Monday , August 26 2019
Home / IMFBlog

IMF Blog

Articles by IMF Blog

Chart of the WeekFintech, Fiber-optics, and Financial Inclusion

4 days ago

By IMFBlog
Peoples’ connection to new technology is built on the backbone of electrical and fiber-optic cables running beneath our feet—and under oceans.
In 2010, most economies that were not connected to the modern, cabled internet could be found in the Pacific. However, this is no longer the case, and by 2020 the region will be almost completely connected.

Governments could harness technology to improve tax collection, government transfers, trade financing, and land registries.

Our chart of the week shows the technological transformation taking place in the Pacific island countries, where the completion of submarine fiber-optic cables will facilitate technology-enabled financial inclusion.

  (Source: Teleography)
The spread of innovative financial technologies, known as

Read More »

Taming the Currency Hype

5 days ago

By Gustavo Adler, Luis Cubeddu, and Gita Gopinath
Escalating trade tensions are taking a toll on the global economy and are partly responsible for the recent downward revisions to our growth forecasts for 2019-20.
Facing sluggish growth and below-target inflation, many advanced and emerging market economies have appropriately eased monetary policy, yet this has prompted concerns over so-called beggar-thy-neighbor policies and fears of a currency war. In this blog post, we discuss the implications of recent policy actions and proposals and offer alternative ways to address concerns over trade imbalances that are much more supportive of global growth.

Higher bilateral tariffs are unlikely to reduce aggregate trade imbalances.

Exchange rates can’t do it all
Monetary easing can help

Read More »

chart of the weekFuel for Thought: Ditch the Subsidies

12 days ago

By IMFBlog
Pensions, education, healthcare, better infrastructure, technology, and climate change: fiscal policymakers have their work cut out for them on many fronts.  Whether you live in a rapidly aging advanced economy,  or a low-income or emerging market economy with a young, booming population, all these issues matter for you. 
As the Fiscal Monitor in April 2019 shows, government policies on taxes and spending have to adapt and should shift to growth-enhancing investment.  This means, for example, more money to build classrooms, hospitals and roads, while cutting wasteful spending, such as inefficient energy subsidies.

Removing fossil fuel subsidies, which typically benefit the rich more than the poor, could gain up to 4 percent of global GDP.

Our chart of the week shows that

Read More »

US Business Investment: Rising Market Power Mutes Tax Cut Impact

18 days ago

By Emanuel Kopp, Daniel Leigh, and Suchanan Tambunlertchai
US business investment has been on the rise. Since the passage of the Tax Cuts and Jobs Act at the end of 2017, US businesses have bought more machinery, developed software, and created new intellectual property.
Some believe that the key to this growth in business investment has been the Act’s cut to the corporate tax rate from 35 percent to 21 percent, which lowered the cost of capital. Lower capital costs could, at least theoretically, encourage business owners to increase investment.
But our recent study suggests a simpler reason: business investment has been rising because domestic demand and sales have been rising. We also find that rising market power—the ability of companies to charge prices above production costs—has

Read More »

Chart of the WeekCanada’s Housing Market Slowdown

19 days ago

By IMFBlog
Following a period of escalating prices, Canada’s housing market is cooling. Measures designed to strengthen financial stability such as more stringent tests of borrowers’ ability to repay their loans, along with higher interest rates, combined to make mortgage financing more expensive. As a result, residential mortgage credit slowed to just 3.4 percent annual growth in December 2018.
Nationwide, house prices are 2.5 percent lower than the peak in mid-2018. This week’s chart of the week shows that prices in most major cities have stabilized. In Toronto and Vancouver, declines in house prices reduced speculative “froth” but prices remain overvalued.

Overall, policies that strengthen financial stability succeeded in containing housing-related financial stability risks.

Read More »

Outlook for Latin America and the Caribbean: A Stalling Recovery

28 days ago

By Alejandro Werner
Economic activity in Latin America and the Caribbean remains sluggish. Real GDP is expected to grow by 0.6 percent in 2019—the slowest rate since 2016—before rising to 2.3 percent in 2020.
The weak momentum reflects negative surprises in the first half of 2019, elevated domestic policy uncertainty in some large economies, heightened US-China trade tensions, and somewhat lower global growth.

Elevated policy uncertainty in some large economies of the region has also contributed to the weak growth momentum.

