Rethinking Policy at the IMF


By iMFdirect

The global financial crisis led to a broad rethink of macroeconomic and financial policies in the global academic and policy community. Eight months into the job as IMF Chief Economist, Maury Obstfeld reflects on the IMF’s role in this rethinking and in furthering economic and financial stability.

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Monetary Policy and Financial Stability: Canada’s House-Price Dilemma


By Cheng Hoon Lim

(Version in Français)

Canada’s housing market is sizzling hot and the Bank of Canada has a monetary policy dilemma: increase interest rates to cool the housing market would hurt borrowers and the economy; keep interest rates low adds fuel to the borrowing that led to the rise in housing prices and in household debt. What to do?

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A New Look at the Benefits and Costs of Bank Capital


By Jihad Dagher, Giovanni Dell’Ariccia, Luc Laeven, Lev Ratnovski, and Hui Tong

The appropriate level of bank capital and, more generally, a bank’s capacity to absorb losses, has been a contentious subject of discussion since the financial crisis. Larger buffers give bankers “skin in the game” helping to prevent excessive risk taking and absorb losses during crises. But, some argue, they might increase the cost of financial intermediation and slow economic growth.

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Fiscal Costs of Hidden Deficits: Beware—When It Rains, It Pours


By Elva Bova, Marta Ruiz-Arranz, Frederik Toscani, and Elif Ture

(Version in Español)

Budgets can be full of surprises. And not always good ones. Often times, debt increases significantly because an unforeseen obligation materializes. These contingent liabilities, as they are known in the economist’s jargon, can have significant economic and fiscal costs. In fact, on many occasions, large and unexpected increases in debt across the world were due to the materialization of contingent liabilities. That is why they are often called hidden deficits.

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China’s Housing Market: Defying the Odds?


by iMFdirect

Housing is on everyone’s mind. The collapse of housing bubbles can be very costly.

  • In Japan, house prices rose by about 40 percent during the mid-1980s; the collapse was followed by a ‘lost decade’ in which incomes did not grow and house prices fell by over 40 percent.
  • In the United States, house prices increased by about 30 percent between 2001 and 2006; their collapse was followed by the global financial crisis.

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Virtual Currencies: The Public Impact of Private Money


By iMFdirect

(Version in عربي中文, and Español)

Technology and finance have always gone together. So what’s new this time around? Virtual currencies are part of a broader tech revolution that is driving fundamental change in the global economy.

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The Effects of Wage Moderation: Can Internal Devaluations Work?


By Jorg Decressin and Prakash Loungani

Devaluation is often part of the remedy for a country in financial trouble. Devaluation boosts the competitiveness of a country’s exports and curtails imports by making them more costly. Together, the higher exports and the reduced imports generate some of the financial resources needed to help the country get out of trouble.

For countries that belong to—and want to stay in—a currency union, however, devaluation is not an option. This was the situation facing several euro area economies at the onset of the global financial crisis: capital had been flowing into these countries before the crisis but much of it fled when the crisis hit.

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