Imagine how three-dimensional printing, driverless cars and artificial intelligence will change our future. Or think of how developments in information technology, e-commerce and the sharing economy are already changing the way we learn, work, shop, and travel. Innovation drives progress and, in economic terms, determines productivity growth. And productivity growth, in turn, determines prosperity. It impacts our lives and well-being in fundamental ways: it determines where and how long we live; it determines our quality of life. Continue reading “Imagine What Fiscal Policy Could Do For Innovation” »
(Version in Español)
Budgets can be full of surprises. And not always good ones. Often times, debt increases significantly because an unforeseen obligation materializes. These contingent liabilities, as they are known in the economist’s jargon, can have significant economic and fiscal costs. In fact, on many occasions, large and unexpected increases in debt across the world were due to the materialization of contingent liabilities. That is why they are often called hidden deficits.
The Paris Agreement on Climate Change is a historic diplomatic achievement. Climate change is a global problem. Many believed that global problem solving would prove elusive: the benefits of cutting emissions arise globally while the costs of doing so are borne nationally, so national self-interest would prevent a meaningful agreement. Paris proves otherwise—creating a commonality of purpose at the global level. Continue reading “Climate Change: How To Price Paris” »
By Vitor Gaspar
Does fiscal policy respond systematically to economic activity? Can fiscal policy promote macroeconomic stability? Does greater stability support stronger growth? The answer is yes on all counts. This finding, while seemingly obvious, is now backed by numbers to match each question. The April 2015 Fiscal Monitor explores how.
Fortune, wrote Machiavelli five hundred years ago in The Prince, is like a violent river. She “shows her power where virtue has not been put in order to resist her and therefore turns her impetus where she knows that dams and dikes have not been made to contain her.” Managing the ebb and flow of government’s fiscal fortunes poses similar challenges today. We need a risk-based approach to fiscal policymaking that applies a systematic analysis of potential sources of fiscal vulnerabilities. This method would help countries detect potential problems early, and would allow for institutional changes to build resilience.
Does the European Union need closer fiscal integration, and in particular a stronger fiscal center, to become more resilient to economic shocks? A new IMF book, Designing a European Fiscal Union: Lessons from the Experience of Fiscal Federations, published by Routledge, examines the experience of 13 federal states to help inform the debate on this issue. It analyzes in detail their practices in devolving responsibilities from the subnational to the central level, compares them to those of the European Union, and draws lessons for a possible future fiscal union in Europe.
The book sets out to answer three sets of questions: (1) What is the role of centralized fiscal policies in federations, and hence the size, features, and functions of the central budget? (2) What institutional arrangements are used to coordinate fiscal policy between the federal and subnational levels? (3) What are the links between federal and subnational debt, and how have subnational financing crises been handled, when they occurred?
As 2014 draws to a close, we thought you might like a look back at the most read blogs of the year. These are the headlines and ideas that caught your eyes and the list is based on readership. We thought we’d pull them all together for you in one quick read.
Wishing you a wonky & worldy 2015 from all of us at iMFdirect.
The last five years have been a reminder of the importance of interconnections and risks in the global economy. They have triggered intense discussions on the optimal way to combine fiscal, monetary, and financial policies to deal with spillovers, and on the need and the scope for coordination of such policies.
The IMF’s 15th Jacques Polak Annual Research Conference, which took place in Washington DC on November 13 and 14, 2014, focused on Cross-Border Spillovers, and took stock of what we know and do not know. The summary below picks and chooses some papers, and does not do justice to the full set of papers presented and discussed at the conference. They can all be downloaded, and videos of each session are available, at www.imf.org/external/np/res/seminars/2014/arc.
By Deniz Igan
(version in Español)
There was a time in the not-so-distant past when science fiction could make us look forward to a better world. We had uplifting visions of the future in shows like Star Trek and Back to the Future. Today, the menu of options only offers a dystopian world ruined by poverty and violence (think The Hunger Games, Divergent, or Elysium).
It sure is easy to get pessimistic these days. Six years after the financial crisis, the recovery in the United States has been fragile and weaker than anything we have seen in the post-WWII period. Growth figures, in large part, have been serial disappointments, disrupted by government shutdowns, debt ceiling showdowns, or meteorologically-triggered slowdowns.
by Vitor Gaspar
Unemployment remains unacceptably high in many countries. It increased dramatically during the Great Recession. Global unemployment currently exceeds 200 million people. An additional 13 million people are expected to be unemployed by 2018.
The most worrisome is youth unemployment. There are examples of advanced economies in Europe where youth unemployment surged above 50 percent. In several developing economies, job creation does not absorb the large number of young workers entering the labor force every year.