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Global Banks May Grow More Vulnerable to a Dollar Disruption

3 days ago

By Claudio Raddatz and Adolfo Barajas
عربي, 中文, Español, Français, 日本語, Português, Русский
When a Mexican airline buys Brazilian airplanes, it’s likely to finance the purchase with a US dollar loan obtained from a non-US bank. That’s just one example of the dollar’s outsize role in international financial transactions between non-US counterparts.
What happens if non-US banks suddenly find themselves short of dollars? That was the case during the global financial crisis of 2007-2008, when US financial firms were reluctant to lend dollars to their foreign counterparts. To prevent the collapse of the global financial system, the Federal Reserve provided more than $500 billion in emergency funds to overseas central banks, which could then on-lend the money to their dollar-starved

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Fiscal Policies to Curb Climate Change

4 days ago

By Vitor Gaspar, Paolo Mauro, Ian Parry, and Catherine Pattillo
عربي, 中文, Español, Français, 日本語, Português, Русский
Global warming has become a clear and present threat. Actions and commitments to date have fallen short. The longer we wait, the greater the loss of life and damage to the world economy. Finance ministers must play a central role to champion and implement fiscal policies to curb climate change. To do so, they should reshape the tax system and fiscal policies to discourage carbon emissions from coal and other polluting fossil fuels.
The Fiscal Monitor helps policymakers choose what to do and how to do it, right now, globally and at home.
A better future is possible. Governments will need to increase the price of carbon emissions to give people and firms incentives to

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Connecting the Dots Between Sustainable Finance and Financial Stability

4 days ago

Evan Papageorgiou, Jochen Schmittmann, and Felix Suntheim
عربي, 中文, Español, Français, 日本語, Português, Русский
Unsafe working conditions. Use of child or forced labor. Environmental impact on protected areas. More and more investors are looking at issues and factors beyond traditional financial analysis when directing their money. Sustainable finance aims to help society better meet today’s needs and ensure that future generations will be able to meet theirs too.
The latest IMF Global Financial Stability Report discusses the link between sustainable finance and financial stability and suggests policies for the way forward.
Sustainable finance incorporates environmental, social, and governance (ESG) principles into business decisions and investment strategies. It covers many issues from

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Widening Gaps: Regional Inequality within Advanced Economies

5 days ago

By John Bluedorn, Weicheng Lian, Natalija Novta, and Yannick Timmer
عربي, 中文, Español, Français, 日本語, Português, Русский
Differences in economic performance between regions within countries can be large and sometimes even larger than between countries.
For example, average real GDP per person in the United States is about 90 percent higher than in Slovakia. At the same time, within the United States, per capita GDP in the state of New York is 100 percent higher than in Mississippi.
Many are concerned that these large and persistent gaps signal that regions and people are being left behind, undermining inclusive growth. Poor regional performance can fuel discontent and erode social trust and cohesion.
Chapter 2 of the latest World Economic Outlook looks at the gaps between the better

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How To Reignite Growth in Emerging Market and Developing Economies

5 days ago

By Romain Duval and Davide Furceri
عربي, 中文, Español, Français, 日本語, Português, Русский
Emerging markets and developing economies have enjoyed good growth over the past two decades. But many countries are still not catching up with the living standards of advanced economies.
At current growth rates, it would take more than 50 years for a typical emerging market economy to close half of its current income gap in living standards, and 90 years for a typical developing economy.
Our research in Chapter 3 of the October 2019 World Economic Outlook finds that implementing major reforms in six key areas at the same time—domestic finance, external finance, trade, labor markets, product markets, and governance—can double the speed of income convergence of the average emerging market and

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To Tackle Housing Affordability in Canada, Build More Houses

13 days ago

By Michal Andrle, Cheng Hoon Lim and Troy Matheson
Français
Policymakers across the world worry about affordable housing. They should. It represents the cost of a basic human need—shelter. Canada is no exception as it grapples to provide affordable housing in some cities, like Vancouver and Toronto, where rents are high, and for many, the dream of owning a home has faded.
People who can afford a down payment typically borrow as much as they can to get a foothold in the market—stretching themselves financially and contributing to Canada’s record-high levels of household debt.
So, how can governments help make housing affordable? Our latest staff report suggests boosting housing supply to meet demand.

Housing policies can quickly become politically contentious.

Short-term fixes may

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chart of the weekMobile Money Spreads to Asia

15 days ago

By Esha Chhabra and Bidisha Das
Thanks to mobile money, any person with a basic phone can now make cash transfers, pay bills, and send money to family members abroad without having a bank account. This is a game-changing innovation, particularly for the world’s poor as it is easy and cheap.
Our chart of the week from the IMF’s Financial Access Survey shows the growth in mobile money accounts across regions. While mobile money continues to grow in its epicenter in Africa, it’s also taking off in Asia. Mobile money is just one aspect of the survey, which also provides a wealth of information on the access to and use of basic financial services, including breakdowns by gender.

