policy and political debate

Corruption: A Hidden Tax on Growth

By Vitor Gaspar and Sean Hagan

(Versions in Español عربي中文Français日本語, Русскийعربي)

In recent years, citizens’ concerns about allegations of corruption in the public sector have become more visible and widespread. From São Paulo to Johannesburg, citizens have taken to the streets against graft. In countries like Chile, Guatemala, India, Iraq, Malaysia and Ukraine, they are sending a clear and loud message to their leaders: Address corruption!

Policymakers are paying attention too. Discussing corruption has long been a sensitive topic at inter-governmental organizations like the International Monetary Fund. But earlier this month at its Annual Meetings in Lima, Peru, the IMF hosted a refreshingly frank discussion on the subject.  The panel session provided a stimulating debate on definitions of corruption, its direct and indirect consequences, and strategies for addressing it, including the role that individuals and institutions such as the IMF can play. This blog gives a flavor of the discussion.

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Greece: Past Critiques and the Path Forward

IMG_0248By Olivier Blanchard

(Versions in DeutschEspañolFrançaisItalianoελληνικάРусский中文, 日本語عربي, and Português)

All eyes are on Greece, as the parties involved continue to strive for a lasting deal, spurring vigorous debate and some sharp criticisms, including of the IMF.

In this context, I thought some reflections on the main critiques could help clarify some key points of contention as well as shine a light on a possible way forward.

The main critiques, as I see them, fall under the following four categories:

  • The 2010 program only served to raise debt and demanded excessive fiscal adjustment.
  • The financing to Greece was used to repay foreign banks.
  • Growth-killing structural reforms, together with fiscal austerity, have led to an economic depression.
  • Creditors have learned nothing and keep repeating the same mistakes.

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Behind the News in Greece and China, Moderate Growth Continues

 By Olivier Blanchard

(Versions in Español and عربي)

Today we published the World Economic Outlook Update.

But first, let me talk about the elephant in the room, namely Greece.

The word elephant may not be right: As dramatic as the events in Greece are, Greece accounts for less than two percent of the Eurozone GDP, and less than one half of one percent of world GDP.
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“To Lean or Not to Lean?” That is the Question

By Stefan Laseen, Andrea Pescatori, and Jarkko Turunen

Academics and policy-makers alike have long struggled with the question of whether to use monetary policy to dampen asset price booms – whether to “lean against the wind” or not. Can officials identify emerging asset price bubbles, what are the implications of bursting them, and is monetary policy the appropriate response to potential bubbles? These questions have become even more important to the policy debate in the wake of the global financial crisis, which was preceded by an unsustainable boom in sub-prime mortgage lending and housing prices.

Given over six years of near zero policy interest rates, should the U.S. Fed now use interest rates to lean against potential financial stability risks that may have built up?

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Inequality’s Toll on Growth

by iMFdirect

Inequality is one of the defining issues of our time, so you may want to tune in to this interview with the authors of a new study that shows that  higher inequality leads to lower growth.  You can also read their blog here.

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Greece: A Credible Deal Will Require Difficult Decisions By All Sides

blanchBy Olivier Blanchard

(Versions in 中文Françaisελληνικά, عربي, and Español)

The status of negotiations between Greece and its official creditors – the European Commission, the ECB and the IMF – dominated headlines last week.  At the core of the negotiations is a simple question: How much of an adjustment has to be made by Greece, how much has to be made by its official creditors?

In the program agreed in 2012 by Greece with its European partners, the answer was:   Greece was to generate enough of a primary surplus to limit its indebtedness.  It also agreed to a number of reforms which should lead to higher growth.  In consideration, and subject to Greek implementation of the program, European creditors were to provide the needed financing, and provide debt relief if debt exceeded 120% by the end of the decade.

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Financing for Sustainable Development: Money and the Right Policies

By Min Zhu and Sarwat Jahan

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Countries will start a new chapter in their development this year with the United Nation’s Sustainable Development Goals. Designed to replace the Millennium Development Goals, these new goals will broaden the vision of development to embrace economic, social, and environmental issues. To achieve these goals, two elements are critical: money and the right policies to use the money. The IMF, along with many others in the global community, will partner with countries to bring these two elements together.

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U.S. Economy Returning to Growth, but With Pockets of Vulnerability

2014MDNEW_04By Christine Lagarde 

IMF staff have just concluded their annual health check of the U.S. economy, and released their concluding statement.

This year we have also undertaken a Financial Sector Assessment Program with the United States. We conduct these once every 5 years for systemically important countries and it is a comprehensive exercise looking at the whole U.S. financial system.

Given this important work, we have focused our review of the U.S. economy on financial stability risks and the appropriate policies to mitigate them, as well as looking at recent movements in the U.S. dollar and the timing, form, and impact of interest rate normalization by the Fed.

A more detailed report on the U.S. economy and on the financial sector will be available on July 8.

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Once in a Generation

Jeff Hayden altBy Jeff Hayden

World leaders will come together three times—in July, September, and December—to press for progress in the fight against poverty and to forge partnerships in support of better-quality life around the world.

In July, government officials and representatives from civil society organizations, donor groups, and the private sector will meet in Addis Ababa, Ethiopia, to secure the financing needed to lift millions out of extreme poverty.

The global community assembles again in New York in September to review progress under the Millennium Development Goals (MDGs), which expire this year, and to adopt new ones—the Sustainable Development Goals (SDGs)—that map out development through 2030.

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Ten Take Aways from the "Rethinking Macro Policy: Progress or Confusion?"

blanchBy Olivier Blanchard

On April 15-16, the IMF organized the third conference on "Rethinking Macro Policy."

Here are my personal take aways.

1. What will be the "new normal"?  

I had asked the panelists to concentrate not on current policy challenges, but on challenges in the "new normal." I had implicitly assumed that this new normal would be very much like the old normal, one of decent growth and positive equilibrium interest rates. The assumption was challenged at the conference.

On the one hand, Ken Rogoff argued that what we were in the adjustment phase of the “debt supercycle.” Such financial cycles, he argued, end up with debt overhang, which in turn slows down the recovery and requires low interest rates for some time to maintain sufficient demand.  Under that view, while it may take a while for the overhang to go away, more so in the Euro zone than in the United States, we should eventually return to something like the old normal.

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