Chart of the WeekThe Pre-Pandemic Debt Landscape—and Why It Matters

2021-02-02T10:19:45-05:00February 1, 2021|

By Xuehui Han, Paulo Medas, and Susan Yang

Many countries entered the pandemic with elevated debt levels. Our new update of the IMF’s Global Debt Database shows that global debt—public plus private—reached $197 trillion in 2019, up by $9 trillion from the previous year. This substantial debt created challenges for countries that faced a debt surge in 2020, as economic activity collapsed and governments acted swiftly to provide support during the pandemic.

Higher debt can potentially reduce the ability of governments to react to the COVID-19 crisis.

Our data show that the global average debt-to-GDP ratio […]

The Effects of Wage Moderation: Can Internal Devaluations Work?

2019-03-27T14:05:49-04:00November 17, 2015|

By Jorg Decressin and Prakash Loungani

Devaluation is often part of the remedy for a country in financial trouble. Devaluation boosts the competitiveness of a country’s exports and curtails imports by making them more costly. Together, the higher exports and the reduced imports generate some of the financial resources needed to help the country get out of trouble.

For countries that belong to—and want to stay in—a currency union, however, devaluation is not an option. This was the situation facing several euro area economies at the onset of the global financial crisis: capital had been flowing into […]

Making Monetary Policy Decisions in the Dark

2019-03-27T15:27:24-04:00August 12, 2015|

By Francesco Grigoli, Alexander Herman, Andrew Swiston, and Gabriel Di Bella

(Version in Español and Português)

In the wake of the global financial crisis, monetary and fiscal policies were used aggressively to counteract the effects of the crisis on economic activity. Policymakers look at a number of indicators to guide them in assessing an economy’s level of activity relative to its productive capacity. But trying to figure out the position of the economy in real time is often quite challenging, with consequences for setting policy.

In the case of Brazil in 2011, for example, policymakers estimated […]

Financial Stability Committees: Learning from the Experts

2019-03-27T15:58:03-04:00June 16, 2015|

By Jorge Roldos and Alejandro Werner

(Versions in Español and Português)

Macroeconomists and financial sector experts need to talk to each other. Such communication is important to help identify and measure systemic risks as well as to coordinate and/or conduct macroprudential policies—rules that reduce instability across the financial system.

The creation of financial stability committees, including in Latin America, have been a forum for precisely this—working together to share information about evolving risks, develop monitoring and mitigating tools, and to define the decision-making authority, accountability, and communication to the general public. But institutional design and governance of […]

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

2019-03-27T17:34:46-04:00May 1, 2015|

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 […]

A Mirage, Not An Oasis: Easy Money and Financial Markets

2017-04-14T01:52:32-04:00October 15, 2014|

By Fabio Cortes, David Jones and Evan Papageorgiou

Low interest rates and other central bank policies in the United States have sent investors looking for higher returns on their investments. Money is pouring into mutual funds and exchange-traded funds, which is fueling a mispricing of credit and a build-up of risks to liquidity in the markets—the ability to trade in assets of any size, at any time, and to find a ready buyer.

Mutual funds and exchange-trade funds are the largest owners of U.S. corporate and foreign bonds (Chart 1). […]

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