Asia’s mobile money uptake
Over the past five years, mobile money has gained traction in South Asia, which is

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From Stablecoins to Central Bank Digital Currencies

19 days ago

By Tobias Adrian and Tommaso Mancini-Griffoli
(Español, Português)
As privately issued stablecoins continue to encroach on more traditional forms of money—like cash and bank deposits—policymakers will not simply look on from the sidelines. They will arbitrate. Their rules and actions will determine how we will eventually pay for everyday items like a cup of coffee, and, more importantly, will affect the structure and risks of our financial sector.
Our last blog introduced stablecoins—cryptographic tokens that can be easily exchanged, benefitting from minimal price volatility relative to cash. Consumers might quickly adopt these new, cheaper, faster, and more user-friendly services integrated into their social media platforms. However, these also come with notable risks that require

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Chart of the WeekWhen the Night Lights Go On in Asia

21 days ago

By Jiaxiong Yao
It is often said that a picture is worth a thousand words. The value of a picture taken from space is a new metric we can use to measure economic growth and activity.
The past decade has seen a dramatic increase in economists’ use of satellite images of the earth at night.  These “night lights”, as they are called, help study a wide variety of topics, ranging from growth and development to poverty and inequality, particularly in places where economic data are scarce and unreliable. Night lights reveal both the remote corners of our world in new detail and how they change over time.
As we show in our chart of the week, based on research, strong economic performance in the past three decades has made Asia much brighter at night.

The value of a picture taken from space

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The Economics of Data

22 days ago

By Yan Carrière-Swallow and Vikram Haksar
Español, Português
Look around the global economy and you’ll see an American company developing the next generation of driverless cars, a Chinese financier extending loans to “mom-and-pop” stores that used to lack access to credit, and researchers at a Swiss pharmaceutical company developing a treatment for a chronic health condition.
What do all these valuable economic activities have in common, despite taking place on different continents and in different sectors of the economy?
Had we asked the question of global firms thirty years ago, the answer would probably have been “not much.” But today, the answer is clear. They all rely on the same indispensable input: data. And lots of it.

Global cooperation is needed to ward off the risk that

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Digital Currencies: The Rise of Stablecoins

26 days ago

By Tobias Adrian and Tommaso Mancini-Griffoli
Español, Português
A battle is raging for your wallet. New entrants want to occupy the space once used by paper bills or your debit card.
The adoption of new, digital payment methods could bring significant benefits to customers and society: improved efficiency, greater competition, broader financial inclusion, and more innovation. But it could invite risks to financial stability and integrity, monetary policy effectiveness, and competition standards, as outlined in a recent IMF staff paper, the first of a new series of Fintech Notes.

Adoption of new forms of money will depend on their attractiveness as a store of value and means of payment.

Stablecoin adoption
Adoption of new forms of money will depend on their attractiveness as a

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Chart of the WeekVoting on Gender Parity

28 days ago

By Rasmane Ouedraogo
Español, Português
Electoral violence occurs in many African countries. Tragically, thousands are killed and displaced during election cycles on the continent. Over the next year and a half, Presidential elections are scheduled in thirteen sub-Saharan African countries, raising fears that, as in the past, violent incidents or conflict may erupt again. But what can African nations do to lessen electoral violence?

Can women then, be the leading force for democratic and peaceful elections in Africa?

Our Chart of the Week taken from recent IMF research suggests that women’s participation in the workforce could make election-related violence less likely in Africa. Nearly half the individuals surveyed say that they fear becoming a victim of electoral violence. That

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A Capital Market Union for Europe: Why it’s Needed and How to Get There

September 10, 2019

By Ashok Vir Bhatia, Srobona Mitra, and Anke Weber
When savers and firms invest and borrow beyond their national borders, they enjoy opportunities to diversify their portfolios and lower their funding costs, respectively. In Europe, this idea—of an integrated financial system that offers a richness of financing choice—remains an elusive goal: capital markets are far from integrated.

