Posted on August 10, 2016 by iMFdirect
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
Filed under: banking, Economic research, euro zone, Europe, Financial regulation, IMF, International Monetary Fund, negative interest rates | Tagged: banking, ECB, economic growth, Europe, European Central Bank, excess liquidity, IMF, International Monetary Fund, Japan, monetary policy, negative interest rates, negative rate policy, price stability, Switzerland | 2 Comments »
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 October 7, 2015 by iMFdirect
By José Viñals
(Versions in 中文, Français, Русский, 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.
Filed under: Advanced Economies, Asia, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Public debt | Tagged: China, emerging economies, euro area, European Central Bank, financial stability, GFSR, Japan, José Viñals, U.S. Federal Reserve, United States | Leave a comment »
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.
Filed under: Advanced Economies, Economic Crisis, Economic research, Europe, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Reform | Tagged: debt, euro area, Europe, European Central Bank, non-performing loans, recession | Leave a comment »
Posted on July 13, 2015 by iMFdirect
By Yingyuan Chen, David Jones and Sanjay Hazarika
(Versions in 中文 and deutsch)
Global financial markets traditionally take their cue from the United States. Unexpected Fed rate hikes have unsettled global markets in the past. The entire global financial system threw a tantrum when then Fed Chairman Ben Bernanke merely suggested in May 2013 that the end to bond-buying and other policies could soon begin. However for the past year, the gears of global markets seem to have been thrown into reverse — it is German government bonds, known as Bunds, rather than U.S. bonds, known as Treasuries, that appear to be driving prices in global bond markets. This role reversal could add a new layer of complexity to investor calculations as they prepare for the beginning of Fed interest rate hikes, which are expected later in 2015. Also, as developments in Greece lead to rises and falls in Bund and Treasury yields, this is a trend worth keeping an eye on.
Filed under: Advanced Economies, Asia, Economic outlook, Economic research, Emerging Markets, Europe, Finance, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Reform | Tagged: bund, emerging market, European Central Bank, Germany, GFSR, Global Financial Stability Report, interest rates, Japan, U.S. Treasury, United States, US Federal Reserve | Leave a comment »
Posted on April 30, 2015 by iMFdirect
By Will Kerry and Jean Portier
A year ago our research showed Europe had an €800 billion stock of bad loans. In our latest Global Financial Stability Report we show that the problem has now grown to more than €900 billion. This stock of nonperforming loans is concentrated in the hardest hit economies, with two-thirds located in just six euro area economies. The European Central Bank’s Asset Quality Review confirmed this picture, which revealed that the majority of banks in many of these economies had high levels of nonperforming assets (see chart 1).
Filed under: Advanced Economies, Economic outlook, Economic research, Europe, Financial Crisis, growth, IMF, International Monetary Fund, Investment | Tagged: bank lending, debt overhang, euro area, European Central Bank, GFSR, Global Financial Stability Report, inflation, interest rates, liquidity, nonperforming loans | Leave a comment »
Posted on April 27, 2015 by iMFdirect
By James Daniel and Rachel van Elkan
Since mid-2014, diversity and divergence—applying to countries’ economic situations, policies and performance—have dominated global economic discussions. Differing economic performance in major advanced countries has led to divergent monetary policies.
Both the Bank of Japan and the European Central Bank have started significant expansions of their balance sheets, while the U.S. Federal Reserve has ended its bond-buying program and is expected to start raising rates. This has had many effects, in particular, contributing to a sharp depreciation of the Yen and the Euro against the U.S. dollar (see chart 1).
Filed under: Asia, Economic Crisis, Economic outlook, Economic research, Europe, Finance, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund, Reform | Tagged: Australia, Bank of Japan, capital flows, China, European Central Bank, exchange rate, exports, Hong Kong SAR, India, Indonesia, Japan, Korea, macroprudential policy, Malaysia, monetary policy, New Zealand, Philippines, Singapore, Thailand, trade, U.S. Federal Reserve | Leave a comment »