Government Bonds: No Longer a World Without Risk

2017-04-15T14:27:39-04:00March 24, 2011|

The risk free nature of government bonds, one of the cornerstones of the global financial system, has come into question as the global crisis unfolds. One thing is now very clear: government bonds are no longer the risk-free assets they once were. This carries far reaching implications for policymakers, central bankers, debt managers, and how the demand and supply sides of government bond markets function.

Exploring Economic Policy Frontiers After the Crisis: 2010 IMF Research Conference

2017-04-15T14:31:02-04:00November 19, 2010|

The crisis has forced economists and policy makers to go back to their drawing boards. Where did they go wrong, and what implications does the crisis have for both macroeconomic theory and macroeconomic policy making? This was the topic of this year’s IMF Jacques Polak Research Conference. The twelve papers presented at the conference provided rich fodder for discussion. Here, Olivier Blanchard shares some flavor of the major themes, including: (i) the increased attention to fiscal policy; (ii) the scope for monetary policy to lessen the adverse ‘real economy’ effects of financial disruptions; (iii) the role of international capital flows in weakening financial stability; and (iv) the prominence of regulatory issues and the interplay with the real economy.

Asia: The Challenge of Capital Inflows

2017-04-15T14:37:16-04:00May 18, 2010|

History has shown that persistent and large capital inflows can be a double edged sword. While they bring with them numerous benefits, they do pose risks and policy dilemmas. Continued large capital flows pose, for example, the risk of overheating and runups in asset prices that may subsequently render the region vulnerable to outflows and asset price busts.

Does Cheap Foreign Money Bring Risks for Latin America?

2017-04-15T14:37:21-04:00May 4, 2010|

By Nicolás Eyzaguirre

Versión en Español

Not so long after the global financial crisis, the supply of foreign financing has become abundant, and cheap, for many emerging market countries.  This sounds like good news for Latin America, and it is—creating opportunities for debt management, saving on interest paid to foreigners, and expanding opportunities for investment.  But it also comes with a number of potential risks that need to be managed.

Our new Regional Economic Outlook for the Western Hemisphere takes an in-depth look at the risks arising from what we call “easy external financial conditions.”  There we […]

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