There are policy options to bring new life into anemic economic recoveries and to counteract renewed slowdowns. Our new paper, along with our co-authors, debunks widespread concerns that little can be done by policymakers facing a vicious cycle of (too) low growth, (too) low inflation, near-zero interest rates, and high debt levels.
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.
Banks are struggling to overhaul the way they do business given new realities and new regulations adopted in the aftermath of the global financial crisis. While banks are generally stronger—they have more capital—they are less profitable, as measured by the return on equity. There are a number of reasons behind this, including: anemic net income at banks, particularly in the euro area; higher levels of equity; and banks taking fewer risks.
If they cannot change their business models, there is a risk that banks will not be […]
By José Viñals
I have three key messages for you today:
1. Policymakers are facing a new global imbalance: not enough economic risk-taking in support of growth, but increasing excesses in financial risk-taking posing stability challenges.
2. Banks are safer but may not be strong enough to vigorously support the recovery. And risks are shifting to the shadow banking system in the form of rising market and liquidity risks. If left unaddressed, these […]
By Deniz Igan
(Version in Español)
Something unusual happened this year. For the first time in almost ten years, a book by an economist made it to Amazon’s Top 10 list. Thomas Piketty’s Capital in the Twenty-First Century captured the attention of people from all walks of life because it echoed what an increasing number of Americans have been feeling: the rich keep getting richer and poverty in America is a mainstream problem.
The numbers illustrate the troubling reality. According to the U.S. Census Bureau, […]
The recovery continues, but it remains weak, indeed a bit weaker than we forecast in April.
We have revised our forecast for world growth in 2014 from 3.7 percent in April to 3.4 percent today. This headline number makes things look worse than they really are. To a large extent, it reflects something that has already happened, namely the large negative US growth rate in the first quarter. […]
The prospects for global growth have brightened in recent months, led by a stronger recovery in the advanced economies. Yet in Latin America and the Caribbean, growth will probably continue to slow, although some countries will do better than others. We analyze the challenges facing the region in our latest Regional Economic Outlook and discuss how policymakers can best deal with them.
We’ve had a spate of good news on the economic front recently. Does this mean that we are finally out of the fiscal woods? According to our most recent Fiscal Monitor report, not yet, as public debt remains high and the recovery uneven.
First, the good news. The average deficit in advanced economies has halved since the 2009 peak. The average debt ratio […]
The IMF’s Christine Lagarde is in Brussels on January 28 to talk about jobs and growth in Europe.
The good news is growth is finally picking up in the euro area as it is slowly emerging from the deep recession. But nearly 20 million people are unemployed.
The most effective way of boosting jobs is to get growth going again.
The IMF has a new book that analyzes today’s challenges head-on and proposes a roadmap for the continent’s recovery.
Christine Lagarde will discuss the book along with Wolfgang Schäuble, Finance Minister of Germany, and Luis de Guindos, Minister of Economy and Competitiveness […]
(Version in Français)
My second stop on this trip to Africa, after Kenya, was Mali—a country that is facing an extraordinarily difficult transition: from restoring political stability to securing economic stability—from crisis to recovery.
Having gone through massive turmoil in 2012, Mali is emerging successfully, thanks to the perseverance and fortitude of its people. Parliamentary and presidential elections have been held, and the newly elected government has put forth a new economic […]