Slower growth
Sluggish activity in the first half of this year largely reflects temporary factors, including adverse weather conditions that reduced mining output in Chile and agricultural output in Paraguay. Mining activity in Brazil moderated

Read More »

chart of the weekUS$100 Bill on the Rise

July 25, 2019

By IMFBlog
A curious thing has happened in US currency: the $100 bill recently overtook the ubiquitous $1 bill in circulation volume, for the first time in history. In other words, the most valuable banknote in the United States became the most widely circulated.
As we show in our chart of the week, based on an article in the IMF’s Finance & Development magazine, there are more $100 bills circulating now than ever before, roughly doubling in volume since the global financial crisis.

So what explains this boom in Benjamins, as the bills are known, especially when cashless options are increasing by the day? In this age of digital everything, are Americans suddenly growing nostalgic for greenbacks in high denominations?
Not exactly. While overall demand for US currency is indeed on the

Read More »

Sluggish Global Growth Calls for Supportive Policies

July 23, 2019

By Gita Gopinath
عربي, 中文, Español, Français, 日本語, Português, Русский
In our July update of the World Economic Outlook we are revising downward our projection for global growth to 3.2 percent in 2019 and 3.5 percent in 2020. While this is a modest revision of 0.1 percentage points for both years relative to our projections in April, it comes on top of previous significant downward revisions. The revision for 2019 reflects negative surprises for growth in emerging market and developing economies that offset positive surprises in some advanced economies.
Growth is projected to improve between 2019 and 2020. However, close to 70 percent of the increase relies on an improvement in the growth performance in stressed emerging market and developing economies and is therefore subject to high

Read More »

Rebalancing the Global Economy: Some Progress but Challenges Ahead

July 17, 2019

By Gita Gopinath
Español, 日本語
Following the global financial crisis, overall current account surpluses and deficits fell sharply from about 6 percent of global GDP in 2007 to about 3.5 percent in 2013. Since then, as shown in our new External Sector Report, global current account imbalances have declined only slightly to 3 percent of world GDP in 2018, while rotating toward advanced economies and away from emerging economies, including China whose current account is now broadly in line with fundamentals.
Trade actions and tensions have so far not significantly affected global current account imbalances, as trade has been diverted to other countries with lower or no tariffs. Instead, as highlighted in an earlier blog, these trade tensions and related uncertainties are weighing on global

Read More »

Chart of the weekCorporate Tax Rates: How Low Can You Go

July 15, 2019

By IMFBlog
In life, two things are certain: death and taxes, the saying goes.
Unless you are a large multinational corporation, in which case, maybe not.  Over the past 30 years, corporate tax rates in all countries have fallen to very low levels, as we show in our chart of the week.
This is a problem on several fronts and is one of the reasons why a new approach to international corporate taxation is urgent.
First, the ease with which multinationals seem able to avoid tax, combined with the three-decade long decline in corporate tax rates, undermines both tax revenue and faith in the fairness of the overall tax system.

In life, two things are certain: death and taxes.

Second, the current situation is especially harmful to low-income countries, depriving them of much-needed

Read More »

Chart of the weekTrade Balances Mostly Driven by Economic Forces, Not Tariffs

July 10, 2019

By IMFBlog
Español, Português
Over the past two decades, most of the changes in bilateral trade balances—the difference in the value of exports and imports between two countries—were explained by macroeconomic factors, according to IMF research.
These factors include fiscal policy, demographics, and weak domestic demand. They may also include exchange rate policies and domestic supply-side policies, like subsidies to state-owned enterprises or to export sectors.
In contrast, changes in tariffs played a much smaller role in influencing trade balances.
Our chart of the week from the April World Economic Outlook quantifies the drivers of changes in bilateral trade balances. It specifically looks at the roles of macroeconomic factors, tariffs, and how countries organize their production

Read More »

Tariff Shocks: The Role of Value Chains in Europe

July 3, 2019

By Raju Huidrom, Carlos Mulas-Granados, Laura Papi, and Emil Stavrev
(Español, Português)
The Czech Republic exports only a small number of cars and car parts directly to the United States, but it’s likely to suffer significant economic damage if that country were to impose tariffs on auto imports. The reason: the Czech Republic supplies parts that are used to build cars exported by other European countries.
Europe’s auto industry is one of many that are part of global value chains, in which different stages of manufacturing are dispersed among several countries. Because almost 70 percent of European exports are linked to value chains, tariffs imposed on products shipped by one country can affect many others. That is why, as we explain in a recent study, it’s important to view

