Posted on July 13, 2015 by iMFdirect
By Yingyuan Chen, David Jones and Sanjay Hazarika
(Versions in 中文 and deutsch)
Global financial markets traditionally take their cue from the United States. Unexpected Fed rate hikes have unsettled global markets in the past. The entire global financial system threw a tantrum when then Fed Chairman Ben Bernanke merely suggested in May 2013 that the end to bond-buying and other policies could soon begin. However for the past year, the gears of global markets seem to have been thrown into reverse — it is German government bonds, known as Bunds, rather than U.S. bonds, known as Treasuries, that appear to be driving prices in global bond markets. This role reversal could add a new layer of complexity to investor calculations as they prepare for the beginning of Fed interest rate hikes, which are expected later in 2015. Also, as developments in Greece lead to rises and falls in Bund and Treasury yields, this is a trend worth keeping an eye on.
Filed under: Advanced Economies, Asia, Economic outlook, Economic research, Emerging Markets, Europe, Finance, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Reform | Tagged: bund, emerging market, European Central Bank, Germany, GFSR, Global Financial Stability Report, interest rates, Japan, U.S. Treasury, United States, US Federal Reserve | Leave a comment »
Posted on July 9, 2015 by iMFdirect
By Olivier Blanchard
(Versions in Español and عربي)
Today we published the World Economic Outlook Update.
But first, let me talk about the elephant in the room, namely Greece.
The word elephant may not be right: As dramatic as the events in Greece are, Greece accounts for less than two percent of the Eurozone GDP, and less than one half of one percent of world GDP.
Filed under: Advanced Economies, Asia, Economic Crisis, Economic outlook, Emerging Markets, Europe, Financial Crisis, Globalization, growth, IMF, Inequality, International Monetary Fund, Latin America, Politics, Reform | Tagged: Brazil, economic forecasts, emerging economies, eurozone, Greece, IMF forecast, Japan, Olivier Blanchard, Russia, Spain, United States, WEO, World Economic Outlook | Leave a comment »
Posted on July 1, 2015 by iMFdirect
By Stefan Laseen, Andrea Pescatori, and Jarkko Turunen
Academics and policy-makers alike have long struggled with the question of whether to use monetary policy to dampen asset price booms – whether to “lean against the wind” or not. Can officials identify emerging asset price bubbles, what are the implications of bursting them, and is monetary policy the appropriate response to potential bubbles? These questions have become even more important to the policy debate in the wake of the global financial crisis, which was preceded by an unsustainable boom in sub-prime mortgage lending and housing prices.
Given over six years of near zero policy interest rates, should the U.S. Fed now use interest rates to lean against potential financial stability risks that may have built up?
Filed under: Advanced Economies, Economic outlook, Economic research, Employment, Finance, Financial Crisis, Fiscal policy, Government, growth, IMF, International Monetary Fund, Investment, Multilateral Cooperation, Politics | Tagged: Federal Reserve, financial risks, financial stability, inflation, interest rates, investment, macroprudential policy, U.S., U.S. Fed, United States | Leave a comment »
Posted on June 25, 2015 by iMFdirect
By Ali Alichi, Douglas Laxton, Jarkko Turunen, and Hou Wang
A few weeks ago, the Fund suggested that the Federal Reserve could defer its first increase in the policy rate until it sees greater signs of wage or price inflation, with a gradual increase in the federal funds rate thereafter. Such a monetary policy strategy could help avoid the “dark corners” in which, as Olivier Blanchard has argued, small shocks can have potentially large effects. In this blog and accompanying working paper, we expand upon this idea. We also outline the potential benefits of an expanded communications toolkit.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Employment, Financial Crisis, Fiscal policy, Government, growth, IMF, International Monetary Fund, Investment, Public debt | Tagged: Federal Reserve, global economic outlook, inflation, interest rates, jobs, U.S., U.S. Fed, U.S. interest rates, U.S. monetary policy, United States | 1 Comment »
Posted on June 10, 2015 by iMFdirect
By Eugenio Cerutti, Jihad Dagher, and Giovanni Dell’Ariccia
Housing finance—considered one of the villains of the recent global financial crisis—was seen, at least until recently, as a vehicle for economic growth and social stability. Broader access to housing finance promotes home ownership, especially for younger and poorer households; which in turn is often linked to social stability, and ultimately economic growth.
But real-estate boom episodes have often ended in busts with dire economic consequences, especially when the boom was financed through fast credit growth. Several countries have seen these boom-bust patterns over the last decade, particularly in some of the hardest hit countries during the global financial crises, such as Ireland, Spain, and the United States. Despite having different mortgage market structures, these three countries saw an astonishing increase in house prices and construction on the back of risky lending which was followed by a painful adjustment period—a mortgage credit boom gone bad.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Finance, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: house prices, household debt, housing market, Ireland, monetary policy, mortgages, real estate, Spain, United States | Leave a comment »
Posted on June 4, 2015 by iMFdirect
By Christine Lagarde
IMF staff have just concluded their annual health check of the U.S. economy, and released their concluding statement.
This year we have also undertaken a Financial Sector Assessment Program with the United States. We conduct these once every 5 years for systemically important countries and it is a comprehensive exercise looking at the whole U.S. financial system.
Given this important work, we have focused our review of the U.S. economy on financial stability risks and the appropriate policies to mitigate them, as well as looking at recent movements in the U.S. dollar and the timing, form, and impact of interest rate normalization by the Fed.
A more detailed report on the U.S. economy and on the financial sector will be available on July 8.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Employment, Finance, Financial Crisis, Fiscal policy, Government, growth, Inequality, Politics, Reform | Tagged: Christine Lagarde, financial stability, financial system, fiscal policies, inflation, monetary policy, U.S., United States | Leave a comment »
Posted on May 20, 2015 by iMFdirect
By José Viñals
Financial market liquidity can be fleeting. The ability to trade in assets of any size, at any time and to find a ready buyer is not a given. As discussed in some detail last fall in this blog, a number of factors, including the evolving structure of financial markets and some regulations appear to have pushed liquidity into a new realm: markets look susceptible to episodes of high price volatility where liquidity suddenly vanishes.
In our April 2015 Global Financial Stability Report we identify a new aspect to the problem: asset price correlations have risen sharply in the last five years across all major asset classes (see figure). Continue reading
Filed under: Advanced Economies, Emerging Markets, Europe, Finance, IMF, International Monetary Fund | Tagged: bond markets, central banks, euro area, exchange rate, Financial regulation, GFSR, Global Financial Stability Report, Japan, market liquidity, market volatility, monetary policy, oil prices, swap lines, Switzerland, U.S. Fed, United States | Leave a comment »