Inflation | IMF Blog

Two to Tango—Inflation Management in Unusual Times

By Vitor Gaspar, Maurice Obstfeld, and Chang Yong Rhee

June 15, 2017

Versions in 中文 (Chinese), and 日本語 (Japanese)

Shinjuku shopping district, Tokyo, Japan. Strong coordination between monetary and fiscal policies can help Japan tackle its low inflation (photo: Nikada/iStock/Getty Images)

Monetary and fiscal policies interact in complex ways. Yet modern institutional arrangements typically feature a strict separation of responsibilities. For example, the central bank targets inflation and smooths business cycle fluctuations, while the fiscal authority agrees to respect its budget constraint and to support financial stability by maintaining the safe asset status of its debt. This gives governments the freedom to pursue a multiplicity of economic and social objectives (in IMF parlance, inclusive growth).

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By IMFBlog| June 15th, 2017|Advanced Economies, aging, Asia, Economic outlook, Fiscal policy, inflation, inflation targeting, International Monetary Fund, monetary policy|0 Comments

The Fruits of Growth: Economic Reforms and Lower Inequality

Lagarde.2015MDPORTRAIT4_114x128 By Christine Lagarde

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

Growth is essential for improving the lives of people in low-income countries, and it should benefit all parts of society.

Traveling through Africa in the last few days, I have been amazed by the vitality I have witnessed: business startups investing in the future, new infrastructure under construction, and a growing middle class. Many Africans are now making a better living and fewer are suffering from poverty. My current host, Uganda, for example, has more than halved its absolute poverty rate to about 35 percent from close to 90 percent in 1990.

But we have also seen a flip side. Poverty, of course, but inequality as well remain stubbornly high in most developing countries, including in Africa, and too often success is not shared by all. Continue reading “The Fruits of Growth: Economic Reforms and Lower Inequality” »

By IMFBlog| January 26th, 2017|Economic research, growth, IMF, Inequality, International Monetary Fund, Reform|0 Comments

A Field Guide to Exchange Rate Regimes in Central, Eastern and Southeastern Europe

By Philip Gerson and Johannes Wiegand

For an economist interested in examining the evolution of monetary and exchange rate regimes, Central, Eastern and Southeastern Europe (CESEE) provides a habitat of unparalleled diversity. Almost every type of regime can be found in the region: from floating and inflation targeting over various pegs to the unilateral use of the euro and full euro area membership.

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By IMFBlog| November 29th, 2016|Economic research, euro zone, Fiscal policy, IMF, International Monetary Fund, structural reforms|0 Comments

The Whole Can Be Greater Than the Sum of its Parts

By Vitor Gaspar, Maurice Obstfeld and Ratna Sahay

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.

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By IMFBlog| September 28th, 2016|capital markets, Economic research, Fiscal policy, Government, IMF, International Monetary Fund, Reform, Uncategorized|0 Comments

The Lowdown on U.S. Core Inflation

By Yasser Abdih

There was a time when U.S. central bankers worried that inflation was too high, and they tried to bring it down. Now the opposite is true: the Federal Reserve is concerned that inflation has remained stubbornly low, and it’s trying to boost prices. The reason: persistently low inflation raises the risk that prices will actually start to decline, a dangerous condition known as deflation. That’s bad news because it makes people less willing to borrow and spend—anticipating lower prices, consumers will put off spending—and could also lead to a fall in wages. Continue reading “The Lowdown on U.S. Core Inflation” »

By IMFBlog| July 26th, 2016|Advanced Economies, International Monetary Fund, Uncategorized|0 Comments

Learning to Adjust: The Effects of Currency Depreciations on Inflation in Latin America

By Yan Carrière-Swallow and Bertrand Gruss

(Versions in Español and Português)

Falling global commodity prices and the normalization of monetary policy in the United States have contributed to widespread currency depreciations in Latin America. In theory, a falling currency is expected to create inflation by driving up the price of imported goods and services—triggering what economists call exchange rate pass-through.

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By IMFBlog| May 11th, 2016|Advanced Economies, banking, International Monetary Fund, Uncategorized|0 Comments

It’s Mostly Food: How to Tame Indian Inflation

By Rahul Anand and Paul Cashin

After being low for decades, inflation in India trended higher from the mid-2000s. It reached 10–11 percent by 2008, and remained elevated at double digits for several years. Even though inflation fell by almost half in 2014, inflation expectations have remained high.

High and persistent inflation in recent years has presented serious macroeconomic challenges in India, increasing the country’s domestic and external vulnerabilities. As Reserve Bank of India Governor Raghuram Rajan pointed out at the 8th R.N. Kao Memorial Lecture in 2014, “inflation is a destructive disease … we can’t push inflation under the carpet as a central banker. We have to deal with it.”

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By IMFBlog| March 10th, 2016|Asia, Emerging Markets, IMF, Inequality, International Monetary Fund, LICs|0 Comments

Population Pressures

By Jeff Hayden

(Versions in عربي and Español)

Say “population growth” and many people immediately think of resources under stress. The mind jumps to 19th century scholar Thomas Malthus, who saw population outstripping the food supply, or to Paul Ehrlich, whose 1968 book The Population Bomb warned of global catastrophe from overpopulation.

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By IMFBlog| February 25th, 2016|Africa, China, Employment, Fiscal policy, Government, growth, IMF, International Monetary Fund|0 Comments

Managing China’s Economic Transition

By Changyong Rhee

(Version in 中文 and Español)

From advanced economy financial markets to developing country commodity producers, the world has closely followed developments in China in recent months. After 35 years of extraordinarily rapid growth, the Chinese economy is undergoing a major transition from export-led growth to a model increasingly driven by consumption and services, with less emphasis on debt-financed public investment.

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By IMFBlog| October 5th, 2015|Asia, Economic outlook, Emerging Markets, Financial Crisis, Fiscal policy, growth, IMF, International Monetary Fund|0 Comments

Making Monetary Policy Decisions in the Dark

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 in real time that the economy was at a level of output consistent with its productive capacity. Over time, however, the assessment of the cyclical position of the Brazilian economy changed drastically. It had not just been at full capacity, but was overheating. The economy was actually facing inflationary pressures, requiring policy tightening to bring it back to the central bank’s target.

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By IMFBlog| August 12th, 2015|Economic Crisis, Economic outlook, Economic research, Emerging Markets, Español, Finance, Fiscal policy, growth, IMF, International Monetary Fund, Investment, Public debt|0 Comments

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