Posted on April 10, 2016 by iMFdirect
By Jose Viñals, Simon Gray, and Kelly Eckhold
Versions in: عربي (Arabic), Deutsch (German), 日本語 (Japanese), and Español (Spanish)
We support the introduction of negative policy rates by some central banks given the significant risks we see to the outlook for growth and inflation. Such bold policy action is unprecedented, and its effects over time will vary among countries. There have been negative real rates in a number of countries over time; it is negative nominal rates that are new. Our analysis takes a broad view of recent events to examine what is new, country experiences so far, the effectiveness of negative nominal rates as well as their limits and their unintended consequences. Although the experience with negative nominal interest rates is limited, we tentatively conclude that overall, they help deliver additional monetary stimulus and easier financial conditions, which support demand and price stability. Still, there are limits on how far and for how long negative policy rates can go. Continue reading
Filed under: Advanced Economies, banking, euro zone, Europe, Finance, Financial markets, IMF, inflation, International Monetary Fund, Japan | Tagged: bank balance sheets, banks, bonds, corporate bonds, Denmark, equities, European Central Bank, Japan, monetary policy, negative interest rates, nominal interest rates, quantitative easing, real interest rates, Sweden, Switzerland, unconventional monetary policy, zero lower bound | Leave a comment »
Posted on December 17, 2015 by iMFdirect
By Fabio Cortes
Current regulations only require U.S. and European bond mutual funds to disclose a limited amount of information about the risks they have taken using financial instruments called derivatives. This leaves investors and policymakers in the dark on a key issue for financial stability. Our new research in the October 2015 Global Financial Stability Report looks at just how much is at stake. Continue reading
Filed under: Economic research, Europe, Financial markets, International Monetary Fund, U.S. | Tagged: bonds, derivatives, financial markets, financial stability, Global Financial Stability Report, IMF, interest rates, leverage, market volatility, mutual funds, United States | Leave a comment »
Posted on December 7, 2015 by iMFdirect
By Olivier Blanchard, Jonathan D. Ostry, Atish R. Ghosh, and Marcos Chamon
(Version in Español)
With the expected move by the Federal Reserve to raise interest rates before the end of the year, many are asking about the effects on emerging market countries. Will outflows increase, and how will this affect economic activity in emerging markets? To answer that, we need to know if capital inflows are in general expansionary or contractionary.
One would think that the question was settled long ago. But, in fact, it is not. It is a case where theory suggests one thing and practice another. The workhorse model of international macro (the Mundell-Fleming model), for example, suggests that, for a given monetary policy rate, inflows lead to an appreciation, and thus to a contraction in net exports—and a decrease in output. Only if the policy rate is decreased sufficiently can capital inflows be expansionary. Symmetrically, using a model along these lines, Paul Krugman argued in his 2013 Mundell-Fleming lecture that capital outflows are expansionary.
Filed under: Economic outlook, Economic research, Emerging Markets, growth, International Monetary Fund | Tagged: bonds, capital flows, emerging markets, foreign exchange, IMF, interest rates, macroeconomic models, monetary policy, Olivier Blanchard, United States | Leave a comment »
Posted on November 24, 2014 by iMFdirect
By Sean Hagan
(version in Español)
To restructure or not to restructure? That is a question few governments would like to face. Yet, if a country does find itself with an unsustainable debt burden, one way or another, it will have to be restructured. And if that time comes, it is better for the debtor, creditors, and the entire financial system that the restructuring be carried out in a prompt, predictable, and orderly manner.
The global financial crisis ushered in a new wave of sovereign debt crises that has reinvigorated discussions over the current framework for sovereign debt restructuring. The experience with Greece’s debt restructuring in 2012 and the ongoing litigation involving Argentina, in particular, provide a salutary reminder that vulnerabilities remain.
Filed under: Economic Crisis, Economic research, Europe, Finance, Financial Crisis, Fiscal policy, growth, Latin America, Public debt, Reform | Tagged: Argentina, bonds, debt restructuring, financial restructuring, government debt, Greece, Kazakhstan, Mexico, sovereign debt, U.S. Treasury, Vietnam | Leave a comment »
Posted on November 7, 2014 by iMFdirect
By Evan Papageorgiou
When the U.S. Federal Reserve first mentioned in 2013 the prospect of a cutback in its bond buying program, markets had a “taper tantrum.” Many emerging markets saw large increases in volatility, even though outflows from their domestic markets were small and short-lived. Now the Fed has ended its bond buying and is looking ahead to rate hikes, and portfolio flows continue to arrive at the shores of emerging market economies. So everything’s fine, right? Not quite.
In our latest Global Financial Stability Report, we show that the large concentration of advanced economy capital invested in emerging markets acts as a conduit of shocks from the former to the latter.
Filed under: Advanced Economies, Economic outlook, Economic research, Emerging Markets, Fiscal policy, International Monetary Fund, Investment | Tagged: bonds, Brazil, Chile, Colombia, emerging market, euro area, Germany, Global Financial Stability Report, government bond, Hong Kong, Hungary, Indonesia, interest rates, investment, Ireland, Israel, Japan, Malaysia, Mexico, Netherlands, Philippines, Poland, Russia, South Africa, Thailand, Turkey, U.S. Federal Reserve, United Kingdom, United States | Leave a comment »
Posted on February 19, 2014 by iMFdirect
By Subir Lall
(Version in Português)
Today the IMF released a report on Portugal’s progress under the country’s Economic Adjustment Program. What is the latest assessment?
A strong start
There is no doubt that Portugal has made remarkable progress over the past three years. When the sovereign lost access to international bond markets in 2011, the outlook was grim. The economy was facing large domestic and external imbalances and dismal growth prospects. Unprecedented official financing from Portugal’s European partners and the IMF provided a window of opportunity to address the weaknesses at the root of the crisis and regain market confidence. While constrained by formal and informal strictures, the authorities rose to the occasion.
Filed under: Economic Crisis, Emerging Markets, Employment, Europe, Financial Crisis, growth, International Monetary Fund | Tagged: bonds, fiscal adjustment, labor market, Portugal, reforms, unemployment | Leave a comment »