Greece is the first developed country to default on the IMF. But it continues to service its debt owed to private bondholders. How does this compare to historical experience? This column presents new evidence on seniority in sovereign debt markets. Despite the lack of a sovereign insolvency procedure, there is a clear-cut pecking order of sovereign debt repayments, which holds across countries and over time. Greece is an outlier case, and the Eurozone rescue loans face an elevated risk of arrears and haircuts in the future.
Matthias Schlegl, Christoph Trebesch, Mark L. J. Wright, Tuesday, August 11, 2015
Gaston Gelos, Hiroko Oura, Saturday, July 25, 2015
The growth of the asset management industry has raised concerns about its potential impacts on financial stability. This column assesses the systemic risk created by fund managers’ incentive problems and a first-mover advantage for end investors. Fund flows and fund ownership affect asset prices, and fund managers’ behaviour can amplify risks. This lends support to the expansion and strengthening of industry oversight, both at the individual fund and market levels.
Ashoka Mody, Thursday, June 18, 2015
The Greek crisis continues to take centre stage in policy debates. This column provides insight on the topic using evidence from three recent IMF studies. A suggested programme for Greece includes debt relief (debt equal to 50% of GDP and payable over 40 years), scaling down the banking system, and setting a flat 0.5% of GDP primary surplus over the next three years.
Anusha Chari, Peter Blair Henry, Friday, March 6, 2015
In the wake of the Great Recession, a contentious debate has erupted over whether austerity is helpful or harmful for economic growth. This column compares the experiences of the East Asian countries – whose leaders responded to the East Asian financial crisis with expansionary fiscal policy – with those of the European periphery countries during the Great Recession. The authors argue that it was a mistake for the European periphery countries to pivot from fiscal expansion to consolidation before their economies had recovered.
Susan Schadler, Thursday, October 9, 2014
The IMF went to extraordinary lengths to come to the assistance of Ukraine, financing above-quota limits and breaking its rule to withhold lending during acute conflict. The fighting continues and the government has yet to make concrete its commitments to the programme. Now that the 2014 economic projections are coming to resemble the ‘adverse scenario’, the IMF faces the task not only of remedying the situation in Ukraine, but of salvaging its own credibility.
Ruud de Mooij, Michael Keen, Victoria Perry, Sunday, September 14, 2014
Multinational companies’ ability to pay little corporate income tax has grabbed headlines recently. This column argues that the details of international tax rules matter for macroeconomic performance – especially in low-income countries. This emphasises the importance of the G20–OECD Action Plan on Base Erosion and Profit Shifting. However, dealing properly with tax spillovers will require a deeper global debate about the international tax architecture itself.
James Boughton, Monday, September 15, 2014
The international financial system is not working fine and reforms of regional and global institutions are much needed. This column discusses some of the transformations that the IMF could implement in order to keep pace with the changes in the world economy. One problem for the credibility of the IMF is the G20 in its current design and organisation. Institutional reforms, however, should be combined with advances in economic policy in order to promote economic growth and financial stability.
Giang Ho, Paolo Mauro, Friday, September 12, 2014
Forecasters often predict continued rapid economic growth into the medium and long term for countries that have recently experienced strong growth. Is this optimism warranted by past international growth experience? This column explores this question by looking at economic growth forecasts at longer-term horizons.
Marcus Miller, Lei Zhang, Wednesday, September 10, 2014
During the Great Moderation, inflation targeting with some form of Taylor rule became the norm at central banks. This column argues that the Global Crisis called for a new approach, and that the divergence in macroeconomic performance since then between the US and the UK on the one hand, and the Eurozone on the other, is partly attributable to monetary policy differences. The ECB’s model of the economy worked well during the Great Moderation, but is ill suited to understanding the Great Recession.
Pradumna B. Rana, Tuesday, August 5, 2014
China’s frustration with the slow progress of IMF governance reform has contributed to the evolution of a China-led architecture that locks out the West – the latest examples being the New Development Bank and the Credit Reserve Arrangement established by the BRICS. This column argues that these institutions are not a threat to the IMF and the World Bank, but they complicate global economic governance. It is unlikely that Europe’s ‘troika’ model – where the IMF works jointly with regional financing facilities – will be possible in Asia. We perhaps need a New Bretton Woods.
