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Posts Tagged ‘IMF’

Weak Productivity: The Role of Financial Factors and Policies

Posted by hkarner - 9. Januar 2018

By Romain Duval, Giuseppe Nicoletti, and Fabrizio Zampolli, IMF Blog

January 8, 2018

weak productivity has been a problem even before the global financial crisis 

Almost ten years after the onset of the global financial crisis productivity growth remains anaemic in advanced economies despite very easy monetary conditions, casting doubts on the sustainability of the cyclical recovery. The productivity slowdown started well before the crisis, which then amplified the problem. To what extent can this slowdown be ascribed to policies and financial factors, including loose monetary policy prior to 2008, corporate and bank balance sheet vulnerabilities, and the exceptional monetary and financial policy responses to the crisis?

Together with policymakers and top scholars in the fields of finance and productivity, the Bank for International Settlements, the International Monetary Fund and the Organization for Economic Cooperation and Development, supported by the Global Forum on Productivity, will seek to address this question with a conference on Weak Productivity: The Role of Financial Factors and Policies held at OECD Headquarters in Paris, France on January 10 and 11. As the organizers of this conference, our goal is to stimulate and inform the policy debate, as well as open promising avenues for further research. Den Rest des Beitrags lesen »

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Buried bombs? The world economy

Posted by hkarner - 3. Januar 2018

Date: 02-01-2018
Source: The Economist

The IMF expects every large economy to expand in 2018. While a global financial crisis is highly unlikely this year, there are more than a few ways the current projections could go wrong.

China, where debt and new borrowing remain worryingly high, may not be able to maintain growth while putting out financial fires, and slower growth there would affect other economies.

The euro area could face a crisis like 2007-09, if a big economy with slow growth and high public debt loses market confidence and needs a bail-out too big for German voters to accept.

In the Middle East, meanwhile, a regional war would cause oil prices to soar, leading to a recession in developed economies that exposes unseen financial vulnerabilities.

Then there are central banks, which may cause a downturn by tightening policy too much, too quickly. Still, as the IMF’s forecasts indicate, all will probably be fine.

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Strength in Numbers: A Safety Net to Prevent Crises in the Global Economy  

Posted by hkarner - 20. Dezember 2017

 By IMFBlog

December 19, 2017

Walking on a safety net: countries need insurance in bad economic and financial times (photo: Vivek Prakash/Newscom).

If you are lucky, when the going gets tough, you have a group of people you can rely on to help you through a crisis. Countries are no different—a safety net to help them in bad economic and financial times can make the difference in peoples’ lives.  

Insurance against crises

The global financial safety net should help countries in three ways: provide insurance to help prevent crises; supply financing to countries if crises materialize; and provide incentives for countries to adopt the right policies.

Here is a quick breakdown of the safety net.  It has four main layers:

  • countries’ own reserves;
  • bilateral swap arrangements between two countries;
  • regional financing arrangements; and
  • the IMF.

All these layers have expanded over the past 20 years. Den Rest des Beitrags lesen »

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The Year in Review: Global Economy in 5 Charts

Posted by hkarner - 19. Dezember 2017

By Oya Celasun, Gian Maria Milesi-Ferretti, and Maurice Obstfeld, IMF Blog

December 18, 2017

On the economic front, 2017 is ending on a high note (photo: allstars/shutterstock)

It has been a tumultuous year marked by natural disasters, geopolitical tensions, and deep political divisions in many countries.

On the economic front, however, 2017 is ending on a high note, with GDP continuing to accelerate over much of the world in the broadest cyclical upswing since the start of the decade.

Here are five charts that help tell the economic story of the past year. Den Rest des Beitrags lesen »

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Propping Up the Chinese Economy: Credit versus Fiscal Stimulus  

Posted by hkarner - 14. Dezember 2017

December 13, 2017

Credit booms are addictive. Credit supports growth and the perception of wealth. Yet credit booms are risky, and are often followed by financial busts and economic slowdowns. The challenge is taming credit without hurting growth.

Mainland China is experiencing a major credit boom. As of end-2016, total social financing—a broad measure of credit—exceeded 200 percent of GDP. The credit-to-GDP gap—a measure of financial vulnerability—is the second highest among 44 economies covered by BIS (after Hong Kong SAR).

