Inequality: Fiscal Policy Can Make the Difference

By Vitor Gaspar and Mercedes Garcia-Escribano

 October 11, 2017

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Wealth and poverty side-by-side in Rio de Janeiro, Brazil: inequality is rising within countries around the world (photo: Jean-Marc David/SIPA/Newscom). 

Income inequality among people around the world has been declining in recent decades. This is due to countries like China and India’s incomes catching-up to advanced economies. But the news is not all good. Inequality within countries has increased, particularly in advanced economies. Since the global economic recovery has gained pace and is now widespread, policymakers have a window of opportunity to respond with reforms that tackle inequality, and our new Fiscal Monitor shows how the right mix of fiscal policies can make the difference.

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Financial Stability Improves, But Rising Vulnerabilities Could Put Growth at Risk

By Tobias Adrian

October 11, 2017

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

The headquarters of the European Central Bank in Frankfurt, Germany: To avoid causing market turbulence, central banks will have to clearly communicate their plans to gradually unwind crisis-era policies (photo: Caro/Sven Hoffman/Newscom).

It seems like a paradox. The world’s financial system is getting stronger, thanks to healthy economic growth, buoyant markets, and low interest rates. Yet despite these favorable conditions, dangers in the form of rising financial vulnerabilities are starting to loom. That is why policymakers should act now to keep those vulnerabilities in check. Continue reading “Financial Stability Improves, But Rising Vulnerabilities Could Put Growth at Risk” »

Global Economic Upswing Creates a Window of Opportunity

By Maurice Obstfeld

October 10, 2017

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

 

The global recovery is continuing, and at a faster pace. The picture is very different from early last year, when the world economy faced faltering growth and financial market turbulence. We see an accelerating cyclical upswing boosting Europe, China, Japan, and the United States, as well as emerging Asia.

The latest World Economic Outlook has therefore upgraded its global growth projections to 3.6 percent for this year and 3.7 percent for next—in both cases 0.1 percentage point above our previous forecasts, and well above 2016’s global growth rate of 3.2 percent, which was the lowest since the global financial crisis. Continue reading “Global Economic Upswing Creates a Window of Opportunity” »

Inequality: Tools from the Old Masters to Help Today’s Policymakers

By Vitor Gaspar, Paolo Mauro, and Tigran Poghosyan

October 3, 2017

Unemployed day laborers in South Africa: the country has relatively high income, but also high inequality (photo: Rogan Ward/Newscom).

With inequality rising in many countries, policymakers need to choose the best fiscal policies that will help share the benefits of economic growth, and in so doing, make it more inclusive.

The early 20th century English economist Arthur Pigou, among others, saw economic welfare as influenced by both “the size of the national dividend” and “the way in which it is distributed among the members of the community.” Continue reading “Inequality: Tools from the Old Masters to Help Today’s Policymakers” »

How Policy Makers Can Better Predict a Downturn – and Prepare

By Claudio Raddatz and Jay Surti

October 3, 2017

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A trading floor in Singapore. Financial conditions provide valuable clues to the economic outlook and can improve the accuracy of forecasts (photo: Caro/Oberhaeuser/Newscom).

The global financial crisis showed that periods of robust growth and seeming calm in financial markets can be followed by a sudden surge in market volatility and an unexpected economic downdraft. That’s why it is so important for policy makers to keep a close watch on so-called financial conditions. These can include everything from bond yields and oil prices to foreign exchange rates and levels of domestic debt. Continue reading “How Policy Makers Can Better Predict a Downturn – and Prepare” »

Corruption in Latin America: A Way Forward

By David Lipton, Alejandro Werner, and S. Pelin Berkmen

September 28, 2017

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Sustained action on many fronts will be needed to push countries out of the corruption trap (photo: People Images/iStock). 

In our first blog of this two-part series, we noted that, despite recent progress, corruption in Latin America is still high. In this second blog, we look at measures to fight corruption that have worked well in other countries. Learning about these policies can provide insights to guide Latin America in the design of their anti-corruption strategies, even if the final shape of these policies will differ depending on country specifics. Continue reading “Corruption in Latin America: A Way Forward” »

The Unequal Burden of Rising Temperatures: How Can Low-Income Countries Cope?

By Sebastian Acevedo, Mico Mrkaic, Evgenia Pugacheva, and Petia Topalova

September 27, 2017

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The Earth’s temperature is rising. This will shape the economic future of communities across the globe (photo: Leolintang/iStock by GettyImages).

The Earth’s temperature is rising and its climate is changing. The increase in temperatures will shape the economic future of communities and countries across the globe. All countries will feel the direct negative effects from unmitigated climate change. But as our research in Chapter 3 of the October 2017 World Economic Outlook shows, the effects of higher temperatures will not be equal everywhere and the brunt of the adverse consequences will be borne by those who can least afford it—low-income countries.  Continue reading “The Unequal Burden of Rising Temperatures: How Can Low-Income Countries Cope?” »

Structural Reforms Give Biggest Help To Lagging Countries

By Angana Banerji and Christian Ebeke

September 22, 2017

Structural reforms can jumpstart productivity in countries with weaker initial productivity, and help them catch up with their peers (photo: The Palmer/iStock).

Labor and product market reforms, which make economies more efficient, can benefit all countries. But they are especially helpful in jumpstarting productivity in countries where productivity is weaker. This is good news as it implies that reforms are one route through which countries with lower per capita incomes can catch up with richer countries instead of persistently lagging behind: economic hardship is not destiny. Our new paper provides fresh arguments in favor of the often-difficult structural reforms. Continue reading “Structural Reforms Give Biggest Help To Lagging Countries” »

Corruption in Latin America: Taking Stock

By  David LiptonAlejandro Werner, Carlos Gonçalves

September 21, 2017 

Versions in Español (Spanish)  Português (Portuguese)

Systemic corruption drains public resources and drags down economic growth (photo: People Images/iStock).

Corruption continues to make headlines in Latin America. From a scheme to shelter assets leaked by documents in Panama, to the Petrobras and Odebrecht scandals that have spread beyond Brazil, to eight former Mexican state governors facing charges or being convicted, the region has seen its share of economic and political fallout from corruption. Latin Americans are showing increasing signs of discontent and demanding that their governments tackle corruption more aggressively.

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Drifting Apart: Income Convergence in the Euro Area

A souvenir shop in Lisbon, Portugal: Income convergence in the euro area has slowed (Photo: Rafael Marchante/REUTERS/Newscom)

By Jeffrey Franks and Hanni Schölermann

September 13, 2017

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The experience of recent decades has challenged the prediction that the single currency would help differences in income levels across euro area countries narrow over time. This income convergence among the founding countries of the euro has not happened, prompting a need for further economic reforms. While newer members of the euro have converged, even this trend has stalled since the crisis.

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