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

Versions in Español (Spanish), 語 (Japanese)

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.

Continue reading “Drifting Apart: Income Convergence in the Euro Area” »

Back-to-School Blogs

By IMFBlog

September 5, 2017

Back to school in Paris, France: get caught up on our top blogs you may have missed over the summer (photo: LAURENT CHAMUSSY/SIPA/Newscom)

What a summer it’s been. To help you get a handle on all that has happened in the global economy, our editors have compiled a handy primer of our blogs published over the summer months. Continue reading “Back-to-School Blogs” »

More Action Needed on European Bank Profitability

By John Caparusso, Rohit Goel and Will Kerry

August 30, 2017

Versions in Español (Spanish), Deutsche (German), Français (French)

A woman withdraws money from an automated teller machine in Italy: Some European banks have too many branches relative to assets (photo: Martin Moxter imageBROKER/Newscom)

European banking has made considerable progress in the past few years: Banks have built up capital, regulation is stronger and supervision has been enhanced. But profitability remains weak, posing risks for financial stability.

In a sample of more than 170 large European lenders with combined assets of $35 trillion, roughly half generated a weak return on equity in 2016, and banks representing only 15 percent of assets generated a healthy return on equity, defined as more than 10 percent. Weak profitability is also shown in a low return on assets for domestic banks in many European countries. The drivers of these weak returns reflect varying combinations of low income, high costs, or provisions needed to build buffers against non-performing assets.

Continue reading “More Action Needed on European Bank Profitability” »

Aging Japan Puts a Strain on the Financial System

By Gaston Gelos and Sònia Muñoz

August 10, 2017

Versions in 中文 (Chinese), 日本語 (Japanese)

Elderly shoppers in Tokyo’s Sugamo district: As Japan's population ages, demand for financial services shifts (photo: Issei Kato/Reuters/Newscom).

Japan’s population is shrinking and getting older, posing challenges to the nation’s financial system. How Japan copes could guide other advanced economies in Asia and Europe that are grappling with the same trends but are at an earlier phase of similar demographic developments.

Continue reading “Aging Japan Puts a Strain on the Financial System” »

Two to Tango—Inflation Management in Unusual Times

By Vitor Gaspar, Maurice Obstfeld, and Chang Yong Rhee

June 15, 2017

Versions in 中文 (Chinese), and 日本語 (Japanese)

Shinjuku shopping district, Tokyo, Japan. Strong coordination between monetary and fiscal policies can help Japan tackle its low inflation (photo: Nikada/iStock/Getty Images)

Monetary and fiscal policies interact in complex ways. Yet modern institutional arrangements typically feature a strict separation of responsibilities. For example, the central bank targets inflation and smooths business cycle fluctuations, while the fiscal authority agrees to respect its budget constraint and to support financial stability by maintaining the safe asset status of its debt. This gives governments the freedom to pursue a multiplicity of economic and social objectives (in IMF parlance, inclusive growth).

Continue reading “Two to Tango—Inflation Management in Unusual Times” »

Restarting the Growth Engine in Sub-Saharan Africa

By IMFBlog

May 19, 2017

Version in Français (French)

The IMF’s latest economic health check of sub-Saharan Africa shows that growth fell to its lowest level in 20 years.

In this podcast, the IMF African Department’s Celine Allard, who oversaw the report, says that this drop brought a halt to the 5 to 6 percent growth rate that was enjoyed in the last two decades. Some factors contributing to this slowdown are lower commodity prices, the devastation of a severe drought—exacerbating crop infestation and leading to a famine affecting some 20 million people—and political conflicts that affect trade.

Continue reading “Restarting the Growth Engine in Sub-Saharan Africa” »

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. Continue reading “Five Keys to a Smart Fiscal Policy” »

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. Continue reading “Global Financial Stability Improves; Getting the Policy Mix Right to Sustain Gains” »

How an Extended Period of Low Growth Could Reshape the Financial Industry

By Gaston Gelos and Jay Surti

Versions in  عربي (Arabic), Français (French), Русский (Russian), and Español (Spanish)

What happens if advanced economies remain stuck in a long-lasting funk marked by tepid growth, low interest rates, aging populations and stagnant productivity? Japan offers an example of the impact on banks, and our analysis suggests that there could also be far-reaching consequences for insurance companies, pension funds, and asset-management firms.

Continue reading “How an Extended Period of Low Growth Could Reshape the Financial Industry” »

Load More Posts