The ECB’s Negative Rate Policy Has Been Effective but Faces Limits

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: , , , , , , , , , , , , , | 2 Comments »

A Spanner in the Works: An Update to the World Economic Outlook

Posted on July 19, 2016 by iMFdirect

21970901656_57e69fe1e3_zBy Maurice Obstfeld

Versions in عربي (Arabic), 中文 (Chinese), Français (French), and Español (Spanish)

The United Kingdom’s June 23 vote to leave the European Union adds downward pressure to the world economy at a time when growth has been slow amid an array of remaining downside risks. The first half of 2016 revealed some promising signs—for example, stronger than expected growth in the euro area and Japan, as well as a partial recovery in commodity prices that helped several emerging and developing economies. As of June 22, we were therefore prepared to upgrade our 2016-17 global growth projections slightly. But Brexit has thrown a spanner in the works.

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Filed under: Advanced Economies, Economic outlook, Economic research, Europe, International Monetary Fund | Tagged: , , , , , , , , , , , , , , , , , , | Leave a comment »

Who Wins and Who Loses As China Rebalances

Posted on May 12, 2016 by iMFdirect

By Serkan Arslanalp, Thomas Helbling, Jaewoo Lee, and Koshy Mathai

Version in 中文  (Chinese)

China’s economy leaves nobody indifferent. The world is watching closely as the second largest economy in the world is shifting its growth model from an export-driven one to one centered on household consumption. As China’s economy slows and rebalances, its impact is being felt on an already fragile global economy, and particularly in the rest of the Asia region. Our recent studies show that while China’s rebalancing will adversely affect some Asian economies, it will also open opportunities for several others.

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Filed under: Asia, China, Financial markets, growth, IMF, International Monetary Fund, Investment, technology, trade | Tagged: , , , , , , , , , , , , | Leave a comment »

The Broader View: The Positive Effects of Negative Nominal Interest Rates

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: , , , , , , , , , , , , , , , , | 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 »

China’s Housing Market: Defying the Odds?

Posted on February 1, 2016 by iMFdirect

by iMFdirect

Housing is on everyone’s mind. The collapse of housing bubbles can be very costly.

  • In Japan, house prices rose by about 40 percent during the mid-1980s; the collapse was followed by a ‘lost decade’ in which incomes did not grow and house prices fell by over 40 percent.
  • In the United States, house prices increased by about 30 percent between 2001 and 2006; their collapse was followed by the global financial crisis.

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Filed under: China, Financial Crisis, housing, IMF, International Monetary Fund, Japan, U.S. | Tagged: , , , , , , , , | Leave a comment »

Trading Out of Trouble in Latin America

Posted on November 4, 2015 by iMFdirect

By Natalija Novta and Fabiano Rodrigues Bastos

(Versions in Español and Português)

Growth in Latin America and the Caribbean is suffering a double whammy—economic activity has slowed down sharply and the medium-term outlook continues to deteriorate. It is therefore not surprising that policymakers across the region are eagerly searching for ways to revitalize growth.

One answer may be more trade—both within the region and with the rest of the world. Our new study analyzes the export performance in developing and emerging market regions over the past two decades to assess the potential for future export growth in Latin America. We find evidence that most countries in the region “undertrade” compared to what standard models would predict. This has been an entrenched problem for almost a quarter of a century, partly as a result of the region’s geography and a legacy of protectionist policies.

Continue reading →

Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Español, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Latin America | Tagged: , , , , , , , , , , , , , , , , | Leave a comment »

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