Stijn Claessens talks to Viv Davies about the recent IMF book titled 'Global Crises: Causes, Consequences and Policy Responses', co-edited with M Ayhan Kose, Luc Laeven, and Fabian Valencia. The book provides a comprehensive overview of current research into financial crises and the policy lessons learned. They discuss crisis prevention and management, and the crisis in the Eurozone. The interview was recorded in April 2014.
The global economy seems to be on the mend. In this column, IMF Chief Economist Olivier Blanchard provides a quick overview of the likely developments. The key points are that the recovery is happening as expected, but it remains fragile and uneven across major economies. Normalising monetary policy poses risks for vulnerable emerging markets and deflation is a real concern for the Eurozone.
The IMF’s January 2014 World Economic Outlook Update has three main messages:
First, the recovery is strengthening.
We forecast world growth to increase from 3% in 2013 to 3.7% in 2014. We forecast growth in advanced economies to increase from 1.3% in 2013 to 2.2% in 2014. And we forecast growth in emerging market and developing economies to increase from 4.7% in 2013 to 5.1% in 2014.
From recession to normalcy: Recoveries as a third phase of the business cycle
Antonio Fatás, Ilian Mihov14 August 2013
The last recession in the US ended in June 2009. Yet, three years on, unemployment remains high. This column argues that we need to better understand how business cycles of recession and expansion work. Detailed evidence from the US suggests that recoveries are not simply mirror images of recessions. Because of its policy relevance, economists and policymakers must acknowledge that the pattern of recession/recovery has significantly changed over the last half century.
According to the NBER business cycle dating committee, the last recession in the US ended in June 2009 (NBER 2013). Three years later US unemployment remains high and most estimates suggest that output remains below potential; a pattern also present in other advanced economies. As a result, central banks have made explicit commitments to keep interest rates at low levels until the recovery is firmly established, referring to a future date when the economy is close enough to ‘normal’.
The world economy seems to be acting in unexpected ways. This column argues that austerity and quantitative easing do not seem to be working out as advertised. There is an urgent need to review the effectiveness of alternative macroeconomic policy approaches, and prepare an internationally agreed pro-growth plan to reflate distressed economies. The outlines of one such plan are presented.
We may have avoided the cliffs, but we still face high mountains
Olivier Blanchard13 February 2013
The new year has provided cheer for macroeconomic optimists. This column by Olivier Blanchard, one of the world’s leading economists, argues that important progress has been made in putting the crisis behind us, but that recovery continues to be hampered by the need for fiscal consolidation and a weak financial system.
Optimism is in the air, particularly in financial markets. And some cautious optimism may indeed be justified.
Compared to where we were at the same time last year, acute risks have decreased. The US has avoided the fiscal cliff, and the euro explosion in Europe did not occur. And uncertainty is lower.
But we should be under no illusion. There remain considerable challenges ahead. And the recovery continues to be slow, indeed much too slow.
Put poetically: We may have avoided the cliffs. But we still face high mountains.
This time is different, again? The US five years after the onset of subprime
Carmen M Reinhart, Kenneth Rogoff22 October 2012
The strength of the US recovery has become a political issue in the presidential election. The US is doing better than other advanced economies, but famous economists associated with the Romney campaign claim this is not good enough. The US, they argue, is different. Here, the masters of the 'this time is different' research genre – Carmen Reinhart and Ken Rogoff – argue that US historical performance is not different when it is properly measured, so the economy’s performance is better than expected.
Have the US and European economies parted company? The signals are increasingly clear
Lucrezia Reichlin, Domenico Giannone, Jasper McMahon, Saverio Simonelli02 May 2012
According to official statistics, the UK and Europe are heading for recession, while the US is recovering. This has led some to suggest that European economies are moving in the opposite direction to the US. This column, written by the co-founders of Now-Casting, presents new now-casting estimates that put Europe and the US even further apart.
According to the NBER (2012), the last recession ended in June of 2009. CEPR (2012) dates the end of the recession in the Eurozone in the same quarter. For the UK, there is no established chronology but a visual inspection of Figure 1 shows that the recession and the subsequent recovery in the three economies have been highly synchronised.
Prakash Loungani, M Ayhan Kose, Marco E Terrones24 April 2012
How different is the current recovery from past ones? How do prospects differ between advanced and emerging economies? This column argues that the ongoing recovery in advanced economies has so far paralleled the weak and protracted recovery following the 1991 global recession to a surprising degree, partly because of challenges in Europe. In contrast, the recovery in emerging market economies has been unusually strong.
The last global recession was the deepest of the four recessions the world has experienced since World War II. Each recession led to fears of economic apocalypse but the global economy recovered in a year or two. Because of the depth of the last recession, some analysts worried that the world would relive the Great Depression of the 1930s. Luckily, and through significant policy actions, the global economy has been on a path of recovery over the past three years, but still suffering from the legacies of the crisis.
The world economy is showing scattered signs of improvement but remains fragile according to official forecasts. This column summarises the latest update of the Brookings Institution-FT Tracking Indices for the Global Economic Recovery. It confirms some positive signs but also much to worry about as the world economy continues to meander with no clear sense of direction.
As the G20 changes its recommendations from fiscal stimulus towards fiscal austerity, this column argues that policymakers should be careful not to leave the most vulnerable behind. It says that robust social spending and investments are needed even under tight fiscal conditions – stock markets may bounce back, but a generation growing up in poverty may not.
It has now been about two years since the first international food price shocks erupted in 2008. Even as recent news reports have begun to celebrate the first tentative signs of global economic recovery, a growing number of analysts have begun to warn of its fragility.