International Policy Coordination: The Loch Ness Monster


By Olivier Blanchard, Jonathan D. Ostry, and Atish R. Ghosh

International policy coordination is like the Loch Ness monster: much discussed but rarely seen. Going back over the decades, and even further in history to the period between the Great Wars, coordination efforts have been episodic.

Coordination seems to occur spontaneously in turbulent periods, when the world faces the prospect of some calamitous outcome and the key players are seeking to avoid cascading negative spillovers. In quieter times, coordination is rarer—though not unheard of; the Louvre and Plaza accords are examples.

Today, policy coordination has resurfaced as a hot topic: while the worst of the global financial crisis is behind us, no one would claim that a return to “Great Moderation” is in the cards, and policymakers around the globe appear worried about policy transmissions across many dimensions.

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


By José Viñals

(Versions in  عربي, 中文, EspañolFrançaisРусский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.

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More Diversity will Help the IMF at Work


By iMFdirect

Nemat Shafik, who took over as IMF Deputy Managing Director in April, says she has been surprised by the vigor of internal policy debate at the IMF. “From the outside looking in, you have the impression that the IMF is a monolith with a very single-minded view of the world. When you are inside the Fund, what is really striking is how active the internal debate is,” she says.

At a time when the global economy is being buffeted by continued uncertainty in Europe, uprisings in the Middle East, and signs of overheating in some emerging market economies, there’s a lot to discuss. And, in addition to global economic problems, the IMF’s work environment has come under increased scrutiny, in particular how women are treated and its professional code of conduct.

In an interview, Ms. Shafik discusses some of these issues Continue reading

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