A Tale of Two Tellers


Jeff Hayden

by Jeff Hayden

My mother eases her car into the drive-through lane at our local bank, signs the back of her check, and places it in a metal canister. WHOOSH—the cylinder flies through a pneumatic tube to the teller inside the building.

In a few minutes, the teller squawks her thanks from the intercom speaker nearby. Another WHOOSH, and the canister returns. Inside we find a deposit receipt and a lollipop. Welcome to high-efficiency consumer banking, circa 1973.

Summer 2016. In our kitchen, I watch my oldest son rip open his paycheck and whip out his iPhone. TAP. SWIPE. CLICK. The deposit is made in an instant, thanks to an app that plugs him into an electronic banking network.

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An Argument for Paying Down Public Debt


By Vitor Gaspar and Julio Escolano

What should governments do about high public debt-to-GDP ratios?  This question is getting much-deserved attention. Let’s abstract from macroeconomic (business cycle) considerations and look at the issue purely from an optimal tax smoothing perspective—that is, weighing the cost and benefits of raising taxes to pay down debt. By doing so we decidedly do not engage in the current debate about the contribution that fiscal policy may make to demand management. Continue reading

Back to School Blogs


By iMFdirect

It’s been a busy summer, and you might not have had a chance to read everything as it came across your screen.  So as your holidays wind down and you head to work, the editors at iMFdirect have put together some key blogs on hot topics to help you get back up to speed by September.

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The Euro Area Workforce is Aging, Costing Growth


By Shekhar Aiyar, Christian Ebeke, and Xiaobo Shao

Versions in Français (French), and Español (Spanish)

In parallel to the aging of the general population, the workforce in the euro area is also growing older. This could cause productivity growth to decline in the years ahead, raising another policy challenge for governments already dealing with legacies from the crisis such as high unemployment and debt.  Continue reading

Currency & Power


by iMFdirect

We have a global economy, but we don’t have a global currency. Or do we?

In this podcast interview with Benjamin Cohen, professor of International Political Economy at the University of California, Cohen explains why currencies become internationalized, and examines the relationship between world currencies and State power.

Power is influence, and it is also the ability to do what you want without having to worry about what others want, according to Cohen.

The United States dollar has been a dominant currency because the U.S. economy has dominated since World War II. What makes the dollar attractive, according to Cohen, is the U.S. financial market. The dollar offers liquidity advantages that no other does.

Cohen describes what he calls a currency pyramid, which  includes the U.S. dollar at the very peak.  It has universal scope and domain. Potentially the renminbi, China’s currency (also known as the yuan), which is still just a minnow, according to Cohen, but it’s international use is growing quite rapidly. It reflects that China has achieved a degree of autonomy that’s almost unprecedented.

Some people would like one world currency, which would come with a great deal of power. Cohen does not believe a world currency is possible in today’s world.

The best we can hope for is for institutions like the IMF to help governments to manage their currencies more efficiently.

According to Cohen, as long as we have a political system that relies on state sovereignty, we’re going to live with an imperfect monetary system, and the best we can hope for is international institutions that can help smooth some of the rough edges.

To listen to the podcast, you can tune in here:

 

The ECB’s Negative Rate Policy Has Been Effective but Faces Limits


By Andy Jobst and Huidan Lin

Versions in Français (French), and Español (Spanish)

More than two years ago, seeking to revive a moribund economy, the European Central Bank (ECB) embarked on a new monetary policy measure: charging interest on excess liquidity that banks held at the central bank. The move complemented a series of other easing measures aimed at bringing inflation back to the ECB’s price stability objective of below, but close to, two percent over the medium term. Continue reading

Sluggish Business Investment in the Euro Area: The Roles of Small and Medium Enterprises and Debt


By John C. Bluedorn and Christian Ebeke

Small businesses could be the lifeblood of Europe’s economy, but their size and high debt are two of the factors holding back the investment recovery in the euro area. The solution partly lies in policies to help firms grow and reduce debt.

Our new study, part of the IMF’s annual economic health check of the euro area, takes a novel bottom-up look at the problem. We analyze the drivers of investment using a large dataset of over six million observations in eight euro area countries, from 2003 to 2013: Austria, Belgium, Germany, France, Finland, Italy, Portugal, and Spain. Continue reading

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