Read More »

The Slope of the US Yield Curve and Risks to Growth

July 2, 2019

By Tobias Adrian, Rohit Goel and Fabio Natalucci
The slope of the yield curve in the US has inverted in recent months, making long-term debt significantly cheaper than short-term debt. This inversion is a gauge of investors’ confidence in the economy and signals doubts about future growth.
The slope of the Treasury yield curve is the difference between the interest rate on long-term and short-term debt; and each time the curve inverts, there are questions about the reliability of the signal. For example, the fact that interest rates have been low for a prolonged period may change the information provided by the yield curve. Moreover, due to unconventional monetary policies, central banks hold a significant share of outstanding long-term bonds, which influences the “long end” of the yield

Read More »

Chart of The WeekThe Price of Capital Goods and the Threat to Investment

July 1, 2019

By IMFBlog
Español, Português
Over the past three decades, the prices of machinery and equipment have fallen sharply relative to overall prices. Rising trade and sweeping technological improvements have led to more efficient production of capital goods. This has helped countries around the world raise real investment and improve living standards.
However, trade tensions and sluggish productivity growth could slow the decline in the relative price of machinery and equipment, which would hold back investment growth worldwide.
Our chart of the week from the April World Economic Outlook  shows that since 1990, the price of machinery and equipment relative to the price of consumption fell about 40 percent in emerging market and developing economies.

Over the past three decades, the

Read More »

Five Facts on Fintech

June 27, 2019

By Tobias Adrian and Ceyla Pazarbasioglu
From artificial intelligence to mobile applications, technology helps to increase your access to secure and efficient financial products and services.
Since fintech offers the chance to boost economic growth and expand financial inclusion in all countries, the IMF and World Bank surveyed central banks, finance ministries, and other relevant agencies in 189 countries on a range of topics and received 96 responses.
A new paper details the results of the survey alongside findings from other regional studies, and also identifies areas for international cooperation—including roles for the IMF and World Bank—and in which further work is needed by governments, international organizations, and standard-setting bodies.

Foremost in all countries’ minds

Read More »

When Disaster Strikes: Preparing for Climate Change

June 26, 2019

By Seán Nolan and Krishna Srinivasan
Earlier this year, Cyclone Idai devastated Mozambique, Malawi, and Zimbabwe by leaving more than 1,000 people dead, thousands more missing, and damages in the billions. These storms were among the recent reminders of how natural disasters can cause severe and catastrophic damage. Natural disasters destroy lives and property and have large and lasting effects on economies by reducing production and increasing debt burdens. They also tend to disproportionately affect the poor, who have a limited ability to cope with the impact.
Although not alone, the small island countries in the Caribbean and Pacific are particularly vulnerable to natural disasters. They have suffered, on average, disaster-related losses of 2 to 3 percent of GDP per year over the past

Read More »

Chart of the WeekGrowing Through Education in Nigeria

June 24, 2019

By Vivian Malta and Monique Newiak
Our chart of the week, drawn from the IMF’s 2019 economic health check for Nigeria, highlights substantial inequality in access to education between girls and boys, and between rich and poor.
It is widely accepted that addressing educational gaps results in rapid and large benefits for children, their families, communities, and the country more broadly.

Limited schooling for girls
According to a survey conducted by the Nigeria Bureau of Statistics, a girl born into a Nigerian family in the poorest fifth of society spends about 1 year in school—approximately a third of the already limited schooling enjoyed by, say, her brother.
Access to education improves as a family gets richer, but gender inequality in education is entrenched and barely

Read More »

Chart of the WeekMapping the World’s Financial Weak Spots

June 20, 2019

By IMFBlog
Español, Português
Where will the next financial crisis come from? The short answer is: We don’t know. We can, however, look for vulnerabilities in the system that, if left untreated, can develop into problems.
What do we mean by a vulnerability? It is an area of weakness that can amplify and spread an unexpected economic shock, increasing the level of risk to the financial system. Imagine the impact of an earthquake on a house built on sand, as opposed to bedrock. In the financial world, cracks in the bedrock can arise from high levels of debt and mismatches of institutions’ risk factors such as currencies or the maturities of their exposures.

