Posted on June 2, 2011 by iMFdirect
By Anoop Singh
Capital flows into emerging Asia should be high on the ‘watch list’ for policymakers in the region. But, perhaps, not in the way we had previously anticipated.
Twelve months ago our policy antennae were keenly attuned to the risks posed by the foreign capital that flooded into Asia from mid-2009 onwards. What was remarkable about this was the speed of the rebound after the massive drop during the global financial crisis. Within just 5 quarters, net inflows rose from their early 2009 trough to their mid-2010 peak—a mere one-fifth of the time that typically elapsed between troughs and peaks in the cycle of capital flows during the pre-Asian crisis period.
Another twelve months on, what we’re seeing is not really all that “exceptional”—a point often overlooked in the current debate on capital inflows to emerging markets. Continue reading
Filed under: Asia, Economic outlook, Emerging Markets, IMF, International Monetary Fund | Tagged: Asian crisis, capital flows, emerging Asia, external buffers, financial risk, financial stability, global financial crisis, Macroeconomic policies, macroprudential policies, monetary policy, monetary transmission, overheating, portfolio flows, Regional Economic Outlook: Asia and Pacific, risky assets | Leave a comment »
Posted on May 24, 2011 by iMFdirect
By Antoinette M. Sayeh
(Version in Français)
Sub-Saharan Africa’s “frontier markets”—the likes of Ghana, Kenya, Mauritius, and Zambia—were seemingly the destination of choice for an increasing amount of capital flows before the global financial crisis. Improving economic prospects in these countries was a big factor, but frankly, so too was a global economy awash with liquidity.
Then the crisis hit. And capital—particularly in the form of portfolio flows—was quick to flee these countries as was the case for so many other economies.
Fast forward to 2011. Capital flows are coming back to the frontier, but in dribs and drabs. Continue reading
Filed under: Africa, Economic outlook, IMF, International Monetary Fund | Tagged: capital controls, capital flows, capital inflows, equity investments, fixed-income investments, foreign direct investment, frontier markets, global financial crisis, liquidity conditions, Macroeconomic policies, macroprudential policies, net private capital flows, portfolio flows, Regional Economic Outlook: Sub-Saharan Africa, shallow financial markets, Sub-Saharan Africa | 1 Comment »
Posted on May 13, 2011 by iMFdirect
By Ruud de Mooij
In February, President Obama said “Companies are taxed heavily for making investments with equity; yet the tax code actually pays companies to invest using leverage”. And he is right: the corporate tax code in the United States creates a significant bias toward debt finance over equity.
Of course, the U.S. is not unique. In most of Europe, Asia and elsewhere in the world, the tax advantages of debt finance are even bigger than in the U.S.
The crux of the issue is that interest paid on borrowing can be deducted from the corporate tax bill, while returns paid on equity—dividends and capital gains—cannot.
The debt distortion is not new. What is new, however, is that we have come to realize that excessive debt (or leverage) is much more costly than we have always thought. Continue reading
Filed under: Advanced Economies, Financial Crisis, Fiscal policy, International Monetary Fund | Tagged: capital gains, corporate income tax, corporate profits, debt bias, debt finance, dividends, equity, financial crises, global financial crisis, interest deductiblity, investment, leverage, tax avoidance, tax deduction, tax incentives | Leave a comment »
Posted on May 5, 2011 by iMFdirect
By David Owen
(Version in Русский)
Medium-term economic growth prospects in the Caucasus and Central Asia region are strong. But, to secure ongoing prosperity, the eight countries of the region—Armenia, Azerbaijan, Georgia, Kazakhstan, the Kyrgyz Republic, Tajikistan, Turkmenistan, and Uzbekistan—will need to look beyond traditional sources of growth.
The challenge for policymakers will be to foster new and more diverse growth drivers, outside mining, oil, and gas.
There are seven policy pillars that can help them do that: Continue reading
Filed under: Economic outlook, Emerging Markets, International Monetary Fund | Tagged: bank financing, business environment, Caucasus and Central Asia, commodity prices, diversify growth, economic growth, foreign investment, global financial crisis, global recovery, governance, inequality, international trade, Regional Economic Outlook: Middle East and Central Asia, regional integration, sustainable growth, trade liberalization, unemployment | 3 Comments »
Posted on April 21, 2011 by iMFdirect
Finance ministers and central bank governors from around the world, gathering at the Spring Meetings of the IMF and World Bank in Washington last week, identified a slew of continued and emerging risks to the global economy, including higher food and fuel prices, the disaster in Japan, unrest in the Middle East, lingering unemployment in parts of the world, and the risk of overheating in some dynamic emerging markets.
With the recovery solidifying but still fragile, ministers put the spotlight on how to strengthen the IMF’s surveillance—its economic assessment and analysis—to help countries take the action needed to address risks and avoid future crises. Continue reading
Filed under: Annual Meetings, Economic Crisis, Financial Crisis, IMF, International Monetary Fund | Tagged: commodity prices, G-20, global financial crisis, IMF surveillance, IMF-World Bank Spring Meetings, International Monetary and Financial Committee, multilateral surveillance, overheating, risks, Tharman Shanmugaratnam, unemployment | 2 Comments »