How did credit growth contribute to output growth in China? Has credit allocation worsened as the economy became saturated with credit? Can output growth be supported by other means, such as fiscal stimulus? Den Rest des Beitrags lesen »

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Improving Financial Stability in China

Posted by hkarner - 9. Dezember 2017

By Ratna Sahay and James P. Walsh, IMF Blog

December 6, 2017

 China’s leaders have made financial stability one of their top priorities 

China’s leaders have made financial stability one of their top priorities. Given the size and importance of the Chinese market, with the world’s largest banks and second-largest stock market, that is welcome news for China and the world. The financial system permeates virtually all aspects of economic activity, having played a key role in facilitating rapid economic growth and in sharply reducing poverty rates.

China is moving from the world’s factory floor toward a more a more modern, consumer-driven economy. During this transition, however, some tensions have emerged in the financial sector.

Three concerns

The IMF recently concluded its latest evaluation for China under the IMF’s Financial Sector Assessment Program (FSAP). The assessment identifies three important and interconnected concerns about the Chinese financial system:

  • Lending boom. A focus on maintaining growth and employment has resulted in sustained rapid credit growth despite the slowing economy. This debt is largely owed by companies—some of which may not have good prospects—and local governments, but an increasing share is owed by households. Credit growth is an important indicator of future financial distress, because lending standards often fall in the rush to make more loans.
  • Complexity. Rules on bank lending to traditional sectors, such as construction and real estate, have pushed risky borrowers away from banks and toward more lightly regulated financial products. At the same time, banks are offering increasingly complex wealth management products to savers looking for higher-yielding assets.
  • Guarantees. Banks often compensate investors for losses on financial products to preserve their reputations; the government has repeatedly intervened to stabilize financial markets; and investors have come to believe that state-owned enterprises will be bailed out if they get into trouble. But protecting investors and companies from losses encourages them to underestimate risk and can lead to a misallocation of investment to less productive economic activities.

Taken together, these factors have created a highly dynamic and fast-moving financial system that is very difficult to monitor. Removing implicit guarantees—allowing markets to fall, firms to fail, and investors to lose money—is particularly challenging. Better social safety nets, financial education, and improved bankruptcy procedures will help. But credit growth will not slow sustainably unless tolerance for job losses and slower economic growth rises, particularly at local level, and new sources of revenue are found for local governments.Key goal

China’s authorities recognize these risks and are seeking to contain them. President Xi in April cited financial stability as a key goal for China. And since the last assessment in 2011, the Chinese authorities have continuously improved supervision of banks, insurance companies, and securities firms.

The IMF’s main recommendations for further improvement are in five key areas: systemic risk monitoring, interagency coordination, bank capital, liquidity buffers, and crisis management. Let’s take a closer look at the recommendations in each area:

  • China’s authorities should create a body, focused solely on financial stability, to improve oversight of systemic risk. Such a body, by regularly discussing and assessing issues on a cross-agency basis, can help identify systemic risks and make recommendations to the implementing supervisors. Improving the quality of data will be important in this regard.
  • Financial supervisors need to have greater independence to pursue their mandates without concern about being overruled. They also need more resources to adequately supervise a large and complex system. Finally, better coordination – at all levels, not just at the top – is essential to identifying and managing risks.
  • The large size of the credit boom calls for gradually increasing capital at banks to cushion them against a sudden cyclical economic downturn. An increasingly complex and interlinked financial system also calls for higher buffers at several large banks to prevent shocks from spreading to other parts of the financial system. Finally, China’s unique risks – such as the dangers inherent in lifting widespread implicit guarantees and the presence of large off-balance sheet exposures that banks have historically guaranteed – call for higher levels of capital across the system during the transition.
  • Banks and other financial institutions are increasingly using very short-term borrowing to finance their investments. To contain risks if those flows reverse, banks should hold more liquid assets, and rules on lending among financial institutions should be amended to encourage safer, and longer-term, lending.
  • Several elements of an effective framework for crisis management are already in place. Further reforms are needed to reduce the reliance on public funds in managing weak financial institutions, while ensuring they can fail safely, for example by expanding administrative resolution powers in line with international standards.

Supervising one of the world’s largest and most complicated systems is a challenging task. The Chinese authorities have worked hard to keep pace with growth and innovation but, as in all countries, many gaps remain. They recently created a Financial Stability and Development Committee to monitor systemic risks and prevent financial disruptions and announced new rules to contain riskiness of asset management products. Addressing such concerns should help China continue to grow both rapidly and safely.

