Fed Tightening May Squeeze Portfolio Flows to Emerging Markets

By Robin Koepke

December 14, 2017

Version in  中文 (Chinese),  Français (French),  Русский (Russian)

Derivatives traders in Singapore: Tighter Federal Reserve monetary policy is likely to reduce overseas purchases of emerging market stocks and bonds (photo: Caro/Rupert Oberhaeuser/Newscom)

A key question facing global investors today is what impact the US Federal Reserve’s monetary policy normalization process will have on capital flows to emerging markets. The IMF’s new model estimates show that normalization—raising the policy interest rate and shrinking the balance sheet—will likely reduce portfolio inflows by about $70 billion over the next two years, which compares with average annual inflows of $240 billion since 2010. Continue reading “Fed Tightening May Squeeze Portfolio Flows to Emerging Markets” »

Chart of the Week: Women Workers Wanted in Japan

By IMFBlog

November 21, 2017

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

A Japanese mother works at home with her child. Encouraging women to take on full time work and have children would help boost growth in Japan (photo: iStock by Getty Images).

Problem: Japan is the most aged society among advanced economies (almost 27 percent of its people are over 65). It also faces a shortage of labor (unemployment is just 2.8 percent). Both limit the country’s growth potential. Continue reading “Chart of the Week: Women Workers Wanted in Japan” »

Climate Change Will Bring More Frequent Natural Disasters & Weigh on Economic Growth

by Sebastian Acevedo, and Natalija Novta

November 16, 2017

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

As natural disasters become more frequent and intense, countries should invest in resilient infrastructure to better withstand such hazards (photo: Carlos Garcia Rawlins/Newscom).

The weather seems to be getting wilder and fiercer. From devastating hurricanes in the U.S. and the Caribbean, to raging wildfires in California and ruinous floods in India, the human and economic toll of extreme weather events is enormous. Continue reading “Climate Change Will Bring More Frequent Natural Disasters & Weigh on Economic Growth” »

Better thy Neighbor? Cross-border Effects of Fiscal Actions

By Patrick Blagrave, Giang Ho, Ksenia Koloskova, and Esteban Vesperoni

September 27, 2017

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

Domestic fiscal policies, such as public spending, can generate meaningful spillovers to neighboring countries (Photo: Ymgerman/iStock by GettyImages)

In the wake of the global financial crisis, fiscal stimulus was advocated widely to help mitigate the recession. The thinking at the time was that fiscal stimulus would be particularly effective because its impact on activity tends to be larger when demand falls short of supply and central banks keep interest rates low. This, in turn, would lead to larger positive cross-border effects—or spillovers—on other countries.

Continue reading “Better thy Neighbor? Cross-border Effects of Fiscal Actions” »

The Benefits and Costs of a U.S. Tax Cut

By Sandra Lizarazo, Adrian Peralta-Alva, and Damien Puy

September 1, 2017

Versions in Español (Spanish)

A recent IMF paper looks at the effects of lowering personal income tax rates on income distribution and the U.S. economy (photo: Ingram Publishing/Newscom)

U.S. lawmakers getting ready to rewrite the nation’s tax code have a fundamental question to answer: What are the priorities for tax reform? Do you want faster growth? Less income inequality? A tax cut that doesn’t increase the budget deficit? In a recent working paper, we find that, depending on how a tax cut is targeted, it is possible to make some progress toward the first two objectives. Personal income tax cuts can help support growth and, if well targeted, can also help improve income distribution. However, we find that lowering personal income tax rates does not raise growth enough to offset the revenue loss that is caused by the tax cut itself. Continue reading “The Benefits and Costs of a U.S. Tax Cut” »

Global Cooperation—An Uphill Battle: Finance & Development magazine

By Camilla Lund Andersen

August 30, 2017

As access to information burgeons, experts are more crucial than ever. 

This issue of F&D looks at what is arguably the clearest challenge the world faces: how to address complex global problems amid growing skepticism about the benefits of multilateralism and continued global integration.

Continue reading “Global Cooperation—An Uphill Battle: Finance & Development magazine” »

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” »

Off the Charts: Your Favorite 5 Charts

By IMFBlog

August 28, 2017

(photo: iStock by Getty Images).

Much as sailors use nautical charts to determine their location at sea, economists use charts to show who we are, where we are, and where we might be going.

In the Spring, we began our Chart of the Week feature on the blog: snapshots in time and over time of how economies work to help illuminate the uncharted waters ahead for the global economy.

Here are our top five charts of the week, based on readership:

Continue reading “Off the Charts: Your Favorite 5 Charts” »

Pension Shock

By Mauricio Soto

August 24, 2017

Young adults in the workforce will need to build their own nest eggs in the age of public pension reforms. (photo: Ingram Publishing/Newscom).

Young adults in advanced economies must take steps to increase their retirement income security

Public pensions have played a crucial role in ensuring retirement income security over the past few decades. But for the millennial generation coming of working age now, the prospect is that public pensions won’t provide as large a safety net as they did to earlier generations. As a result, millennials should take steps to supplement their retirement income.

Continue reading “Pension Shock” »

Chart of the Week: The Potential for Growth and Africa’s Informal Economy

By IMFBlog

August 8, 2017

A street vendor sells roasted corn in Tanzania: Unregistered household enterprises comprise a significant portion of sub-Saharan Africa’s economy (photo: Ton Koene/VWPics/Newscom)

By 2035, sub-Saharan Africa will have added more working-age people to their workforce than the rest of the world’s regions combined. And this growing workforce will have to be met with jobs. In the region, up to 90 percent of jobs outside agriculture are in the informal sector. This includes household enterprises that are not formally registered, like street vendors or domestic workers. It also includes off-the-books activities by registered firms—for example, the taxi driver who offers a discount if the meter is not turned on.

Continue reading “Chart of the Week: The Potential for Growth and Africa’s Informal Economy” »

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