Countries in the IMF Financial Spotlight in 2017

By iMFdirect

The IMF will assess a range of financial systems in 2017: large ones such as China and Japan, medium-sized ones like Luxembourg, Spain, and Turkey, and small ones such as Guyana and Zambia.  Continue reading “Countries in the IMF Financial Spotlight in 2017” »

Imagine What Fiscal Policy Could Do For Innovation

By Vitor Gaspar and Ruud De Mooij

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

Imagine how three-dimensional printing, driverless cars and artificial intelligence will change our future. Or think of how developments in information technology, e-commerce and the sharing economy are already changing the way we learn, work, shop, and travel. Innovation drives progress and, in economic terms, determines productivity growth. And productivity growth, in turn, determines prosperity. It impacts our lives and well-being in fundamental ways: it determines where and how long we live; it determines our quality of life. Continue reading “Imagine What Fiscal Policy Could Do For Innovation” »

By | March 31st, 2016|Fiscal, Fiscal policy, IMF, International Monetary Fund, technology|0 Comments

Time to Act on the G-20 Agenda: The Global Economy Will Thank You

2014MDNEW_04By Christine Lagarde

(Versions in 中文, Français, 日本語Русский, Türk, and Español)

Implementation, investment, and inclusiveness: these three policy goals will dominate the G-20 agenda this year, including the first meeting of finance ministers and central bank governors in Istanbul next week. As Turkish Prime Minister Ahmet Davutoğlu recently put it: “Now is the time to act” – şimdi uygulama zamanı.

There is a lot at stake. Without action, we could see the global economic supertanker continuing to be stuck in the shallow waters of sub-par growth and meager job creation. This is why we need to focus on these three “I’s”:

Continue reading “Time to Act on the G-20 Agenda: The Global Economy Will Thank You” »

Housing Bubbles: An Ounce of Prevention is Worth a Pound of Cure

By Kevin Fletcher and Peter Kunzel

The main features of boom-bust cycles in housing markets are by now all too familiar.

During booms, conditions such as lax lending standards and low interest rates help drive up house prices and with them mortgage debt.

When the bust arrives, over-indebted households find themselves underwater on their mortgages— owing more than their homes are worth.

Feeling the pinch of reduced wealth and access to credit, households, in turn, rein in consumption. At the same time, lower house prices cause investment in new houses to tumble.

Together, these forces significantly depress output and increase unemployment. Non-performing loans increase, and banks respond by tightening credit and lending standards, further depressing house prices and adding to the vicious cycle.

Continue reading “Housing Bubbles: An Ounce of Prevention is Worth a Pound of Cure” »

Portfolio Investment in Emerging Markets: More Than Just Ebb and Flow

Evan PapageorgioBy Evan Papageorgiou When the U.S. Federal Reserve first mentioned in 2013 the prospect of a cutback in its bond buying program, markets had a “taper tantrum.” Many emerging markets saw large increases in volatility, even though outflows from their domestic markets were small and short-lived. Now the Fed has ended its bond buying and is looking ahead to rate hikes, and portfolio flows continue to arrive at the shores of emerging market economies. So everything’s fine, right? Not quite. In our latest Global Financial Stability Report, we show that the large concentration of advanced economy capital invested in emerging markets acts as a conduit of shocks from the former to the latter. Continue reading “Portfolio Investment in Emerging Markets: More Than Just Ebb and Flow” »

Europe’s Russian Connections

By Aasim M. Husain, Anna Ilyina and Li Zeng

(Version in Русский)

The conflict in Ukraine and the related imposition of sanctions against Russia signal an escalation of geopolitical tensions that is already being felt in the Russian financial markets (Chart 1). A deterioration in the conflict, with or even without a further escalation of sanctions and counter-sanctions, could have a substantial adverse impact on the Russian economy through direct and indirect (confidence) channels.

Chart 1

CESEE-Blog_7-30-14_final.001

What would be the repercussions for the rest of Europe if there were to be disruptions in trade or financial flows with Russia, or if economic growth in Russia were to take a sharp downturn? To understand which countries in Europe might be most affected, we looked at the broad channels by which they are connected to Russia—their trade, energy, investment, and financial ties. See also separate blog on Russia-Caucasus and Central Asia links.

Continue reading “Europe’s Russian Connections” »

Euro Area: An Unbalanced Rebalancing?

By John Bluedorn and Shengzu Wang

Since the financial crisis, the euro area current account, made up mostly of the trade balances of the individual countries, has moved from rough balance into a clear surplus. But the underlying rebalancing across economies within the euro area has been highly asymmetric, with some debtors, like Greece, Ireland, and Spain, seeing large current account improvements (sometimes into surplus), while creditors, like Germany and the Netherlands, have basically maintained their surpluses (Chart 1). A set of new staff papers look at the drivers of the improvements in debtor current accounts and the persistence of creditor current accounts, and whether these developments are a cause for concern.

Euro Area Current Account.Chart1

Continue reading “Euro Area: An Unbalanced Rebalancing?” »

Fixing International Corporate Taxation—Not Just a Problem for Advanced Economies

Mick KeenBy Michael Keen

It’s hard to pick up a newspaper these days (or, more likely for readers of blogs, to skim one online) without finding another story about some multinational corporation managing, as if by magic, to pay little corporate tax. What lets them do this, of course, are the tax rules that countries themselves set. A new paper takes a closer look at this issue, which is at the heart of the IMF’s mandate: the way tax rules spill over national boundaries, and what this means for macroeconomic performance and economic development. These effects, the paper argues, are pretty powerful and need to be discussed on a global level.

Follow the money

Take, for instance, international capital movements. Though tax is not the only explanation, the foreign direct investment (FDI) positions shown in Table 1 are hard to understand without also knowing that  tax arrangements in several of these countries make them attractive conduits through which to route investments. In its share of the world’s FDI, for example, the Netherlands leads the world; and tiny Mauritius is home to FDI 25 times the size of its economy.

Continue reading “Fixing International Corporate Taxation—Not Just a Problem for Advanced Economies” »

The Ties That Bond Us: What Demand For Government Debt Can Tell Us About the Risks Ahead

It has become apparent in recent years is that advanced economy government bond markets can also experience investor outflows, and associated runs. Our new research shows that advanced economies’ exposure to refinancing risk and changes in government borrowing costs depend mainly on who is holding the bonds— the demand side for government debt. Tracking who owns what, when and for how long can shed some light on potential risks in advanced economies’ government debt markets.

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