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More People, More Technology, More Jobs: How to Build Inclusive Growth

Posted by hkarner - 5. Dezember 2017

By Stefania Fabrizio and Andrea F. Presbitero, IMF Blog

December 4, 2017

Population growth and technological innovation don’t necessarily have to widen inequality in developing countries. They can also offer new opportunities to increase growth and create jobs: the long-term outcomes depend on today’s policy choices. But those choices are not easy because policies for sustained and inclusive growth may conflict with short-term needs. We look at the trade-offs and how to balance short- and long-term goals for sustainable and inclusive growth.

Population growth and automation

Compared with advanced economies, which already face the challenges of aging and declining population, developing countries are still experiencing demographic growth as today’s children become working-age adults. The United Nations estimates that in Africa the under-25 generation represents 60 percent of the population. As population growth potentially boosts the supply of low-skilled workers, while automation simultaneously squeezes labor demand, this new generation of workers will advance only if they can acquire marketable skills. Den Rest des Beitrags lesen »

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Climate Change Will Bring More Frequent Natural Disasters & Weigh on Economic Growth

Posted by hkarner - 17. November 2017

by Sebastian Acevedo, and Natalija Novta, IMF Blog

November 16, 2017

As natural disasters become more frequent and intense, countries should invest in resilient infrastructure to better withstand such hazards (photo: Carlos Garcia Rawlins/Newscom).

The weather seems to be getting wilder and fiercer. From devastating hurricanes in the U.S. and the Caribbean, to raging wildfires in California and ruinous floods in India, the human and economic toll of extreme weather events is enormous.

Each time an extreme weather event causes significant loss of property and loss of life, a natural disaster is recorded. Natural disasters are a particularly important risk to small, lower income countries because they can quickly wipe out a significant portion of their GDP. For decades, the IMF has been committed to helping meet member’s post-disaster needs. Will these needs increase with climate change? In other words, will climate change bring more frequent weather-related natural disasters? Based on our analysis in Chapter 3 of the October 2017 World Economic Outlook, the answer is yes.

Forces of nature Den Rest des Beitrags lesen »

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Higher taxes can lower inequality without denting economic growth

Posted by hkarner - 21. Oktober 2017

Date: 20-10-2017
Source: The Economist: Buttonwood

A new study by the IMF finds no strong correlation between lower taxes and higher growth

INEQUALITY is one of the big political issues of the 21st century, with many commentators citing it as a significant factor behind the rise of populism. After all, nothing could be more indicative of the triumph of the common man than the elevation of a property billionaire to the American presidency.

A new IMF report* looks at how fiscal policy can help tackle inequality. In advanced economies, taxation already has an impact. The Gini coefficient (a standard measure of income inequality) is around a third lower after taxes and transfers than it is before them. But whereas such policies offset around 60% of the change in market inequality between 1985 and 1995, they have had barely any impact since.

That is because of a change in policy direction. Across the West, taxes on higher incomes have generally fallen. This could be for a number of reasons, the IMF says. The tax take from high earners could have become more “elastic” (ie, sensitive to rate changes); in a mobile world, the elite will move countries to reduce their tax bills. But there is no sign that elasticity has increased in recent decades. A second possibility, easily dismissed, is that the share of income taken by the rich might have fallen; it has, of course, increased. A third option is that society reached a consensus that tax rates needed to be cut to help the rich. In fact, surveys show that people are more in favour of redistributive policies than they were in the 1980s. Den Rest des Beitrags lesen »

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IMF Identifies Nine Big Banks Likely to Struggle With Profitability

Posted by hkarner - 13. Oktober 2017

Date: 12-10-2017
Source: The Wall Street Journal

Projects Deutsche Bank, Citi, Barclays and others could deliver subpar profits by 2019

The International Monetary Fund said some of the world’s largest financial institutions—including Deutsche Bank AG, Citigroup Inc., Barclays PLC and a few Japanese institutions—could struggle in coming years to remain sufficiently profitable.

“About a third of banks by assets may struggle to achieve sustainable profitability, underscoring ongoing challenges and medium-term vulnerabilities,” the IMF said, referring to the world’s most important financial institutions.

The IMF’s critique of the banks came in its biannual Global Financial Stability Report, released Wednesday as finance ministers and central bankers from 189 countries gather in Washington for the annual meetings of the IMF and the World Bank. Den Rest des Beitrags lesen »

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