The Change in Demand for Debt: The New Landscape in Low-income Countries


By Andrea F. Presbitero and Min Zhu

(Versions in 中文 (Chinese), Français, and Português)

Many low-income developing countries have joined the group of Eurobond issuers across the globe— in sub-Saharan Africa (for example, Senegal, Zambia, and Ghana), Asia (for example, Mongolia) and elsewhere, raising over US$21 billion cumulatively over the past decade. Tapping these markets provides a new source of funds, but also exposes borrowers to shifts in investor sentiment and rising global interest rates.

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What Future for Unconventional Monetary Policies


Maurice Obstfeld2By Maurice Obstfeld

How quickly should the United States tighten monetary policy and exit from quantitative easing?  Is the neutral real interest rate lower than before the crisis? Should we raise inflation targets?  What can we learn from the unconventional policies that emerging markets adopted during the crisis? Are we entering an environment of global deflation?  And if so, can the existing central bank toolkit stave off that threat?

Seven years after the crisis, the effects of unconventional monetary policies continue to be a matter of debate. There is little consensus not only about the effectiveness of these policies in promoting aggregate demand, but also about possible unintended side effects on financial stability.

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How to Manage the Commodity Roller Coaster


Vitor Gasparby Vitor Gaspar 

(Versions: عربي中文FrançaisРусский, and Español)

The world economy is experiencing important transitions and associated uncertainties.

  • Commodity prices have fallen sharply, with adverse consequences for exporting countries.
  • China’s rebalancing and the prospect of U.S. interest rate increases are having important and costly spillover effects on other economies.
  • And these and other factors are posing important fiscal challenges, especially for emerging markets.

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Global Financial Stability: Vulnerabilities, Legacies, and Policy Challenges


GFSRBy José Viñals

(Versions in 中文FrançaisРусский, and Español)

Today global financial stability is not yet assured and downside risks prevail. Our recommendation is for an urgent upgrade in policies, to avoid downside risks and to achieve our upside scenario of “successful normalization” of monetary and financial conditions. This will secure financial stability and strengthen the economic recovery.

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Banking Union Before Euro Adoption: Flak Jacket or Straitjacket?


By John Bluedorn, Anna Ilyina and Plamen Iossifov

All European Union members, except Denmark and the United Kingdom, are expected under EU treaties to eventually adopt the euro. Six Central and Eastern EU members – Bulgaria, Croatia, Czech Republic, Hungary, Poland and Romania – are yet to do so.

In the meantime, these countries have a decision to make: Should they opt in to the Banking Union before adopting the euro? Such a move may offer greater insurance against shocks, but at a certain cost to policy flexibility.  In a recent study, we explore some of the trade-offs that countries need to weigh.

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Making Monetary Policy Decisions in the Dark


By Francesco Grigoli, Alexander Herman, Andrew Swiston, and Gabriel Di Bella

(Version in Español and Português)

In the wake of the global financial crisis, monetary and fiscal policies were used aggressively to counteract the effects of the crisis on economic activity. Policymakers look at a number of indicators to guide them in assessing an economy’s level of activity relative to its productive capacity. But trying to figure out the position of the economy in real time is often quite challenging, with consequences for setting policy.

In the case of Brazil in 2011, for example, policymakers estimated in real time that the economy was at a level of output consistent with its productive capacity. Over time, however, the assessment of the cyclical position of the Brazilian economy changed drastically. It had not just been at full capacity, but was overheating. The economy was actually facing inflationary pressures, requiring policy tightening to bring it back to the central bank’s target.

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The Key to Raising Business Investment: Keep Pushing the Accelerator


David Lipton By David Lipton 

Why have businesses in advanced economies not been investing more in machinery, equipment and plants? Business investment is the largest component of private investment, and its weakness has puzzled many of us.

Some believe that the key to more business investment is less uncertainty about fiscal policy, regulation, and structural reforms. Some believe that it is providing better financing, including for small and medium-sized enterprises (SMEs).

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