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Posts Tagged ‘Blanchard’

Challenges ahead: Managing spillovers

Posted by hkarner - 3. Dezember 2014

Olivier Blanchard, Luc Laeven, Esteban R Vesperoni 03 December 2014, voxeu

Chief economist, IMF

Deputy Division Chief in the Research Department of the International Monetary Fund and CEPR Research Fellow

Esteban R Vesperoni

Senior Economist, IMF


The events of the last five years have been a forceful reminder of the interconnections among nations. There has been renewed debate on the optimal way to combine fiscal, monetary, and financial policies to deal with international spillovers, and on the scope for coordination of such policies. This column discusses the highlights of a recent IMF conference on “Cross-Border Spillovers”, and applies the lessons to the challenges of the US and the Eurozone exiting from their unconventional monetary policies.

Events of the last five years have forcefully reminded the global community of the risks present in the global economy and the interconnections among nations. Intense discussions have arisen on the optimal way to combine fiscal, monetary, and financial policies to deal with spillovers across nations, and on the scope for coordination of such policies. In this context, the theme chosen for the IMF’s 15th Jacques Polak Annual Research Conference was “Cross-Border Spillovers”.1 This column discusses the conference highlights. Den Rest des Beitrags lesen »

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The Slow Recovery Continues

Posted by hkarner - 25. Juli 2014

Posted on by iMFdirect

WEOBy Olivier Blanchard

The recovery continues, but it remains weak, indeed a bit weaker than we forecast in April.

We have revised our forecast for world growth in 2014 from 3.7 percent in April to 3.4 percent today. This headline number makes things look worse than they really are. To a large extent, it reflects something that has already happened, namely the large negative US growth rate in the first quarter.  But it is not all due to that.  It also reflects a number of small downward revisions, both in advanced and in emerging economies.

The overall story remains largely the same as before:

Advanced economies are still confronted with high levels of public and private debt, which act as brakes on the recovery.  These brakes are coming off, but at different rates across countries.

Emerging markets are slowing down from pre-crisis growth rates.  They have to address some of their underlying structural problems, and take on structural reforms.   At the same time, they have to deal with the implications of monetary policy normalization in the US.

Let me take you on the usual tour of the world.

Advanced economies Den Rest des Beitrags lesen »

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The Loch Ness consensus

Posted by hkarner - 17. Februar 2014

Date: 16-02-2014
Source: The Economist: Free exchange

Countries make macroeconomic policy by themselves for themselves. Should they?

“INTERNATIONAL policy co-ordination is like the Loch Ness monster,” Olivier Blanchard and Jonathan Ostry of the IMF wrote recently. It is “much discussed but rarely seen”. The oddity was sighted in New York in 1985, when the big economies conspired to weaken the dollar. It resurfaced two years later in Paris, when they decided to stop the greenback’s fall. Some also claim to have witnessed it in Washington in 2008, when the G20 group of big economies agreed to fight the financial crisis with simultaneous fiscal stimulus.

The G20’s finance ministers and central bankers will meet again in Sydney later this month. As they gather, some prominent economists think international co-ordination is due another appearance. They argue that the rich world’s central banks are wrong to ignore the side effects of their policies on emerging economies. By easing monetary policy so aggressively after the crisis, these central banks obliged global capital to hunt for higher yields in emerging economies. Now that America’s Federal Reserve is easing back on its easing, capital is flowing out again, leaving emerging economies in some turmoil. Den Rest des Beitrags lesen »

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Recovery Strengthening, but Much Work Remains

Posted by hkarner - 23. Januar 2014

Posted on January 21, 2014 by iMFdirect

WEOBy: Olivier Blanchard

I want to take a moment today to remember our colleague Wabel Abdallah, who was our resident representative in Afghanistan and who, as many of you know, was killed in the terrorist attack in Kabul on Friday. We are mourning a colleague, a friend to many of us, above all a dedicated civil servant who represented the best the Fund has to offer, and gave his life in the line of duty, helping the Afghan people. Our hearts go out to his family and to the many victims of this brutal attack.

Let me now turn to our update of the World Economic Outlook and distill its 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.

Second, this recovery was largely anticipated.  We have revised our forecast for world growth in 2014 by just 0.1% relative to our October forecast.  The basic reason behind the stronger recovery is that the brakes to the recovery are progressively being loosened.  The drag from fiscal consolidation is diminishing.  The financial system is slowly healing.  Uncertainty is decreasing.

