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 […]

Growth Dividend from Stabilizing Fiscal Policies

2019-03-27T18:16:32-04:00April 8, 2015|

Xavier DebrunBy Xavier Debrun 

(Versions in عربي中文, FrançaisРусский日本語and Español)

Anyone can easily picture an economy where instability, stagnation and runaway government deficits converge into a perfect storm. Yet the simple mirror image of stability, growth, and balanced budgets currently seems odd to many. And with monetary policy looking breathless, some even wonder whether sacrificing fiscal sanity for short-term growth might not be worth a try.

In any economic debate, looking at […]

India’s Economy: Stamina Is The Name Of The Game

2017-04-15T13:56:52-04:00February 21, 2013|

Is India’s growth about to go back to 8-9 percent? The short answer is no. But we need to look back to understand why India’s growth has decelerated to a decade low and why the slump, which has hit investment particularly hard, has persisted for over a year. As structural problems are at the root of the slowdown, so structural reforms must be at the core of the solution.

It’s the Years, Not The Mileage: IMF Analysis of Pension Reforms in Advanced Economies

2017-04-15T14:13:20-04:00February 1, 2012|

Indiana Jones, the fictional character of the namesake movies, once said “It’s not the years, it’s the mileage.” The quote comes to mind as many advanced economies wrestle with the best way for pension reform to ensure both retirees and governments don’t go broke. Our view, explained in a new study, is that in fact the years do matter. Our analysis shows that gradually raising retirement ages could help countries contain pension spending increases and boost economic growth.

Fiscal Glass is Half Full: Some Reasons for Optimism

2017-04-15T14:18:53-04:00September 21, 2011|

In the midst of jittery financial markets, and global economic doom and gloom, it’s easy to become pessimistic. Public debt and fiscal deficits in many advanced economies remain very high. Nevertheless, important progress has been made in fiscal adjustment—the fiscal outlook in most countries is stronger than we expected two years ago. So to the pessimists I say, don’t lose sight of what’s been achieved. But, to the optimists (if there are any) I say, don’t underestimate what still needs to be done. The task that policymakers face is complicated. They need to ensure the public sector is not a source of instability by committing to a plan that will stabilize and then bring down public debt. At the same time, they need to make sure that fiscal tightening itself does not undermine the recovery.

Promises, Promises. Better Measuring the Effect of Pension Reform

2017-04-15T14:24:56-04:00April 26, 2011|

We all hope to retire one day. Our pensions hold the promise of that. Good fiscal policy means thinking about ho w policy decisions—involving long-term promises, such as pensions—affect government finances both today and in the future. With pension reform a priority for so many countries, it is a problem that traditional deficit and debt indicators focus on the health of public finances today, but fail to capture the future impact of pension promises. We propose a new indicator—the “pension-adjusted” budget balance—that can help measure when changes in pension policies are improving or worsening long-term fiscal health. Used as a complement to traditional indicators, this new indicator could help avoid incentives to delay or even reverse pension reforms.

Balancing Fiscal Support with Fiscal Solvency

2017-04-15T14:43:21-04:00November 18, 2009|

Fiscal deficits cannot be lowered in the immediate future. For the time being, fiscal (and monetary) policies must continue to support economic activity. The economic recovery is uneven and could be threatened by any premature withdrawal of policy support. Private demand is still unable to stand on its own two feet. This gives rise to a policy conundrum. How can we reconcile the competing requirements of short-term support for the economy and longer term fiscal solvency?
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