Big Bad Actors: A Global View of Debt

By Vitor Gaspar and Marialuz Moreno Badia

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

In the midst of the Great Depression, the American economist Irving Fisher warned of the dangers of excessive debt and the deflationary pressures that follow on its tail. He saw debt and deflation as the big, bad actors. Now, their close relatives—too high debt and too low inflation—are still in play, at least for advanced economies.

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The Whole Can Be Greater Than the Sum of its Parts

By Vitor Gaspar, Maurice Obstfeld and Ratna Sahay

There are policy options to bring new life into anemic economic recoveries and to counteract renewed slowdowns.  Our new paper, along with our co-authors, debunks widespread concerns that little can be done by policymakers facing a vicious cycle of (too) low growth, (too) low inflation, near-zero interest rates, and high debt levels.

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Sluggish Business Investment in the Euro Area: The Roles of Small and Medium Enterprises and Debt

By John C. Bluedorn and Christian Ebeke

Small businesses could be the lifeblood of Europe’s economy, but their size and high debt are two of the factors holding back the investment recovery in the euro area. The solution partly lies in policies to help firms grow and reduce debt.

Our new study, part of the IMF’s annual economic health check of the euro area, takes a novel bottom-up look at the problem. We analyze the drivers of investment using a large dataset of over six million observations in eight euro area countries, from 2003 to 2013: Austria, Belgium, Germany, France, Finland, Italy, Portugal, and Spain. Continue reading

The Change in Demand for Debt: The New Landscape in Low-income Countries

By Andrea F. Presbitero and Min Zhu

(Versions in 中文 (Chinese), Français, and Português)

Many low-income developing countries have joined the group of Eurobond issuers across the globe— in sub-Saharan Africa (for example, Senegal, Zambia, and Ghana), Asia (for example, Mongolia) and elsewhere, raising over US$21 billion cumulatively over the past decade. Tapping these markets provides a new source of funds, but also exposes borrowers to shifts in investor sentiment and rising global interest rates.

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Shrinking Populations, Rising Fiscal Challenges

By Benedict Clements, Kamil Dybczak, and Mauricio Soto

(Versions in 中文 and 日本語)

Populations are getting older around the world—that’s no surprise in light of declining fertility and improvements in health care. But in many countries, something more dramatic is going on—the population is actually shrinking. These demographic developments portend stark fiscal challenges. What should countries—whatever their degree of economic development—do to respond to these challenges?

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Don’t Rule it Out: Simplifying Fiscal Governance in Europe

By Petya Koeva Brooks and Gerd Schwartz

The 2008 global financial crisis and its aftermath have tested the European Union’s (EU) fiscal governance framework—the rules, regulations, and procedures that influence how budgetary policy is planned, approved, carried out, and monitored. Given the distinctive nature of EU integration, the framework aims to discipline national fiscal policies to prevent adverse spillovers to other countries and distortions to the conduct of the euro area’s common monetary policy.

The build-up of fiscal imbalances, however, revealed gaps in the framework. Public debt in the European Union soared following the crisis in 2008 to an average of around 95 percent in 2014—almost 30 percentage points above its average pre-crisis level (Chart 1).

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Reigniting Strong and Inclusive Growth in Brazil

2014MDNEW_04By Christine Lagarde 

(Versions in Español and Português)

Brazil has made remarkable social gains over the past decade and a half. Millions of families have been lifted from extreme poverty, and access to education and health has improved thanks to a series of well-targeted social interventions, such as Bolsa Familia, the conditional cash transfer program. I was privileged to see some of this tangible progress during my visit to Brazil last week.

I met with Tereza Campello, Brazil’s Minister for Social Development, who explained the network of social programs in the country, and guided us on a visit to Complexo do Alemão—a neighborhood and a group of favelas in the North Zone of Rio de Janeiro. We got there after a ride on the recently built cable car, which links several neighborhoods on the hills to the North Zone. This is a great example of infrastructure that has contributed immensely to improving the economic opportunities of people, who now have a quick way to move around and connect to the larger city. The stations themselves are also focal points of the efforts aimed at improving the daily lives of the people of Rio de Janeiro, since they house important services such as the youth center, a social assistance center, a public library, a training center for micro-entrepreneurs, and even a small branch of the bank that distributes the Bolsa Familia monthly grants.

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