Lagarde—Lending an Ear to Young Voices
By IMFBlog
June 9, 2017
As Managing Director of the IMF, Christine Lagarde travels the world engaging with country officials, civil society, nongovernmental organizations, and media representatives. Lagarde also makes a point to engage with women and youth groups, to listen to their concerns, and to discuss their vision for their countries.
Why Talk of Bank Capital ‘Floors’ Is Raising the Roof
By Tobias Adrian and Aditya Narain
June 8, 2017
The headquarters of the Bank for International Settlements in Basel, Switzerland, which houses the Basel Committee on Banking Supervision (photo: Christian Hartmann/Reuters/Newscom)
Calculating how much capital banks should have is often a bone of contention between regulators and banks. While there has been considerable progress on reaching consensus on an international standard, one key issue remains unresolved. This is a proposal to establish a “floor,” or minimum, for the level of capital the largest banks must maintain.
Some financial institutions and national authorities question the need for a “floor,’’ arguing either that differences in business models or other elements of the global regulatory framework—notably limits on the amount of leverage banks may take on—make them redundant. We disagree. The floor reduces the chances that banks can game the system to reduce their capital buffers to levels that aren’t aligned with their risks. It is an essential element of global efforts to create a level playing field for banks operating across countries by strengthening common standards for regulation, supervision and risk management.
Continue reading “Why Talk of Bank Capital ‘Floors’ Is Raising the Roof” »
Protecting Education and Health Spending in Low-Income Countries
June 6, 2017
Versions in عربي (Arabic), 中文 (Chinese), Français (French) 日本語 (Japanese), Русский (Russian), and Español (Spanish)
Senior class in Nairobi, Kenya. In many countries with IMF-supported programs public spending on education grew significantly faster than the economy of the country (photo: Xinhua/Sipa USA/Newscom)
IMF-supported programs are designed to help economies get back on their feet, but what about their impact on social spending?
Our latest research shows that health and education spending have typically been protected in low-income country programs. In fact, an analysis of more than 25 years of data (1988–2014) suggests that public health spending, as a share of GDP, has on average remained unchanged, while public education spending has increased by 0.32 percentage points.
Continue reading “Protecting Education and Health Spending in Low-Income Countries” »
Chart of the Week: Why Energy Prices Matter
By IMFBlog
June 5, 2017
Versions in عربي (Arabic), 中文 (Chinese), Español (Spanish)
(photo: Imagine China/Newscom)
Wind turbines and solar panels generate electricity at power station, Jiangsu, China. Getting energy prices right will help reduce environmental costs and save lives (photo: Imagine China/Newscom)
World Environment Day is an occasion to consider why it’s so important to get energy prices right. The IMF has long argued that energy prices that reflect environmental costs can help governments achieve their goals not only for improving public health but also for inclusive growth and sound public finances.
A number of countries such as Egypt, Indonesia, Mexico, and Saudi Arabia have recently taken important steps to increase energy prices towards market levels. Some others, such as India and China have made important strides in cost-effective renewable energy sources—and reduced their reliance on fossil fuels. Still, undercharging for fossil fuel energy remains pervasive and substantial and can cause severe health effects from pollution, particularly in densely populated countries. Continue reading “Chart of the Week: Why Energy Prices Matter” »
The SDR: Giving An Old Idea New Life
By IMFBlog
June 2, 2017
The IMF's Special Drawing Right, or SDR, was created more than 50 years ago and used only by IMF member countries to supplement their official reserves. The SDR’s value is based on a basket of five major currencies—the US dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound. In this podcast, Mohamed El-Erian, Chief Economic Advisor at the financial services firm Allianz, and a former deputy director at the IMF, says an expanded use of the SDR in global markets could help to strengthen the world economy. Continue reading “The SDR: Giving An Old Idea New Life” »
Speed Limits for Financial Markets? Not So Fast
By IMFBlog
June 1, 2017
Traders on the floor of the New York Stock Exchange (photo: Andrew Kelly/Reuters/Newscom)
On the afternoon of May 6, 2010, a financial tsunami hit Wall Street. Stunned traders watched as graphs on their computer screens traced the vertiginous 998-point plunge in the Dow Jones Industrial Average, which erased $1 trillion in market value in 36 minutes.
There was little in the way of fundamental news to drive such a dramatic decline, and stocks bounced back later that day. The event, quickly dubbed the “flash crash,” focused attention on the role of high-frequency trading and algorithms in amplifying market volatility.
Continue reading “Speed Limits for Financial Markets? Not So Fast” »
Tomorrow’s Workplace
May 31, 2017
It seems fitting that we are launching our redesigned magazine with a cover dedicated to millennials and the future of work. But while Finance & Development has mainly changed its appearance, not its content, young adults may have to make more fundamental adjustments to keep pace with the requirements of tomorrow’s workplace. Millennials face myriad challenges as they seek to carve out a prosperous future for themselves.
Higher Policy Uncertainty Could Be Bad News for Japan’s Economy
by Elif C. Arbatli, Steven J. Davis, and Arata Ito
May 30, 2017
Version in 中文 (Chinese), 日本語 (Japanese)
Policy uncertainty remains a challenge in Japan, and can harm the country’s economic performance according to a new IMF study. The good news is that credible plans for taxation, spending and structural reforms, as well as greater clarity about monetary policy can reduce uncertainty. Continue reading “Higher Policy Uncertainty Could Be Bad News for Japan’s Economy” »
Chart of the Week: Brexit and The City
By IMFBlog
May 29, 2017
It seems likely that Brexit will alter the relationship that UK-based financial firms have with the European Union—even though negotiations are just beginning.
For an idea of how much is at stake for the United Kingdom’s financial services industry, take a look at our Chart of the Week, drawn from the IMF’s latest Global Financial Stability Report. The chart illustrates the linkages that might be affected by the country’s withdrawal from the EU. One example: of the over-the-counter trading in foreign exchange derivatives in the United Kingdom, Germany and France, the UK share comes to 89 percent. Continue reading “Chart of the Week: Brexit and The City” »
Democratizing the Money Market
By IMFBlog
May 26, 2017
Just as technology is changing the way we live and work, it also affects the way we use and move our money. In this podcast, lawyer and bitcoin expert Patrick Murck of Harvard University tells us that financial technology, or fintech, is poised to revolutionize the way the world does business.
