commentary through Google +.

Extensive Japanese  (日本語) language content and updates are also available.

The Meetings bring together more than 10,000 central bankers, ministers of finance and development, private sector executives, academics, and journalists to discuss global economic issues and the interconnected world.

Filed under: Advanced Economies, Africa, Annual Meetings, Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Europe, Finance, Financial Crisis, Fiscal policy, G-20, Global Governance, Globalization, IMF, International Monetary Fund, Latin America, LICs, Low-income countries, Middle East, Multilateral Cooperation, Politics, Public debt | Tagged: , , , , , , , , , , , , , , , , , , , | 4 Comments »

Risks to Financial Stability Increase, Bold Action Needed

Posted on July 17, 2012 by iMFdirect

By José Viñals

(Versions in  عربي, 中文, Español, Français, Русский, 日本語)

Our latest update of the Global Financial Stability Report has three key messages.

First, financial stability risks have increased, because of escalating funding and market pressures and a weak growth outlook.

Second, the measures agreed at the recent European leaders’ summit provide significant steps to address the immediate crisis, but more is needed. Timely implementation and further progress on banking and fiscal unions must be a priority.

And third, time is running out. Now is the moment for strong political leadership, because tough decisions will need to be made to restore confidence and ensure lasting financial stability in both advanced and emerging economies. It is time for action.

Now, why have financial stability risks increased?

(more…)

Filed under: Advanced Economies, Europe, Financial Crisis, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , , , , , | 3 Comments »

Seven Billion Reasons to Worry: the Financial Impact of Living Longer

Posted on April 11, 2012 by iMFdirect

By S. Erik Oppers

Everyone wants at some point to stop working and enjoy retirement.  In these uncertain economic times, most people worry about their pension. Now take your worries and multiply those several billion times. This is the scale of the pension problem. And the problem is likely bigger still: although living longer, healthier lives is a good thing, how do you afford retirement if you will live even longer than previously thought?

This so-called longevity risk, as discussed in the IMF’s Global Financial Stability Report has serious implications for global financial and fiscal stability, and needs to be addressed now.

Here’s the issue: governments have done their analysis of aging largely based on best guesses of population developments. These developments include further drops in fertility and some further increase in longevity. The trouble is that in the past, longevity has been consistently and substantially underestimated. We all live much longer now than had been expected 30, 20, and even just 10 years ago. So there is a good chance people will live longer than we expect now. We call this longevity risk—the risk we all live longer than anticipated.

Risky business

Why is that a risk, you may ask. We all like to live longer, healthy lives. Sure, but let’s now return to those pension worries. If you retire at 65 and plan your retirement finances expecting to live another 20 years (assuming you have enough savings for at least that period), you would face a serious personal financial crisis if you actually live to 95, or— well in your 100s.

(more…)

Filed under: Advanced Economies, Economic Crisis, Employment, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , | 12 Comments »

How to Exit the Danger Zone: IMF Update on Global Financial Stability

Posted on January 24, 2012 by iMFdirect

By José Viñals

(Versions in  عربي, 中文, Español, Français, Русский, 日本語)

Since September of last year, risks to global financial stability have deepened, notably in the euro area.

However, over the past few weeks, markets have been encouraged by measures to provide liquidity to banks and sovereigns in the euro area. This recent improvement should not be taken for granted, as some sovereign debt markets remain under stress, and as bank funding markets are on life support from the European Central Bank (ECB).

Main sources of risk

Many of the root causes of the euro area crisis still need to be addressed before the system is stabilized and returns to health. Until this is done, global financial stability is likely to remain well within the “danger zone,” where a misstep or failure to address underlying tensions could precipitate a global crisis with grave economic and financial consequences.

Despite the recent improvements, sovereign financing stress has increased for many countries—with almost two-thirds of outstanding euro area bonds at spreads in excess of 150 basis points—and financing prospects are challenging. Markets remain very volatile and long-term foreign investors have sharply reduced their exposure to a number of euro area debt markets, including some in the core. Keeping these investors involved is essential to stabilizing markets.

(more…)

Filed under: Advanced Economies, Economic Crisis, Emerging Markets, Europe, Financial Crisis, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 2 Comments »

Strong Leadership, Collective Action Key to Economic Recovery

Posted on September 23, 2011 by iMFdirect

By iMFdirect

The 2011 IMF-World Bank Annual Meetings are taking place in Washington DC as the global economy enters a dangerous new phase — financial markets jitters and risks to the recovery are giving everyone plenty to talk about.  Here are our ‘must reads’ for the meetings. (more…)

Filed under: Annual Meetings, Economic outlook, IMF, International Monetary Fund | Tagged: , , , , , , , , , | 4 Comments »

The Danger Zone: Financial Stability Risks Soar

Posted on September 21, 2011 by iMFdirect

By José Viñals

(Versions in عربي, Français, 日本語, and Русский)

We are back in the danger zone. Since the IMF’s previous Global Financial Stability Report, financial stability risks have increased substantially—reversing some of the progress that had been made over the previous three years.

 Several shocks have recently buffeted the global financial system: unequivocal signs of a broader global economic slowdown; fresh market turbulence in the euro area; and the credit downgrade of the United States.

This has thrown us into a crisis of confidence driven by three main factors: weak growth, weak balance sheets, and weak politics. (more…)

Filed under: Economic research, Europe, Financial Crisis, Financial regulation, Financial sector supervision, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , | 9 Comments »

Interest Rates and Investor Decisions: The Long and Short of It

Posted on September 13, 2011 by iMFdirect

By Erik Oppers

What drives the investment decisions of investors with a longer time horizon? Our research found these investors generally do not look at differences in interest rates among countries when deciding where to invest.

It turns out the factors they do consider in making these decisions are good and stable growth prospects, low country risks—including political and economic stability—and a stable exchange rate. This all makes good sense for long-term investors such as pension funds and insurance companies.

So why all this talk about how low interest rates in advanced economies are “pushing” investment flows to emerging countries, where interest rates are generally higher—is this story wrong? (more…)

Filed under: Advanced Economies, Emerging Markets, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , | 2 Comments »

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