Chart of the Week: Sharing the Fruits of Growth

By IMFBlog

At last week’s Spring Meetings of the IMF and World Bank, economists and policymakers discussed ways to maintain the momentum of the global economic expansion—while also ensuring that the fruits of growth are shared more widely within their countries. Fiscal policy—government’s ability to tax and spend—has an important role to play.

The effectiveness of fiscal policy in mitigating inequality varies widely by country, as seen in our Chart of the Week. The chart shows the redistribution effect of fiscal policy before and after taxes, as measured by the change in the Gini coefficient. A Gini of zero expresses perfect equality, while a Gini of one expresses maximum inequality. (more…)

Global Policy Agenda Aims to Sustain Growth Momentum, Build Inclusiveness

By IMFblog

For the first time in years, the global economy is gaining momentum against the backdrop of a rapidly changing and uncertain world. Trade, economic integration, and technological progress have brought enormous benefits—but some groups are missing out on the rewards. Policymakers are increasingly grappling with how to ensure that these benefits are shared more broadly. Working within the multilateral framework, countries should strive for strong and more balanced growth and to provide economic opportunities for all.

The Managing Director’s Global Policy Agenda, which will be discussed with the IMF’s policy-setting body—the International Monetary and Financial Committee—outlines the challenges that policymakers face, the policy priorities for the IMF’s 189 member countries, and what the Fund can do to support its members.

The report discusses how the institution can help its members design policies and reforms that raise growth, enhance resilience, and make the global economy more inclusive and durable. The Global Policy Agenda also stresses that multilateral cooperation is the most effective vehicle for addressing global challenges.

Read the IMF’s latest Global Policy Agenda, released today.

 

Five Keys to a Smart Fiscal Policy

By Vitor Gaspar and Luc Eyraud

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

We live in a world of dramatic economic change. Rapid technological innovation has fundamentally reshaped the way we live and work. International trade and finance, migration, and worldwide communications have made countries more interconnected than ever, exposing workers to greater competition from abroad. While these changes have brought tremendous benefits, they have also led to a growing perception of uncertainty and insecurity, particularly in advanced economies.

Today’s conditions require new, more innovative solutions, which the IMF calls smart fiscal policies. By smart policies we mean policies that facilitate change, harness its growth potential, and protect people who are hurt by it. At the same time, excessive borrowing and record levels of public debt have limited the financial resources available to government. So, fiscal policy must do more with less. Fortunately, researchers and policy makers are realizing that the fiscal tool kit is broader and the tools more powerful than they thought. Five guiding principles sketch the contours of these smart fiscal policies, which are described in chapter one of the IMF’s April 2017 Fiscal Monitor. (more…)

Global Financial Stability Improves; Getting the Policy Mix Right to Sustain Gains

By Tobias Adrian

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

The world’s financial system has become safer and more stable since our last assessment six months ago. Economic activity has gained momentum. The outlook has improved and hopes for reflation have risen. Monetary and financial conditions remain highly accommodative. And investor optimism over the new policies under discussion in the United States has boosted asset prices. These are some of the conclusions of the IMF’s latest Global Financial Stability Report

But it’s important for governments in the United States, Europe, China and elsewhere to follow through on investor expectations by adopting the right mix of policies. This means preventing fiscal imbalances, resisting calls for higher trade barriers, and maintaining global cooperation on regulations needed to make the financial system safer. (more…)

Global Economy Gaining Momentum—For Now

By Maurice Obstfeld

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

Momentum in the global economy has been building since the middle of last year, allowing us to reaffirm our earlier forecasts of higher global growth this year and next. We project the world economy to grow at a pace of 3.5 percent in 2017, up from 3.1 percent last year, and 3.6 percent in 2018. Acceleration will be broad based across advanced, emerging, and low-income economies, building on gains we have seen in both manufacturing and trade.

Our new projection for 2017 in the April World Economic Outlook is marginally higher than what we expected in our last update. This improvement comes primarily from good economic news for Europe and Asia, as well as our continuing expectation for higher growth this year in the United States.

(more…)

Chart of the Week: Seeking Solutions to Growing Inequality

By IMFblog

As finance ministers and central banks gather in Washington this week for the spring meetings of the IMF and World Bank, income inequality will be among the topics of discussion.

While global economic integration has brought enormous benefits in the form of rising living standards, it has also contributed to widening inequality within some countries. In advanced economies, the incomes of the top 1 percent have grown three times faster than those of the rest of the population over the past three decades.

Why should this be a concern to policy makers? To put it simply, when the benefits of growth are shared more broadly, growth is stronger, more durable, and more resilient.

In a speech on April 12, IMF Managing Director Christine Lagarde outlined steps governments can take to help workers who have been affected by labor-market dislocations, including greater emphasis on retraining and vocational training, job search assistance, and relocation support.

The IMF’s Fiscal Monitor, to be released on April 19, also explains how governments can use taxation and spending to ensure that growth is more equitable.

Drivers of Declining Labor Share of Income

By Mai Chi Dao, Mitali Das, Zsoka Koczan, and Weicheng Lian

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

After being largely stable in many countries for decades, the share of national income paid to workers has been falling since the 1980s. Chapter 3 of the April 2017 World Economic Outlook finds that this trend is driven by rapid progress in technology and global integration.

(more…)

Union of Labor and Growth

By IMFBlog

John Evans is Head of the Trade Union Advisory Committee to the Organisation for Economic Cooperation and Development, which represents some 65 million organized workers worldwide. In this podcast, he says that the labor market works much like any other market, driven by supply and demand, and the latter is very dependent on how well the economy is doing.  (more…)

Chart of the Week: Inequality and the Decline in Labor Share of Income

By IMFBlog

As discussed in the IMF’s G20 Note, and a blog last week by IMF Managing Director Christine Lagarde, a forthcoming chapter of the World Economic Outlook seeks to understand the decline in the labor share of income (that is, the share of national income paid in wages, including benefits, to workers) in many countries around the world. These downward trends can have potentially large and complex social implications, including a rise in income inequality.  (more…)

What to Do about Growth

camilla-andersen-may2015By Camilla Lund Andersen

Deep unease about rising inequality and stagnating living standards in advanced economies was at the heart of the 2016 political upheaval. Globalization and trade have been blamed, but entrenched slow growth—what economists call secular stagnation—may be the real culprit. Parents who took for granted that their children would enjoy a brighter future had their dreams dashed by the global financial crisis of 2008. Nine years later, rising populism and a return to nationalist, inward-looking policies threaten to unravel the postwar economic order.  (more…)

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