The Global Crisis has triggered substantive policy responses, but assessing the impacts of these and the effects on the real economy is a challenging task. This column discusses the work of the International Banking Research Network in examining international spillovers of prudential instruments through credit provision by banks. It finds that prudential instruments sometimes spill over across borders through bank lending, and that international spillovers vary across prudential instruments and are heterogeneous across banks. There appears to be no one channel or even direction of transmission that dominates spillovers.
Claudia Buch, Matthieu Bussière, Linda Goldberg, 09 December 2016
Pınar Yeşin, 26 October 2016
The IMF invests significant resources in developing models to estimate equilibrium exchange rates. This column assesses the predictive power of one vintage of IMF exchange rate models during 2006–2011. The models performed exceptionally well at predicting exchange rate movements over the medium run, which is particularly remarkable given that the period covered the unanticipated Global Crisis and the assessments were not shared publicly at the time.
Beatrice Scheubel, Livio Stracca, 04 October 2016
The global financial safety net is one of the key infrastructures of financial globalisation. However, its current constellation does not reflect a coherent design, but rather the interaction of different instruments used for different purposes and developed over time. This column presents the first database that brings together all of the relevant data for assessing the global financial safety net, including foreign exchange reserves, IMF instruments, regional financing arrangements, and central bank swap lines. An analysis shows that the availability of the net helps to cushion the effects of capital flow reversals.
Vítor Constâncio, Philipp Hartmann, 24 November 2016
The ECB’s 2016 Sintra Forum on Central Banking focused on the international monetary and financial system. In this column, the organisers of the forum highlight some of the main points from the discussions, including concerns that the world economy may be suffering from a shortage of safe assets and proposals for which areas international regulatory reforms should be further developed.
Christian Thimann, 31 May 2016
The IMF’s latest Global Financial Stability Report devotes for the first time a chapter to the systemic risks potentially associated with the insurance sector and how regulatory bodies should respond. This column examines the key points and proposes a way forward for the global regulatory framework for insurance. In particular, it argues for the importance of not treating the sector in the same way as the banking sector as the two operate very different business models. Similarly, for an activity-based approach, a regulatory focus on just nine ‘systemically important’ insurers rather than the sector as a whole is flawed.
Alex Pienkowski, Joyce Saito, Suchanan Tambunlertchai, 28 March 2016
Initiatives to reduce public debt in low-income countries have made substantial progress over the past decade, but challenges remain and continue to evolve. This column presents the findings from a new IMF-World Bank report on these developments. Low-income countries have benefited from debt relief and favourable economic conditions, resulting in generally lower debt burdens and vulnerabilities. There has also been a shift in debt financing, with greater reliance on emerging market economies, international capital markets, and domestic sources. However, more recently, risks have begun to re-emerge necessitating fiscal prudence and improved debt management.
Marcus Miller, Sayantan Ghosal, 08 January 2016
Shylock's insistence in 'The Merchant of Venice' that his “pound of flesh” be paid as per the contract, regardless of the extreme and grotesque cost to the debtor, is an apt parallel with vulture funds holding out on Argentinian debt pay-outs. This column assesses the Argentinian debt situation and develops an accord that would create a compromise between the extremes on both sides.
Andrew Berg, Andrea Presbitero , Luis-Felipe Zanna, 05 January 2016
Recent policy recommendations suggest that the output growth ‘bang’ for each additional ‘buck’ of public investment depends on the efficiency of public investment spending. This column argues that high-efficiency and low-efficiency countries may have similar growth impacts from additional public investment spending. This is because efficiency and scarcity of public capital are likely to be inversely related across countries. Efficiency and the rate of return need to be considered together in assessing the impact of increases in investment.
Peter van Bergeijk, 07 December 2015
The analysis and forecasts of the IMF are well covered in the press. This column deals with a less noted development in the data provided by the IMF, namely the nominal decrease in Gross Planet Product. Since the IMF forecast both positive growth and positive inflation, the nominal shrinkage of GPP puts into question the consistency of the IMF World Economic Outlook data and forecasts.
