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Posts Tagged ‘Blanchard’

Greece: Past Critiques and the Path Forward

Posted by hkarner - 10. Juli 2015

A reasonable explanation by O. Blanchard, who – in my opinion – is a serious guy! (hfk)

Posted on by iMFdirect

IMG_0248By Olivier Blanchard

A citizen of France, Olivier Blanchard has spent his professional life in Cambridge, U.S. After obtaining his Ph.D in economics at the Massachusetts Institute of Technology in 1977, he taught at Harvard University, returning to MIT in 1982, where he has been since then. He is the Class of 1941 Professor of Economics, and past Chair of the Economics Department. He is currently on leave from MIT, as Economic Counsellor and Director of the Research Department of the International Monetary Fund.

All eyes are on Greece, as the parties involved continue to strive for a lasting deal, spurring vigorous debate and some sharp criticisms, including of the IMF.

In this context, I thought some reflections on the main critiques could help clarify some key points of contention as well as shine a light on a possible way forward.

The main critiques, as I see them, fall under the following four categories:

  • The 2010 program only served to raise debt and demanded excessive fiscal adjustment.
  • The financing to Greece was used to repay foreign banks.
  • Growth-killing structural reforms, together with fiscal austerity, have led to an economic depression.
  • Creditors have learned nothing and keep repeating the same mistakes. Den Rest des Beitrags lesen »

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Greece: A credible deal will require difficult decisions by all sides

Posted by hkarner - 18. Juni 2015

blanchard1-1Olivier Blanchard,  15 June 2015, voxeu

The status of negotiations between Greece and its official creditors – the European Commission, the ECB and the IMF – dominated headlines last week.  At the core of the negotiations is a simple question: How much of an adjustment has to be made by Greece, how much has to be made by its official creditors? Den Rest des Beitrags lesen »

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Ten Take Aways from the “Rethinking Macro Policy: Progress or Confusion?”

Posted by hkarner - 2. Mai 2015

An excellent report on the current thinking (hfk)

Posted on by iMFdirect

blanchBy Olivier Blanchard

On April 15-16, the IMF organized the third conference on “Rethinking Macro Policy.

Here are my personal take aways.

1. What will be the “new normal”? 

I had asked the panelists to concentrate not on current policy challenges, but on challenges in the “new normal.” I had implicitly assumed that this new normal would be very much like the old normal, one of decent growth and positive equilibrium interest rates. The assumption was challenged at the conference.

On the one hand, Ken Rogoff argued that what we were in the adjustment phase of the “debt supercycle.” Such financial cycles, he argued, end up with debt overhang, which in turn slows down the recovery and requires low interest rates for some time to maintain sufficient demand.  Under that view, while it may take a while for the overhang to go away, more so in the Euro zone than in the United States, we should eventually return to something like the old normal.

On the other hand, Larry Summers argued that, while debt overhang was clearly relevant, more was going on.  He expanded on his secular stagnation hypothesis, arguing that, in the context of a chronic excess of saving over investment, keeping the economy at potential may well require very low or even negative real interest rates.  He pointed out that real interest rates had started declining long before the crisis, and pointed also to the further decline in long rates since he first stated this hypothesis at an IMF conference last year. If he is right, the new normal will not be like the old normal. Den Rest des Beitrags lesen »

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Rethinking macroeconomic policy: Introduction

Posted by hkarner - 21. April 2015

Olivier Blanchard 20 April 2015, voxeublanchard1-1

My subtitle was rejected by one of the co-organisers, namely Larry Summers. He argued that I was far too optimistic, that we were nowhere close to knowing where were going. Arguing with Larry is tough, so I chose an agnostic title, and shifted to “Rethinking Macro Policy III. Progress or confusion?” Den Rest des Beitrags lesen »

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Four Forces Facing the Global Economy

Posted by hkarner - 15. April 2015

Posted on by iMFdirect

WEOBy Olivier Blanchard 

In our April 2015 World Economic Outlook, we forecast global growth to be roughly the same this year than last year, 3.5% versus 3.4%.   This global number reflects an increase in growth in advanced economies, 2.4% versus 1.8%, offset by a decrease in growth in emerging market and developing economies, 4.3% versus 4.6% last year.   In short, to repeat the words used by the IMF Managing Director last week, we see growth as “moderate and uneven”.

Behind these numbers lies an unusually complex set of forces shaping the world economy.  Some, such as the decline in the price of oil and the evolution of exchange rates, are highly visible.  Some, from crisis legacies to lower potential growth, play more of a role behind the scene but are important nevertheless.  Let me briefly review them.

Legacies from both the financial and the euro crises are still visible in many advanced economies. To varying degrees, weak banks and high levels of debt—public, corporate, or household—still weigh on spending and growth. Low growth, in turn, makes deleveraging a slow process.  There is a clear lesson here:  Deleveraging will take time. Den Rest des Beitrags lesen »

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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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