Sharing the Recovery: SDR Channeling and a New Trust

2021-10-12T14:32:37-04:00October 8, 2021|

By Ceyla Pazarbasioglu and Uma Ramakrishnan

عربي, Español, 日本語, Português, Русский

Options to magnify the impact of the Special Drawing Rights Allocation through voluntary channeling.

One of the most significant measures introduced by the International Monetary Fund in response to the global pandemic was the recent historic allocation of Special Drawing Rights, or SDRs. The challenge now is to ensure this distribution is redirected—or channeled—to where the need is greatest. To that end, we are exploring three options to enable more resilient and sustainable economic futures for the poorest and most vulnerable countries.

The task now is to redirect the SDRs to their greatest effect.

The IMF’s response to COVID-19

Since the onset of the COVID-19 pandemic, the IMF has lent nearly $117 billion to 87 countries. We reshaped our lending policies to enhance our support to members, and recently reformed our concessional lending policy framework under the Poverty Reduction and Growth Trust (PRGT) to expand our lending to low-income countries.

We have also joined forces with the other international organizations to help accelerate the global vaccine rollout, and improve access to non-vaccine therapeutics and diagnostics.

But we didn’t stop there. The historic SDR allocation, back in August, equivalent to $650 billion, […]

Why Basic Science Matters for Economic Growth

2021-10-12T14:36:58-04:00October 6, 2021|

By Philip Barrett, Niels-Jakob Hansen, Jean-Marc Natal and Diaa Noureldin

عربي, 中文, Español, Français,  日本語, Português, Русский

Public investment in basic research will pay for itself.

The pandemic has rolled back decades of economic progress and wrought havoc on public finances. To build back better and fight climate change, sizable public investment needs to be sustainably financed. Boosting long-term growth—and thereby tax revenue—has rarely felt more pressing.

But what are the drivers of long-term growth? Productivity—the ability to create more outputs with the same inputs—is an important one. In our latest World Economic Outlook, we emphasize the role of innovation in stimulating long-term productivity growth. Surprisingly, productivity growth has been declining for decades in advanced economies despite steady increases in research and development (R&D), a proxy for innovation effort.

Knowledge transfer between countries is an important driver of innovation.

Our analysis suggests that the composition of R&D matters for growth. We find that basic scientific research affects more sectors, in more countries and for a longer time than applied research (commercially oriented R&D by firms), and that for emerging market and developing economies, access to foreign research is especially important. Easy technology […]

Inflation Scares in an Uncharted Recovery

2021-10-12T14:38:41-04:00October 6, 2021|

By Francesca Caselli and Prachi Mishra

عربي中文, Español, Français, 日本語, Português, Русский

A key question is what combination of events could cause persistently faster price gains.

The economic recovery has fueled a rapid acceleration in inflation this year for advanced and emerging market economies, driven by firming demand, supply shortages, and rapidly rising commodity prices.

We forecast in our latest World Economic Outlook that higher inflation will likely continue in coming months before returning to pre-pandemic levels by mid-2022, though risks of an acceleration do remain.

Policymakers must walk a fine line between patient support for the recovery and being ready to act quickly.

The good news for policymakers is that long-term inflation expectations are well anchored, but economists still disagree about how enduring the upward pressure for prices will ultimately be.

Some have said government stimulus may push unemployment rates low enough to boost wages and overheat economies, possibly de-anchoring expectations and resulting in a self-fulfilling inflation spiral. Others estimate that pressures will ultimately be transitory as a one-time surge in spending fades.

Inflation dynamics and recovering demand

We examine if headline consumer price index inflation has moved in line with unemployment. Although the pandemic period poses […]

Crypto Boom Poses New Challenges to Financial Stability

2021-10-12T14:41:35-04:00October 1, 2021|

By Dimitris Drakopoulos, Fabio Natalucci, and Evan Papageorgiou

عربي, 中文Español, Français, 日本語, Português, Русский

As crypto assets take hold, regulators need to step up.

Crypto assets offer a new world of opportunities: Quick and easy payments. Innovative financial services. Inclusive access to previously “unbanked” parts of the world. All are made possible by the crypto ecosystem.

Consumer protection risks remain substantial given limited or inadequate disclosure and oversight.

But along with the opportunities come challenges and risks. The latest Global Financial Stability Report describes the risks posed by the crypto ecosystem and offers some policy options to help navigate this uncharted territory.

The Crypto Ecosystem—What Is It, What’s at Risk?

