Getting into Higher Gear: Why Structural Reforms Are Critical for Revving Up Global Growth

David Lipton 2016-1By David Lipton

Versions in عربي (Arabic), Español (Spanish)

Almost a decade after the start of the global financial crisis, the world economy is still trying to achieve escape velocity. The IMF’s recent forecast for global growth is a disappointing 3.1 percent in 2016 and 3.4 percent in 2017. And the outlook remains clouded by increased economic and political uncertainty, including from the impact of the Brexit vote.

Policymakers have taken forceful macroeconomic policy action to support growth, such as fiscal stimulus and appropriately accommodative monetary policy. But a lasting recovery remains elusive. (more…)

Policy Interest Rates in Latin America: Moving to Neutral?

Using our estimated neutral interest rates we find that current policy rates are close to their neutral level in several countries (Chile, Colombia, and Peru). For Brazil and Mexico we find that monetary policies remain stimulative (with actual interest rates below neutral). For other countries in the region our analysis suggests that Costa Rica, the Dominican Republic, Guatemala, Paraguay, and Uruguay have lower interest rates than their neutral level. However, these results should be viewed with caution given data limitations and weaker monetary policy transmissions.

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