By Deniz Igan
July 3, 2018
During the global financial crisis, policymakers faced a steep trade-off in handling bank failures. Using public funds to rescue failing banks (bail-outs) could weaken market discipline and lead to excessive risk taking—the moral hazard effect. […]
February 22, 2018
When the capacity to communicate effectively on financial stability policies is not there, it is like trying to fly a plane with one wing missing. It takes more than sound policy making. Communications is an essential part of the job.
Following the global financial […]
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.
Six years after the start of the global financial crisis, low interest rates and other central bank policies in the United States remain critical to encourage economic risk-taking—increased consumption by households, and greater willingness to invest and hire by businesses. However, this prolonged monetary ease also may have encouraged excessive financial risk-taking. Our analysis in the latest Global Financial Stability Report suggests that although economic benefits are becoming more evident, U.S. officials should remain alert to excessive financial risk-taking, particularly […]