Our recent research finds that European finance is still sharply segmented along national lines, with savers and investors depending heavily on national banking systems. Although the landscape is dotted with many different types of investors and intermediaries, their focus is mostly domestic—“home bias” is pervasive.
An unlevel playing field
This is a problem because it results in an uneven playing field:

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New Index Tracks Trade Uncertainty Across the Globe

September 9, 2019

By Hites Ahir, Nicholas Bloom, and Davide Furceri
Español, Português
Rising trade uncertainty is cited as a driving factor for “sluggish global growth” in the current issue of the IMF’s World Economic Outlook, which describes the state of the world economy.
But how is trade uncertainty measured? How has it evolved over time? Are changes in trade uncertainty confined to specific countries and regions of the world? A new measure of trade uncertainty finds that by this measure of uncertainty it is surging, and not just in the United States and China, where trade tensions are highest, but also in many other countries.
How we built it
We construct the World Trade Uncertainty index for 143 countries starting in 1996. To the best of our knowledge, this is the first effort to create a trade

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Back to School Blogs

September 5, 2019

By IMFBlog
Trade wars and inverted yield curves do not typically top the charts of your summer, beach-friendly reading list.
But summer in the Northern Hemisphere has disappeared as quickly as your last strawberry daquiri, right along with your ability to remember your computer password. 

Trade wars and inverted yield curves do not typically top the charts of your summer reading list.

Need a hand shifting gears?  We have put together a primer of our recent blogs, each a quick read, on the state of the global economy, facts about fintech, a snapshot of countries’ debts and assets, and the outlook for Latin America and the Caribbean, just to name a few.
Taming the Currency Hype
The Slope of the US Yield Curve and Risks to Growth
Five Facts on Fintech
A Global Picture of Public

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A Role for Financial and Monetary Policies in Climate Change Mitigation

September 4, 2019

By William Oman
Español
July 2019 was the hottest month ever recorded on earth, with countries across the world experiencing record-breaking temperatures. A prolonged drought is affecting millions of people in East Africa, and in August 2019 Greenland lost 12.5 billion tons of ice in one day.
A review of the literature by IMF staff aims to spur discussion of what policies to mitigate climate change could or should include. The review suggests that, while fiscal tools are first in line, they need to be complemented by financial policy tools such as financial regulation, financial governance, and policies to enhance financial infrastructure and markets, and by monetary policy.

Financial and monetary policy tools can complement fiscal policies and help with mitigation efforts.

The

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Illuminating Dark Corners of the Global Economy

September 3, 2019

Gita Bhatt
This issue of Finance & Development reminds me of a Sufi parable. A woman sees a mystic searching for something outside his door. “What have you lost?” she asks. “My key,” he responds. So they both kneel down to look for it. “Where exactly did you drop it?” she asks after a few minutes. “In my house,” he replies. “Then why are you looking here?” “Because there is more light.”
The lesson: we all search for answers where it is easiest to look.
That is why we decided to shine a spotlight on the dark web of secret transactions that enable tax evasion and avoidance, money laundering, illicit financial flows, and corruption.
Consider these estimates: bribes to the tune of $1.5–$2 trillion change hands every year. Tax evasion costs governments more than $3 trillion a year, and

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Chart of the WeekTop 5 Charts of Summer

August 29, 2019

By IMFBlog
Español, Português
Our data nerds have been hard at work over the summer and we have taken a dive into the numbers beneath the surface of the daily headlines. Housing prices, powerful companies, corruption, and more have been on our sonar.  
So you can catch up and learn more about the stories below the waterline, our editors have chosen the best from our Chart of the Week series on the blog over the past few months. 

Housing prices, powerful companies, corruption, and more have been on our sonar.

US$100 Bill on the Rise
Corruption and Your Money
House Prices Are Up: Should We Be Happy?
Mapping the World’s Financial Weak Spots
The Rise of Powerful Companies

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Monitoring Global Financial Stability

August 26, 2019

By Tobias Adrian, Dong He, Nellie Liang, and Fabio Natalucci
“It’s awful. Why did nobody see it coming?” asked Queen Elizabeth II in November 2008 during a visit to the London School of Economics, wondering why nobody had predicted the Global Financial Crisis. The bewilderment wasn’t unique to the British monarchy; across the world, many asked the same question.
Ten years on, it remains difficult to forecast financial instability. However, progress is afoot to improve the understanding of important links between the financial sector and the economy. We now understand better how financial vulnerabilities can amplify negative shocks and hurt output and employment.
Twice a year, the IMF comes out with its latest analysis of global financial stability risks in the Global Financial Stability

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

August 22, 2019

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

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Taming the Currency Hype

August 21, 2019

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

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chart of the weekFuel for Thought: Ditch the Subsidies

August 14, 2019

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

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US Business Investment: Rising Market Power Mutes Tax Cut Impact

August 8, 2019

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

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Chart of the WeekCanada’s Housing Market Slowdown

August 7, 2019

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.

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Outlook for Latin America and the Caribbean: A Stalling Recovery

July 29, 2019

By Alejandro Werner
Español
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

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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

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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

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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

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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

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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

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