The total market value of all the crypto assets surpassed $2 trillion as of September 2021—a 10-fold increase since early 2020. An entire ecosystem is also flourishing, replete with exchanges, wallets, miners, and stablecoin issuers.

Many of these entities lack strong operational, governance, and risk practices. Crypto exchanges, for instance, have faced significant disruptions during periods of market turbulence. There are also several high-profile cases of hacking-related thefts of customer funds. So far, these incidents have not had a significant impact on financial stability. However, […]

How Countries Can Diversify Their Exports

2021-10-12T14:43:44-04:00September 22, 2021|

by Gonzalo Salinas

Four economy-wide factors—governance, education, infrastructure, and trade policy—relate closely to more varied and complex exports across countries.

As the world’s biggest copper producer, Chile’s shipments of the metal meet around one-third of global demand and represent about half its goods exports.

But beyond mining’s dominance, Chile’s trade flows are more varied and complex than they may appear, with significant exports of vehicles, pharmaceuticals and telecommunications equipment. And according to a recent IMF staff paper, the Andean economy is among those that shine as a role model for diversification policies.

The new approach to explaining diversification underscores the need to effectively shorten geographic distance by enhancing connectivity between nations.

By looking beyond commodities, the research shows that economy-wide policies such as governance and education help foster diverse exports more than narrowly targeted industrial policies, a finding that can better guide nations aiming to expand their international trade.

The examination of 201 countries and territories goes beyond the economic complexity indices that have traditionally been used by economists. Those proxies for the productive capability of a given economic system have strong sensitivity to commodities, which can distort their accuracy.

For a more nuanced read, staff research proposes new ways to gauge diversity and complexity of national […]

To Safeguard Global Financial Stability, Boost the Resilience of Investment Funds

2021-10-12T14:45:30-04:00September 17, 2021|

By Tobias Adrian, Antonio Garcia Pascual, Ranjit Singh, and Jay Surti

عربي, 中文, Español, 日本語, Português, Русский

Investment funds were hit hard by the pandemic; their response amplified its adverse impact on financial markets and capital flows.

Our brush last year with one of the biggest economic shocks of our lifetimes revealed some fundamental vulnerabilities that could affect global financial stability. Caught up in the financial market turmoil generated by risk averse investors, many investment funds were heavily affected by the “dash-for-cash” that extended across borders—and which triggered significant outflows from risky assets and from emerging and developing economies. As this happened, and investor capital flowed out of money market and open-end mutual funds, asset managers were forced to fire-sell these assets, which accelerated the drying up of liquidity and the drop in market value of key assets.

Our policy recommendations would be wins for both issuers and investors alike, more than offsetting any adjustment costs borne by them.

To safeguard financial stability at the national and global levels—and better protect markets and economies from crippling capital outflows—we need to boost the resilience of investment funds. A key part of this involves reducing the […]

How to Tax in Asia’s Digital Age

2021-10-12T14:49:59-04:00September 14, 2021|

By Era Dabla-Norris, Ruud De Mooij, Andrew Hodge, and Dinar Prihardini

中文, Español, 日本語

New global reforms will change where tech giants pay taxes in Asia and make the international tax system more robust.

Digitalization —the technology that powers fintech, e-commerce, and online services—enables us to make mobile money transfers, purchase goods and services online, and interact with people across the globe. It has created some of the largest global businesses, such as online platforms and marketplaces connecting producers and consumers across the world.

The agreed changes could spur more comprehensive reforms applied to all companies and to a larger share of profits.

Asia alone has roughly two billion internet users, with considerable room to grow. Asia’s advanced and emerging market economies have several locally headquartered tech giants—including Alibaba,, Tencent, Rakuten—and host foreign tech giants such as Facebook. A new set of agreed global tax reforms will change where these tech giants and other global giants pay taxes.

Thus far, it’s been challenging for many Asian countries to tax tech giants especially because many are not physically but rather only digitally present in a country. Existing international norms for taxing profits, which many people […]

Your Top 5 Back-to-School Blogs

2021-09-17T16:16:38-04:00September 2, 2021|

By IMFBlog

What’s on your mind as you (or your kids) head back to school?

To help you stay on top of the news and policy debates from the past few months, our IMFBlog editors have put together a list of our top reads on economics and finance.

Our list of blogs gives you a snapshot on the state of the global economy, a glimpse at the new world of cryptocurrencies, and some insight into the phenomenon of rising prices.




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