Third, it is still a weak and uneven recovery.  Among advanced economies, it is stronger in the US than in Europe, stronger in the Euro core than in Southern Europe.  In most advanced economies, unemployment remains much too high.  And downside risks remain.

Tour d’horizon

With these remarks in mind, let me take you on the quick tour of the world. Den Rest des Beitrags lesen »

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Unemployment, labour-market flexibility and IMF advice: Moving beyond mantras

Posted by hkarner - 20. Oktober 2013

Olivier Blanchard (Chief Economist, IMF), Florence Jaumotte, Prakash Loungani, 18 October 2013, voxeu

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.

Growth in advanced economies is gaining some speed. The IMF projects these economies will grow 2% next year, up from an expected 1.2% this year. The average unemployment rate in advanced economies is expected to inch down from its peak of 8.3% in 2010 to 8% next year. This is progress, but it is clearly not enough. The state of labour markets remains dismal for a number of reasons.

First, even before the crisis, average unemployment rates were high in many countries, and potential output growth too low. For instance, between 1995 and 2004, the average unemployment rate in the Eurozone was 9.5%. Unemployment today is over 11%, but a return to the pre-crisis average would be far from nirvana.

Second, the labour market is plagued by a duality of outcomes, which the Great Recession has exacerbated. Workers on temporary contracts have limited employment protection, and have borne the brunt of labour-market adjustment. Low-skilled workers and young people have fared worse than high-skilled and older workers (see Figure 1). The long-term unemployed risk being cast away beyond reach of the tides of recovery.

Figure 1. Recovery differs across groups

Note: Ratio of each group’s employment relative to overall employment.
aOECD average
b2008 Q1-2011 Q4, index = 100 at the start of the crisis Den Rest des Beitrags lesen »

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Fiscal consolidation: At what speed?

Posted by hkarner - 4. Mai 2013

Olivier Blanchard, Daniel Leigh, IMF, 3 May 2013. voxeu

The debate about fiscal consolidation reduces too often to shouting matches about the value of fiscal multipliers, or about the existence of a critical debt-to-GDP ratio. This does not do justice to what is a complex choice, depending on many factors. Our purpose in this article is to review the relevant factors at play and allow for a richer discussion.

In many advanced economies, public debt is very high, and fiscal consolidation must take place. Some factors point to doing more now, others to doing more later. Our purpose in this article is to identify these factors. The right decision, for each country, must depend on a careful weighting of the factors at play.

Less now, more later. Multipliers.

When fiscal multipliers are large, government spending cuts and tax hikes have a large adverse effect on output in the short run, and a small initial effect on the ratio of debt to GDP (Eyraud and Weber, 2013). Indeed, as GDP may initially decline by more than debt, it may lead to an initial increase in the debt-to-GDP ratio, something we have seen in a number of countries in this crisis. (All that is needed, for example, is a multiplier above 1 and the sum of the ratio of revenue-to-GDP and the debt-to-GDP ratio above 100 per cent).

Large multipliers do not necessarily affect the optimal timing of fiscal consolidation, however. If they remain just as large in the future, the adjustment will be as painful later. But, if they are larger now than later, this tilts the adjustment toward doing more later: Less pain now, less pain later. And there are at least three reasons to believe that multipliers are larger now. Den Rest des Beitrags lesen »

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We May Have Avoided the Cliffs, But We Still Face High Mountains

Posted by hkarner - 1. Februar 2013

Posted on January 23, 2013 by iMFdirect


by Olivier Blanchard. He is currently on leave from MIT, as Economic Counsellor and Director of the Research Department of the International Monetary Fund

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 United States 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.

A year ago, we were worried about two short term risks:

We were worried that gridlock might lead to excess fiscal consolidation in the United States. And that firewalls in Europe may not be strong enough to prevent a crisis in Spain or Italy. Den Rest des Beitrags lesen »

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Driving the Global Economy with the Brakes On

Posted by hkarner - 26. Januar 2012

Author: Olivier Blanchard, IMF · January 24th, 2012 ·

Starting with the bad news–the world recovery, which was weak in the first place, is in danger of stalling. The epicenter of the danger is Europe, but the rest of the world is increasingly affected.
There is an even greater danger, namely that the European crisis intensifies. In this case, the world could be plunged into another recession.
Turning to the good news–with the right set of measures, the worst can definitely be avoided, and the recovery can be put back on track. These measures can be taken, need to be taken, and need to be taken urgently. Den Rest des Beitrags lesen »

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