Preventing The Next Catastrophe: Where Do We Stand?


David RomerGuest post by David Romer
University of California, Berkeley, and co-host of Rethinking Macro II: First Steps and Early Lessons

(Versions in 中文, 日本語, and Русский)

As I listened to the presentations and discussions, I found myself thinking about the conference from two perspectives. One is intellectual: Are we asking provocative questions? Are interesting ideas being proposed? Are we talking about important issues? By that standard, the conference was very successful: the discussion was extremely stimulating, and I learned a great deal.

The second perspective is practical: Where do we stand in terms of averting another financial and macroeconomic disaster? By that standard, unfortunately, I fear we are not doing nearly as well. As I will describe, my reading of the evidence is that the events of the past few years are not an aberration, but just the most extreme manifestation of a broader pattern. And the relatively modest changes of the type discussed at the conference, and that in some cases policymakers are putting into place, are helpful but unlikely to be enough to prevent future financial shocks from inflicting large economic harms.

Thus, I believe we should be asking whether there are deeper reforms that might have a large effect on the size of the shocks emanating from the financial sector, or on the ability of the economy to withstand those shocks. But there has been relatively little serious consideration of ideas for such reforms, not just at this conference but in the broader academic and policy communities.

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The Cat in the Tree and Further Observations: Rethinking Macroeconomic Policy


akerlofGuest post by George A. Akerlof
University of California, Berkeley
Senior Resident Scholar at the IMF, and co-host of the Conference on Rethinking Macro Policy II: First Steps and Early Lessons

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

I learned a lot from the conference , and I’m very thankful to all the speakers.  Do I have an image of the whole thing?  I don’t know whether my image is going to help anybody at all, but my view is that it’s as if a cat has climbed a huge tree. It’s up there, and oh my God, we have this cat up there.  The cat, of course, is this huge crisis.

And everybody at the conference has been commenting about what we should do about this stupid cat and how do we get it down and what do we do.  What I find so wonderful about this conference is all the speakers have their own respective image of the cat, and nobody has the same opinion.  But then, occasionally, those opinions mesh.  That’s my image of what we have been accomplishing.

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Emerging Asia: At Risk of the “Middle-Income Trap”?


ASinghBy Anoop Singh

(Versions in 中文 and 日本語)

Emerging economies in Asia have weathered the global financial crisis relatively unscathed and appear to be on track for continued strong growth this year and the next. Perhaps because the region has been doing rather well, policymakers’ concerns have increasingly shifted towards medium-term risks: could growth and fast convergence to living standards in advanced economies—come to an end?

In fact, while the economic performance of emerging economies in Asia remains undoubtedly strong in international comparison, it has already shown signs of gradual weakening.

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


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.

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The World’s Three-Speed Economic Recovery


WEOBy Olivier Blanchard

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

The main theme of our latest outlook is one that you have now heard for a few days: we have moved from a two-speed recovery to a three-speed recovery.

Emerging market and developing economies are still going strong, but in advanced economies, there appears to be a growing bifurcation between the United States on the one hand, and the Euro area on the other.

This is reflected in our forecasts. Growth in emerging market and developing economies is forecast to reach 5.3% in 2013, and 5.7% in 2014. Growth in the United States is forecast to be 1.9% in 2013, and 3.0% in 2014. In contrast, growth in the Euro area is forecast to be -0.3% in 2013, and only 1.1% in 2014.

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


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.

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Scenes From A Central Bank: A Turkish Tale in Two Acts


By Robert Tchaidze and Heiko Hesse 

In mid 2010 the Turkish central bank decided to introduce a policy that increased uncertainty in interest rates hoping that would stop foreign investors who were pouring money into the country in search of a quick buck. That’s right. ‘Keep calm and carry on’ was replaced by ‘Keep them guessing.’

The Turkish economy was overheating.  Money poured into the country from foreign investors attracted by a strong economy and high yields. A lending boom resulted in excessive growth along with an appreciating exchange rate and widening current account deficit. While evidence of success, these kinds of capital inflows are a headache policymakers would rather avoid, as they expose a country to risks that affect the economy and financial system as a whole, while undermining the objective of controlling inflation.

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An Open and Diverse Economy To Benefit All Algerians


Christine LagardeBy Christine Lagarde

(Version in عربي)

I was in Algiers last week, my first time as the Managing Director of the IMF. It was a good visit: we reaffirmed the special partnership between Algeria and the IMF, and I was able to gain a deeper insight into Algeria’s aspirations—and also its challenges in reaching a hopeful future.

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What We Can Do To Improve Women’s Economic Opportunities


Christine LagardeBy Christine Lagarde

Versions in  عربي中文Français, 日本語Русский, and Español

Today, I invite all of you to celebrate International Women’s Day. Let’s celebrate the incredible progress women have made over the past decades in different parts of society, playing a key role in economic life that our grandmothers worked for and dreamed about. Today, although men still dominate the executive suites in most professions, women all over the world hold high positions in the private sector and in public office. Women are no longer the Second Sex Simone de Beauvoir wrote about.

But far too many women face the most fundamental challenges: the right to safety and to choose the life they want.

Across the globe, fewer women than men are in paid employment, with only about 50 percent of working-age women participating in the labor force. In many countries, laws, regulations and social norms still constrain women’s possibilities to seek paid employment. And all over the world women conduct most of the work that remains unseen and unpaid, in the fields and in households.

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A Missing Piece In Europe’s Growth Puzzle


moghadamsmallBy Reza Moghadam

Even before the latest euro area GDP numbers and Italian elections cast a shadow over the continent, economists were struggling to reconcile the steady improvement in market sentiment with the more downbeat data on the economy, production, orders, and jobs.

This video looks at this puzzle from a somewhat different perspective than the usual—and still correct—narrative of weak banks and over-indebted public sectors caught in a vicious cycle. More specifically, we examine the role of household and corporate balance sheets in the countries under financial market stress and the implications for policy priorities.

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