Global governance

Jeffrey Frankel, 09 December 2015

Calls for coordination of macroeconomic policy have made a comeback since the Global Crisis. This column reviews this return of international policy coordination, both in terms of fiscal and monetary policy. It discusses recent developments and considerations in fiscal and monetary policy games, and cautions that most but not all calls for coordination are useful. 

Aida Caldera, Mikkel Hermansen, Oliver Röhn, 19 September 2015

The Global Crisis and its high costs have revived interest in early warning indicators of economic risks. This column presents a new set of indicators to detect vulnerabilities and assess country-specific risks of suffering a crisis. The empirical evidence confirms the usefulness of the vulnerability indicators in warning of severe recessions and crises in OECD countries. But indicators are no silver bullet and should be complemented with other monitoring tools, including expert judgement.

Alan J Auerbach, Yuriy Gorodnichenko, 10 May 2015

The impact of fiscal policy on exchange rates is of key interest to policymakers. This column argues that unexpected government spending instantly affects exchange rates. The finding, based on daily data reporting of the US Defence Department, may suggest that unexpected government spending has broader macroeconomic effects as well. The results, however, do not hold is low-frequency data are used instead.

Deborah Lucas, 05 December 2014

Governments run the world’s largest financial institutions. The size of government activities has grown in recent decades but comprehensive estimates are unavailable. This column presents new evidence on the costs of government credit support. It argues that governments tend to understate credit costs and the consequences of that could be considerable. Cost underreporting may lead to overinvestment and capital misallocation, could encourage the over-reliance on credit, reduce transparency, and cause a build-up of financial risk.

Ian Goldin, 21 November 2014

Global hyperconnectivity and increased system integration have led to vast benefits in terms of income, education, innovation and technology. Yet globalisation has also created serious concerns about how local events can so easily cascade over national borders to become crises that affect everyone. This Vox Talk discusses the widening gap between systemic risks and their effective management. Goldin argues that the new dynamics and complexities of globalisation are endemic and will potentially destabilise our societies unless they are addressed immediately and more effectively.

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