Government debt in the euro area remains one of the most serious vulnerabilities.

One such weak spot is the debt level in US

Read More »

China Deepens Global Finance Links as It Joins Benchmark Indexes

June 19, 2019

By Sally Chen, Dimitris Drakopoulos, and Rohit Goel
中文, 日本語
China is embarking on the next stage of its integration into global financial markets. It is a stage that is likely to see a fresh flood of overseas investment, improved liquidity, better governance, and a broader range of instruments.
The catalyst: inclusion of Chinese stocks and bonds in a larger number of global financial-market indexes. As Chinese securities are added, investment managers who seek to match or surpass the returns of the indexes will adjust their portfolios to include Chinese stocks and bonds. And increasingly it is these benchmark-driven asset managers who are propelling portfolio flows.

This trend of rising foreign ownership is likely to accelerate further.

In the past five years alone, foreign

Read More »

A Global Picture of Public Wealth

June 18, 2019

By Jason Harris, Abdelhak Senhadji, and Alexander F. Tieman
Español, Português
Our new data on government assets shows that when governments know what they own, they can make better use of the assets for the well-being of all their citizens.  We make these data free and publicly available for all to use because we believe transparency can help create better public policy. 
The chart shows that advanced economies have larger balance sheets compared to emerging markets and low-income developing countries. This reflects the size of their public sectors, which generally provide more infrastructure and services. But advanced economies also have larger liabilities and, on average, lower net worth.

We wrote about countries’ assets back in October in the Fiscal Monitor and in our blog about

Read More »

State Ownership in Europe’s Former Socialist States: The Unfinished Reform Agenda

June 18, 2019

By Poul Thomsen
As we approach the 30th anniversary of the fall of the Berlin Wall, the former socialist countries of Central, Eastern, and Southeastern Europe (CESEE) have made tremendous progress in becoming full-fledged market economies and raising income levels. Large-scale privatization in the 1990s was a key element of this transition but produced mixed results. In some cases, privatization generated broad-based ownership and healthy competition, while in some other countries, privatization did not advance so far, or led to public monopolies being replaced by private ones. This experience has highlighted the importance of a strong institutional and competitive environment, including better governance of both public and private entities.  

State owned enterprises systematically

Read More »

Making the Euro Area More Resilient Before the Next Recession Hits

June 17, 2019

By Shekhar Aiyar, John Bluedorn, and Romain Duval
Español, Français, Português
Growth in the euro area rebounded earlier this year, but it remains fragile, while risks have increased. Now is a good time for euro area economies to strengthen their ability to weather any future economic difficulties.
A new IMF staff paper looks at the resilience of euro area countries and finds that they have had more frequent and severe recessions than other advanced economies over the past 20 years. An even greater cause for concern is that differences between member countries’ growth and unemployment rates after euro area-wide downturns have widened. This widening was most stark following the 2008 global financial crisis.

While euro area countries have made substantial progress in improving

Read More »

To Reduce Inequality, Employ Young People

June 13, 2019

Burcu Hacibedel and Priscilla Muthoora
Español, Português
Rising economic growth has reduced inequality in low-income and emerging market countries over the years. In good economic times, young people working helps reduce inequality in both groups of countries. But when growth slows down and jobs are lost, more young people out of work in low-income countries leads to a rise in inequality.  In emerging markets, the story is a bit different and we’ll explain why.
The results in our coauthored recent paper, which studies a group of 71 low-income and emerging market countries, emphasize the importance of both the quality of jobs created and a country’s policies to support employment, which helps reduce inequality and foster more inclusive growth.
A new way of knowing
The relationship

Read More »

Chart of the WeekKeeping the Wheels of Commerce Turning

June 10, 2019

By IMFBlog
The tariff disputes roiling markets are a reminder that the global system of free trade, which has delivered so much prosperity, is a fragile one.
We all know what happened in the 1930s, when trade wars only served to deepen the misery inflicted by the Great Depression. That is why, after World War II, countries agreed to gradually reduce tariffs.
But many continued to restrict flows of goods across borders in other ways as they sought to give their domestic industries an edge over foreign competitors.
One common method was to impose different exchange rates for different kinds of transactions in a bid to stimulate exports and discourage imports. That is one example of what is known as a multiple currency practice, or MCP. Another is to offer favorable exchange rates to