The Editors, 17 November 2015
The IMF, together with CEPR and the Central Bank of Ireland, put on a conference that drew lessons from Ireland’s bailout package titled “Ireland: Lessons from its Recovery from the Bank-Sovereign Loop”. This column summarises the contributions by Eichengreen, Fatás and Schoenmaker, as well as panel comments by Christine Lagarde, Benoît Coeuré, Michael Noonan, and Valdis Dombrovskis.
Maurice Obstfeld, 17 October 2015
In this column, the IMF's new Economic Counsellor and Director of Research presents the latest World Economic Outlook, which shows how the world economy is at the intersection of at least three powerful forces. First is China’s economic transformation away from export- and investment-led growth and manufacturing, in favour of a greater focus on consumption and services; second is the fall in commodity prices; and third is the impending normalisation of monetary policy in the US.
Minouche Shafik, 05 October 2015
We need a strong and resilient global financial safety net to reduce the systemic implications of sovereign crises and allow nations to cope with shocks in order to reap the economic rewards of an integrated system of trade and finance. This column argues that the current arrangements are suboptimal – resembling more of a patchwork than a safety net. Drawing on the experience of central banks during the financial crisis, it offers preliminary policy proposals to enhance the effectiveness of the global financial safety net.
Matthias Schlegl, Christoph Trebesch, Mark Wright, 11 August 2015
Greece is the first developed country to default on the IMF. But it continues to service its debt owed to private bondholders. How does this compare to historical experience? This column presents new evidence on seniority in sovereign debt markets. Despite the lack of a sovereign insolvency procedure, there is a clear-cut pecking order of sovereign debt repayments, which holds across countries and over time. Greece is an outlier case, and the Eurozone rescue loans face an elevated risk of arrears and haircuts in the future.
Gaston Gelos, Hiroko Oura, 25 July 2015
The growth of the asset management industry has raised concerns about its potential impacts on financial stability. This column assesses the systemic risk created by fund managers’ incentive problems and a first-mover advantage for end investors. Fund flows and fund ownership affect asset prices, and fund managers’ behaviour can amplify risks. This lends support to the expansion and strengthening of industry oversight, both at the individual fund and market levels.
Ashoka Mody, 18 June 2015
The Greek crisis continues to take centre stage in policy debates. This column provides insight on the topic using evidence from three recent IMF studies. A suggested programme for Greece includes debt relief (debt equal to 50% of GDP and payable over 40 years), scaling down the banking system, and setting a flat 0.5% of GDP primary surplus over the next three years.
Anusha Chari, Peter Blair Henry, 06 March 2015
In the wake of the Great Recession, a contentious debate has erupted over whether austerity is helpful or harmful for economic growth. This column compares the experiences of the East Asian countries – whose leaders responded to the East Asian financial crisis with expansionary fiscal policy – with those of the European periphery countries during the Great Recession. The authors argue that it was a mistake for the European periphery countries to pivot from fiscal expansion to consolidation before their economies had recovered.
Susan Schadler, 09 October 2014
The IMF went to extraordinary lengths to come to the assistance of Ukraine, financing above-quota limits and breaking its rule to withhold lending during acute conflict. The fighting continues and the government has yet to make concrete its commitments to the programme. Now that the 2014 economic projections are coming to resemble the ‘adverse scenario’, the IMF faces the task not only of remedying the situation in Ukraine, but of salvaging its own credibility.
Ruud de Mooij, Michael Keen, Victoria Perry, 14 September 2014
Multinational companies’ ability to pay little corporate income tax has grabbed headlines recently. This column argues that the details of international tax rules matter for macroeconomic performance – especially in low-income countries. This emphasises the importance of the G20–OECD Action Plan on Base Erosion and Profit Shifting. However, dealing properly with tax spillovers will require a deeper global debate about the international tax architecture itself.
James Boughton, 15 September 2014
The international financial system is not working fine and reforms of regional and global institutions are much needed. This column discusses some of the transformations that the IMF could implement in order to keep pace with the changes in the world economy. One problem for the credibility of the IMF is the G20 in its current design and organisation. Institutional reforms, however, should be combined with advances in economic policy in order to promote economic growth and financial stability.
Giang Ho, Paolo Mauro, 12 September 2014
Forecasters often predict continued rapid economic growth into the medium and long term for countries that have recently experienced strong growth. Is this optimism warranted by past international growth experience? This column explores this question by looking at economic growth forecasts at longer-term horizons.