An Argument for Paying Down Public Debt


By Vitor Gaspar and Julio Escolano

What should governments do about high public debt-to-GDP ratios?  This question is getting much-deserved attention. Let’s abstract from macroeconomic (business cycle) considerations and look at the issue purely from an optimal tax smoothing perspective—that is, weighing the cost and benefits of raising taxes to pay down debt. By doing so we decidedly do not engage in the current debate about the contribution that fiscal policy may make to demand management. Continue reading

The Euro Area Workforce is Aging, Costing Growth


By Shekhar Aiyar, Christian Ebeke, and Xiaobo Shao

Versions in Français (French), and Español (Spanish)

In parallel to the aging of the general population, the workforce in the euro area is also growing older. This could cause productivity growth to decline in the years ahead, raising another policy challenge for governments already dealing with legacies from the crisis such as high unemployment and debt.  Continue reading

The Overwhelming Case for a Carbon Tax in China


By Ian Parry and Philippe Wingender

Version in 中文 (Chinese)

A single policy could do it all for China. A carbon tax—an upstream tax on the carbon content of fossil fuel supply—could dramatically cut greenhouse gases, save millions of lives, soothe the government’s fiscal anxieties, and boost green growth. Continue reading

The Lowdown on U.S. Core Inflation


Yasser AbdihBy Yasser Abdih

There was a time when U.S. central bankers worried that inflation was too high, and they tried to bring it down. Now the opposite is true: the Federal Reserve is concerned that inflation has remained stubbornly low, and it’s trying to boost prices. The reason: persistently low inflation raises the risk that prices will actually start to decline, a dangerous condition known as deflation. That’s bad news because it makes people less willing to borrow and spend—anticipating lower prices, consumers will put off spending—and could also lead to a fall in wages. Continue reading

Rising Income Polarization in the United States


Ali Alichi-IMFBy Ali Alichi

Version in Español (Spanish)

The latest IMF review of the U.S. economy underscores the country’s resilience in the face of financial market volatility, a strong dollar, and subdued global demand. But the review also cites longer-term challenges to growth, including rising income polarization.

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The U.S. Economy: Above 2, Below 5, and 4 P’s


Lagarde.2015MDPORTRAIT4_114x128

By Christine Lagarde

Version in Español (Spanish)

The U.S. economy is in good shape, despite some setbacks in very recent months. The latest IMF review of the U.S. economy can be summed up in three numbers: above 2, below 5, and 4. What does that mean?

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Africa Pausing


Jeff HaydenBy Jeff Hayden

Strong performance by many African economies over the past two decades led some commentators to coin the term “Africa Rising” to describe the region’s surging economic power.

The term graced the cover of TIME magazine in December 2012, in an issue that chronicled the region’s decades-long journey from economic anemia to impressive vigor. Beginning in the mid-1990s, many—but certainly not all—countries in sub-Saharan Africa energized their economies, achieving in recent years some of the world’s highest growth. Living standards improved as a result, as did health care and other key services, inspiring hope for a bright future.

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