Read More »

Chart of the WeekThe Rise of Powerful Companies

June 6, 2019

By IMFBlog
People are concerned that the rising power of big successful companies could lower capital investment, weaken productivity, and reduce people’s take-home pay.
While rising corporate market power has had a fairly limited negative economic impact so far, if left unchecked, it could take a bigger toll on growth and people’s income.
Our Chart of the Week from the April World Economic Outlook analyzes nearly 1 million companies from 27 advanced and emerging market economies since the early 2000s and shows that firms’ average price markup—the ratio of a company’s product price to its production cost—has increased moderately.
Across advanced economies, average markups increased by 8 percent since 2000 but by less than 2 percent in those emerging economies covered by the analysis.

Read More »

How to Help, Not Hinder Global Growth

June 5, 2019

By Christine Lagarde
As the G-20 finance ministers and central bank governors gather this week in Fukuoka, they can take inspiration from their host city. Known as Japan’s “startup city,” Fukuoka has flourished in recent decades by embracing trade, innovation, and openness.
That spirit is needed more than ever to help reduce trade tensions and clear other stumbling blocks on the way back to higher and more sustainable growth. The goal must be to help, not stand in the way of global growth.
Signs of stabilization
In April, I described the global economy as being at a “delicate moment.” The IMF cut its global growth forecast to 3.3 percent in 2019, largely because of temporary, country-specific factors and the tangible effects of trade tensions. At the same time, we projected a pickup in

Read More »

Keynes, the IMF, and the Future

May 30, 2019

By Gita Bhatt
If Lord Keynes, who helped usher in the post–World War II economic order at the Bretton Woods conference, visited the IMF today, he would be astonished at the institution’s evolution. He would find a modern IMF able to help countries with new tools for analyzing financial risks and external imbalances and take on income inequality, corruption, and climate change. He would marvel at our universal membership, diverse staff, and female head.
He would also find a world transformed by new emerging powers and technologies that link countries and markets at light speed.
Keynes would understand today’s reality too. He saw it all before: growing economic and political nationalism, fraying of alliances, and sharply declining support for multilateralism. Yet he wouldn’t despair. With

Read More »

Chart of the WeekCorruption and Your Money

May 28, 2019

By IMFBlog
The costs of corruption run deep. Your taxpayer dollars are lost in different ways, siphoned off from schools, roads, and hospitals to line the pockets of people up to no good.
Equally damaging is the way it corrodes the government’s ability to help grow the economy in a way that benefits all citizens.
And no country is immune to corruption. Our Chart of the Week from the Fiscal Monitor analyzes more than 180 countries and finds that more corrupt countries collect fewer taxes, as people pay bribes to avoid them, including through tax loopholes designed in exchange for kickbacks. Also, when taxpayers believe their governments are corrupt, they are more likely to evade paying taxes.
The chart shows that overall, the least corrupt governments collect 4 percent of GDP more in

Read More »

The Impact of US-China Trade Tensions

May 23, 2019

By Eugenio Cerutti, Gita Gopinath, and Adil Mohommad
US-China trade tensions have negatively affected consumers as well as many producers in both countries. The tariffs have reduced trade between the US and China, but the bilateral trade deficit remains broadly unchanged. While the impact on global growth is relatively modest at this time, the latest escalation could significantly dent business and financial market sentiment, disrupt global supply chains, and jeopardize the projected recovery in global growth in 2019.

Evolution of trade in the US and China
The raising of US tariffs to 25 percent on $200 billion of annual Chinese imports on May 10, together with the announced Chinese retaliation, marks the latest escalation in the US–China trade tensions.
The impact of previously

Read More »

Communications as a Policy Tool

May 22, 2019

By Gerry Rice and Olga Stankova
عربي, 中文, Español, Русский
When it comes to forging economic policy, communicating with the public is no longer an afterthought. Instead, communications are increasingly seen as a policy tool in itself. To be sure, communications can never be a substitute for good policies. But economic reforms are more likely to fail or even be reversed unless they are understood, believed, and accepted by those whom they affect. The same principle applies to a wide range of policies—monetary, financial, fiscal, and structural.
The proliferation of social media makes it possible for ever more people to express their views on public policies, fueling rising expectations for transparency and accountability across the globe. As a result, policymakers face growing pressure

Read More »