Barry Eichengreen, Andrew K Rose, Thursday, June 5, 2014
Since the global financial crisis of 2008–2009, opposition to the use of capital controls has weakened, and some economists have advocated their use as a macroprudential policy instrument. This column shows that capital controls have rarely been used in this way in the past. Rather than moving with short-term macroeconomic variables, capital controls have tended to vary with financial, political, and institutional development. This may be because governments have other macroeconomic policy instruments at their disposal, or because suddenly imposing capital controls would send a bad signal.
Susan Schadler, Monday, April 28, 2014
The IMF has had a preferred creditor status throughout the history of its lending. This implies that borrowing countries are expected to give priority to meeting their obligations to the IMF over other creditors. This column reviews the onset of this preferred status, its purpose, and the way it changed after the recent Eurozone crisis. By lending €30 billion to Greece in 2010, the IMF introduced the option to permanently waive the requirement that a borrowing country is on the path to stability. This option increases the chance of moral hazard and undermines the strong framework for the preferred creditor status.
Charles Wyplosz, Tuesday, December 24, 2013
The Ukraine-Russia deal involves politics as much as economics. This column argues that the economics of the deal will eventually lead to problems for one or both.
Nemat Shafik, Saturday, December 14, 2013
Crises expose weaknesses in rules and institutions, and provide impetus for reform. Macroeconomic policy coordination was strong early in the financial crisis, but momentum slowed. There has been significant progress on financial regulation, yet major challenges remain. International safety nets have been reinforced – including a trebling of IMF resources. This column argues that ensuring the future effectiveness and legitimacy of the IMF, its member countries will need to agree on greater voice and representation for emerging market countries in the interest of a better managed global economy.
Lee C. Buchheit , Beatrice Weder di Mauro, Anna Gelpern, Mitu Gulati, Ugo Panizza, Jeromin Zettelmeyer, Tuesday, November 12, 2013
Sovereign bankruptcies occur regularly and violently. The nature of sovereign-debt problems has changed in comparison to ten years ago. This column discusses policy proposals to better resolve debt crises and prevent them from happening in the future. Such proposals are given both for the Eurozone, and at a global level.
Olivier Blanchard, Florence Jaumotte, Prakash Loungani, Friday, October 18, 2013
The state of labour markets in advanced economies remains dismal despite recent signs of growth. This column explains the IMF’s logic behind the advice it provided on labour markets during the Great Recession. It argues that flexibility is crucial both at the micro level, i.e. on worker reallocation, and at the macro level, e.g. on collective agreements. It suggests that the IMF approach is close to the consensus among labour-market researchers.
Susan Schadler, Tuesday, October 15, 2013
The IMF loans to Greece, Ireland and Portugal are considered controversial by some analysts. This column argues that these loans – granted without having agreed on convincing paths to manageable debt levels – constituted a substantial departure from IMF principles. The situation is costly for Europe and, having now permanently changed the principles guiding large IMF loans, it will be costly for crises to come. A serious rethink of the management and decision-making structure of the IMF is needed.
Bernard Hoekman, Ben Shepherd, Monday, June 3, 2013
Making international trade easier and less bureaucratic – trade facilitation in WTO jargon – is one of the few areas where WTO talks are still making progress. This column discusses recent research that looks at the distribution of gains from trade facilitation among exporters of different sizes. Firm-level data from many developing countries show that firms of all sizes export more in response to improved trade facilitation.
Richard Wood, Saturday, May 11, 2013
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.
Biagio Bossone, Roberta Marra, Saturday, March 16, 2013
Since 2008, we have learned that the root causes of global economic instability are more than the sum of domestic instabilities. This column calls for a broad reconsideration of the principles underpinning current global economic governance; arguing that in a globalised world, isolated domestic economic policymaking is not enough. The international community needs to adhere to a ‘Good Global Citizen’ remit – housed by the IMF – if we are to tackle global economic policy under collective responsibility.