Fixing the Great Distortion: How to Undo the Tax Bias Toward Debt Finance

Posted on November 10, 2016 by iMFdirect

By Ruud de Mooij, Michael Keen, and Alexander Tieman

“The Great Distortion.” That’s what The Economist, in its cover story of May 2015¸ called the systematic tax advantage of debt over equity that is found in almost every tax system.

This “debt bias” is now widely recognized as a real risk to economic stability. A new IMF study argues that it needs to feature more prominently on tax reform agendas; it also sets out options for how to do that.

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Filed under: Economic research, Finance, Fiscal policy, IMF, International Monetary Fund, Public debt, taxation | Tagged: , , , , , , , , , , , | Leave a comment »

Warning Signs as Global Financial Risks Increase

Posted on April 13, 2016 by iMFdirect

GFSRBy José Viñals

Versions in عربي (Arabic), 中文 (Chinese), Français (French), 日本語 (Japanese), Русский (Russian), and Español (Spanish)

 

Over the last six months, global financial stability risks increased as a result of the following developments:

  • First, macroeconomic risks have risen, reflecting a weaker and more uncertain outlook for growth and inflation, and more subdued sentiment. These risks were highlighted yesterday at the World Economic Outlook press conference.
  • Second, falling commodity prices and concerns about China’s economy have put pressure on emerging markets and advanced economy credit markets.
  • Finally, confidence in policy traction has slipped, amid concerns about the ability of overburdened monetary policies to offset the impact of higher economic and political risks.

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Filed under: Advanced Economies, banking, euro zone, Europe, Finance, Financial markets, IMF, International Monetary Fund, oil, U.S. | Tagged: , , , , , , , , , , , , | Leave a comment »

Japan: Time to Load a Fourth Arrow—Wage Increases

Posted on March 13, 2016 by iMFdirect

By Luc Everaert and Giovanni Ganelli

(Version in 日本語)

Everybody agrees: wages need to grow if Japan is to make a definite escape from deflation. Full- time wages have increased by a mere 0.3 percent since 1995! For example, despite its record profits, Toyota increased its base salary only by 1.1 percent last year. The average of 219 Keidanren firms managed just 0.44 percent. Clearly, an increase in base wages, colloquially referred to as “base up”, is long overdue.

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Filed under: Financial markets, Fiscal policy, IMF, International Monetary Fund, Japan, Reform | Tagged: , , , , , , , , , , , , , | Leave a comment »

Greece: Toward a Workable Program

Posted on February 11, 2016 by iMFdirect

poul-thomsen1By Poul M. Thomsen

Versions in عربي (Arabic), Español, Français, and ελληνικά (Greek)

Having successfully pulled Greece from the brink last summer and subsequently stabilized the economy, the government of Alexis Tsipras is now discussing with its European partners and the IMF a comprehensive multi-year program that can secure a lasting recovery and make debt sustainable. While discussions continue, there have been some misperceptions about the International Monetary Fund’s views and role in the process. I thought it would be useful to clarify issues.

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Filed under: Debt Relief, euro zone, Europe, Government, Greece, IMF, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , | Leave a comment »

Bad Debt in Emerging Markets: Still Early Days

Posted on November 9, 2015 by iMFdirect

by John Caparusso, Yingyuan Chen, Evan Papageorgiou and Shamir Tanna

(Versions in 中文, Português, Русский, and Español)

Emerging markets have had a great run. The fifteen largest emerging market economies grew by 48% from 2009 to 2014, a period when the Group of Twenty economies collectively expanded by 6%.

How did emerging markets sustain this growth? In part, they drew upon bank lending to drive corporate credit expansion, strong earnings, and low defaults. This credit boom, combined with falling commodity prices and foreign currency borrowing, now leaves emerging market firms vulnerable and financial sectors under stress, as we discuss in the latest Global Financial Stability Report.

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Filed under: Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, IMF, International Monetary Fund, Reform | Tagged: , , , , , , , , , , , , , , , | Leave a comment »

A Strategy for Resolving Europe’s Problem Loans

Posted on September 24, 2015 by iMFdirect

By Shekhar Aiyar and Anna Ilyina

Problem loans are clogging the arteries of Europe’s banking system. The global financial crisis and subsequent recession have left businesses and households in many countries with debts that they cannot repay. Nonperforming loans as a share of total loans in the EU have more than doubled since 2009, reaching €1 trillion—over 9 percent of the region’s GDP—by end-2014.  These loans are particularly high in the southern part of the euro area, as well as in several Eastern and Southeastern European countries. Only a handful of countries have managed to lower their nonperforming loan ratio to below its post-crisis peak.

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Filed under: Advanced Economies, Economic Crisis, Economic research, Europe, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: , , , , , | Leave a comment »

Greece: Past Critiques and the Path Forward

Posted on July 9, 2015 by iMFdirect

IMG_0248By Olivier Blanchard

(Versions in Deutsch, Español, Français, Italiano, ελληνικά, Русский, 中文, 日本語, عربي, and Português)

All eyes are on Greece, as the parties involved continue to strive for a lasting deal, spurring vigorous debate and some sharp criticisms, including of the IMF.

In this context, I thought some reflections on the main critiques could help clarify some key points of contention as well as shine a light on a possible way forward.

The main critiques, as I see them, fall under the following four categories:

  • The 2010 program only served to raise debt and demanded excessive fiscal adjustment.
  • The financing to Greece was used to repay foreign banks.
  • Growth-killing structural reforms, together with fiscal austerity, have led to an economic depression.
  • Creditors have learned nothing and keep repeating the same mistakes.

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Filed under: Advanced Economies, Debt Relief, Economic Crisis, Economic outlook, Employment, Europe, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Politics, Public debt | Tagged: , , , , , , , , , , | 8 Comments »

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