While pro-cyclical fiscal policies – ie. expansionary fiscal policies in booms and contractionary fiscal stances in downturns – remain a common feature among developing countries, some countries have recently…
I am among those economists who have argued that expansive fiscal policy has been missing as a lever to support recovery in advanced economies, especially in the Eurozone –…
Lecture at University of Illinois at Urbana-Champaigne (October 12, 2014) China, Brazil - two tales of a growth slowdown
IÉSEG - Dr. Otaviano Canuto on emerging markets in the global economy IÉSEG School of Management Published on Mar 17, 2014 Otaviano Canuto who is the Senior Adviser on BRICS…
After experiencing an initial period of rapid growth, many developing countries have fallen into the middle-income “trap”—stuck between low-wage, low-technology markets and high-income, innovation-based developed economies. This note argues that inadequate access to finance has an adverse effect on innovation, directly, through the financing of fewer research and development (R&D) projects, and also indirectly, as fewer individuals may choose to invest in the skills necessary to work in R&D fields.
Bad conditions of mobility and accessibility to jobs and services in most metropolitan regions in developing countries are a key development issue. Besides the negative effects on the wellbeing…
The 2014 baseline for the global economy still appears to be trending upwards, but the Year of the Horse may be jumpy.
Book launch (2014-01-29) - "Dealing with the challenges of macro financial linkages in emerging markets" Click here to download To watch the book launch, click here or copy and paste…
The global economy looks poised to display better growth performance in 2014. Leading indicators are pointing upward – or at least to stability – in major growth poles. However, for this to translate into reality policymakers will need to be nimble enough to calibrate responses to idiosyncratic challenges.
Global financial integration and the linkages between the financial and the real sides of economies are sources of huge policy challenges. This is now beyond doubt, after what we saw in the run-up to and the unfolding of the 2008 global financial crisis. As a consequence, the established wisdom regarding monetary policies and prudential regulation has been subject to a deep critical review, including a demise of the belief that they should be maintained as fully independent functions.
Not long ago, many economists were anticipating a switchover in the global economy's main engines, with autonomous sources of growth in developing economies compensating for the drag of struggling advanced economies. But, in the last few months, enthusiasm about these economies’ prospects has given way to bleak forecasts.
There are still serious questions on how to proceed with the complementary use of prudential regulation and monetary policy. While there are already lessons from emerging markets’ use of the macroprudential policy toolkit, more experience and analysis, particularly on its interaction with monetary policy is needed.
Emerging Markets (EMs) are more likely to suffer shocks, such as commodity-price and terms-of-trade shocks, as well as surges and sudden stops in capital flows.. Furthermore, structural and institutional features typical of most EMs tend to amplify and propagate shocks. Even when asset price-led cycles are not generated within EMs, they tend to be affected the most due to capital flows.
The 2008 financial crisis has emphasized the importance of macro financial linkages. In the financial sector, attention is now focusing on macro prudential regulations that are geared toward the stability of the financial system as a whole. In the macro arena, the recognition that price stability was not sufficient to guarantee macroeconomic stability and that financial imbalances developed despite low inflation and small output gaps has highlighted the need for additional tools (macro prudential policies) to complement monetary policy in countercyclical management. Emerging markets (EMs) face different conditions and have key structural features that can have a bearing on the relevance and efficacy of policy measures. Drawing on Canuto, Otaviano, and Swati R. Ghosh, eds. 2013. Dealing with the Challenges of Macro Financial Linkages in Emerging Markets. Washington, DC: World Bank), this note discusses the challenges of dealing with macro financial linkages and explores the policy toolkit available for dealing with systemic risks, particularly in the context of EMs.
Confidence in conventional financial stability regimes was shattered by the scale of the financial crisis. This book chapter explores the need for coordination between monetary policies and macro prudential…