The Financial System Is Stronger, but New Vulnerabilities Have Emerged in the Decade Since the Crisis

2019-03-13T12:46:35-04:00October 9, 2018|

By Tobias Adrian

October 10, 2018

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Debt owed by governments, companies and households in economies with globally systemically important financial sectors has risen since the global financial crisis (Photo: Richard B. Levine/Newscom)

Although the global expansion has plateaued, easy monetary policies continue to support growth. But we shouldn’t rest too easily. Chapter 1 of the latest Global Financial Stability Report finds that short-term risks to the financial system have increased somewhat over the past six months. […]

Ten Years After Lehman—Lessons Learned and Challenges Ahead

2019-03-13T14:59:00-04:00September 5, 2018|

By Christine Lagarde

September 5, 2018

عربيBaˈhasa indoneˈsia, Español, 中文, Français日本語, PortuguêsРусский

A trader on the New York Stock Exchange the day US investment bank Lehman Brothers filed for bankruptcy: the global crisis that followed is a defining moment of our time (Photo: Nancy-Kaszerman/ZUMA Press/Newscom)

The global financial crisis remains one of the defining events of our time. It will forever mark the generation that lived through it. […]

The Global Expansion: Still Strong but Less Even, More Fragile, Under Threat

2019-03-14T09:28:49-04:00July 16, 2018|

By Maurice Obstfeld

July 16, 2018

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The escalation of trade tensions is the greatest near-term threat to global growth (photo: wildpixel/Getty Images by iStock)

Amid rising tensions over international trade, the broad global expansion that began roughly two years ago has plateaued and become less balanced. […]

Bringing Down High Debt

2019-03-14T12:19:57-04:00April 18, 2018|

By Vitor Gaspar and Laura Jaramillo

April 18, 2018

Versions in عربي (Arabic), 中文 (Chinese),  Español (Spanish), Français (French), 日本語 (Japanese), Português (Portuguese), Русский (Russian)

High debt makes governments’ financing vulnerable to sudden changes in market sentiment (photo: NYSE-LUCAS JACKSON-REUTERS Newscom).

Global debt hit a new record high of $164 trillion in 2016, the equivalent of 225 percent of global GDP. Both private and public debt have surged over the past decade. High debt makes government’s financing vulnerable to sudden changes in market sentiment. It also limits a government’s ability to provide support to the economy in the event of a downturn or a financial crisis.

Countries should use the window of opportunity afforded by the economic upswing to strengthen the state of their fiscal affairs. The April 2018 Fiscal Monitor explores how countries can reduce government deficits and debt in a growth-friendly way.

[…]

Risky Business: Reading Credit Flows for Crisis Signals

2019-03-14T12:50:45-04:00April 10, 2018|

By Claudio Raddatz Kiefer and Jérôme Vandenbussche 

April 10, 2018

Versions in عربي (Arabic),  中文 (Chinese),  Español (Spanish),  Français (French), 日本語 (Japanese), Português  (Portuguese), Русский (Russian)

The odds of a severe economic downturn are higher when a growing portion of credit flows to riskier firms, according to a new IMF study (Photo: Pali 137/ iStock by Getty Images).

Supervisors who monitor the health of the financial system know that a rapid buildup of debt during an economic boom can spell trouble down the road. That is why they keep a close eye on the overall volume of credit in the economy. When companies go on a borrowing spree, supervisors and regulators may decide to put the brakes on credit growth.

Trouble is, measuring credit volume overlooks an important question: how much of that additional money flows to riskier companies – which are more likely to default in times of trouble—compared with more creditworthy firms? The IMF’s latest Global Financial Stability Report seeks to fill that gap by constructing measures of the riskiness of […]

Communications Can Help to Get Financial Stability Off the Ground

2019-03-15T10:25:33-04:00February 22, 2018|

By Olga Stankova

February 22, 2018 

Versions in 中文 (Chinese), Español (Spanish), Português (Portuguese), Русский (Russian)

Policy and communications—two wings to fly to success (photo: iStock by Getty Images).

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 crisis, many countries redoubled their efforts to build stronger financial stability frameworks. Central banks and supervisory agencies have enhanced their capacity to identify and monitor systemic risks in the financial system and have developed new policies to mitigate them. […]

The Euro Area Needs a Fiscal Union

2019-03-15T10:26:56-04:00February 21, 2018|

By Helge Berger, Giovanni Dell’Ariccia, and Maurice Obstfeld

February 21, 2018

Version in Français (French) 

Without more tangible elements of a fiscal union, the euro area will remain fundamentally vulnerable to shocks. (photo: iStock by GettyImages) .

The euro area is experiencing a robust recovery, but the architecture supporting Europe’s currency union remains incomplete and leaves the region vulnerable to future financial crises.

While substantial progress has been made to address some architectural issues—conditional lending facilities and key elements of a banking union—we argue in our recent paper that the euro area needs to build elements of a common fiscal policy, including more fiscal risk sharing, to preserve financial and economic integration and stability. Without some degree of fiscal union, the region will continue to face existential risks that policymakers should not ignore. While this is not a new topic, the current favorable economic climate might be the moment to advance the discussion—and the chance to strengthen the euro area. […]

Weak Productivity: The Role of Financial Factors and Policies

2019-03-14T16:02:37-04:00January 8, 2018|

By Romain Duval, Giuseppe Nicoletti, and Fabrizio Zampolli

January 8, 2018

Auto worker in Mexico: weak productivity has been a problem even before the global financial crisis (photo: Henry Romero/Newscom).

Almost ten years after the onset of the global financial crisis productivity growth remains anaemic in advanced economies despite very easy monetary conditions, casting doubts on the sustainability of the cyclical recovery. The productivity slowdown started well before the crisis, which then amplified the problem. To what extent can this slowdown be ascribed to policies and financial factors, including loose monetary policy prior to 2008, corporate and bank balance sheet vulnerabilities, and the exceptional monetary and financial policy responses to the crisis? […]

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