What Advanced Economies Can Do to Rise Above the “New Mediocre”


By Era Dabla-Norris, Vikram Haksar, and Kalpana Kochhar

Global growth remains anemic more than five years after the global financial crisis. If nothing is done, the prospect of settling into a “new mediocre” will become reality, especially in advanced economies.

In many advanced economies, accommodative monetary policies, growth-friendly fiscal frameworks, and efforts to tackle private debt overhang and improve tax revenues and compliance are essential to lift economic growth in the short term.

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Investment in the Euro Area: Why Has It Been So Weak?


By Bergljot Bjørnson BarkbuS. Pelin Berkmen, and Hanni Schölermann

Investment in the euro area, and particularly private investment, has not recovered since the onset of the global financial crisis.

In fact, the decline in investment has been much more drastic than in other financial crises; and is more in line with the most severe of these crises (see Chart 1). The October 2014 World Economic Outlook showed that many governments cut investment because their finances became strained during the crisis. In addition, housing investment collapsed in some countries, reflecting a natural scaling back after an unsustainable boom. But what is holding back private non-residential investment?

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Time to Act on the G-20 Agenda: The Global Economy Will Thank You


2014MDNEW_04By Christine Lagarde

(Versions in 中文, Français, 日本語Русский, Türk, and Español)

Implementation, investment, and inclusiveness: these three policy goals will dominate the G-20 agenda this year, including the first meeting of finance ministers and central bank governors in Istanbul next week. As Turkish Prime Minister Ahmet Davutoğlu recently put it: “Now is the time to act” – şimdi uygulama zamanı.

There is a lot at stake. Without action, we could see the global economic supertanker continuing to be stuck in the shallow waters of sub-par growth and meager job creation. This is why we need to focus on these three “I’s”:

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Battling Global Unemployment: Too Soon to Declare Victory


Prakash LounganiBy Prakash Loungani

(Version in Français and Español)

Seven years after the onset of the Great Recession, the global unemployment rate has returned to its pre-crisis level: the jobless rate fell to 5.6% in 2014; essentially the same as in 2007, the year before the recession (chart 1, left panel).

Global Unemployment 1

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Moving On Up: The Growth Story of Frontier Economies


Min ZhuBy Min Zhu

(version in Español)

The growth story for frontier economies isn’t the same as China’s in the last two decades, or the United States a hundred years ago.  These fast growing, low-income countries have their own story, and it’s not what you might think.

In May of this year, I wrote about who they are and how they are different, and now I want to go into a bit more detail about how their economies have been on the rise and how they have moved themselves to the frontier.

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Managing House Price Booms in Emerging Markets


Min ZhuBy Min Zhu

(Versions in 中文 and Español)

For the past decade, house prices have steadily increased in the vast majority of the 30 countries that make up the IMF’s House Price Index for Emerging Markets released today at a conference organized by the IMF and the Indian Institute of Management in Bangalore, India (Figure 1).

The index shows a lull in the aftermath of the global financial crisis, followed by an increase for nine consecutive quarters since 2012. This run-up—four times as fast as that in advanced economies—would be even more pronounced if the larger countries in the group such as China and India receive greater weight in the index.

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Emerging Markets & Volatility: Lessons from the Taper Tantrum


By Ratna Sahay and Preya Sharma

You may hear a sigh of relief from emerging market watchers as we approach the end of the year. Yet, against the backdrop of a prolonged period of low interest rates in advanced economies, huge capital flows, and a slowdown in emerging market growth, 2015 promises to keep us all on our toes.  Differences in the timing of exit from unconventional monetary policy in advanced economies will have a global impact. The IMF has been keeping a close eye on developments in emerging markets, providing analysis on issues such as how investors’ differentiate between emerging market countries, the impact of volatile markets, and the factors explaining the slowdown in growth.

In a recent paper, we take a look back at what happened before and during the tapering episode to draw out the key lessons for policymakers. Past experience is clear: decisions by major central banks can have sizable global spillovers. Announcements by the U.S. Federal Reserve, in particular, have been strongly correlated with asset price volatility and capital flows in emerging markets. With expectations of Fed tightening to begin in 2015, we think a better understanding of these events can better inform policymakers’ decisions.

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