Dealing with Sovereign Debt—The IMF Perspective

By Sean Hagan, Maurice Obstfeld, and Poul M. Thomsen

Versions in Français (French), Deutsch (German), ελληνικά (Greek), and Español (Spanish)

Debt is central to the functioning of a modern economy. Firms can use it to finance investments in future productivity. Households can use it to finance lumpy purchases, such as big consumer durables, or a home. Sometimes, however, firms’ investments do not pan out or a household’s main earner loses his or her job. Countries’ legal systems generally recognize that in these cases, debtors and creditors alike—along with society at large—may be better off if there is an orderly procedure for reorganizing debts. 

Chart of the Week: Growth and Inequality

By iMFdirect

Versions in Français (French), and Español (Spanish)

In the past two decades, low-income economies have seen a rise in growth, with fewer living in poverty. Yet inequality in many countries has remained virtually unchanged.

A recent IMF paper explains how the design of policies can matter to spread the economic benefits of growth more broadly.

The Fruits of Growth: Economic Reforms and Lower Inequality

By Christine Lagarde

Versions in: عربي (Arabic), 中文 (Chinese), Français (French), 日本語 (Japanese), Português (Portuguese), Русский (Russian), and Español (Spanish)

Growth is essential for improving the lives of people in low-income countries, and it should benefit all parts of society.

Traveling through Africa in the last few days, I have been amazed by the vitality I have witnessed: business startups investing in the future, new infrastructure under construction, and a growing middle class. Many Africans are now making a better living and fewer are suffering from poverty. My current host, Uganda, for example, has more than halved its absolute poverty rate to about 35 percent from close to 90 percent in 1990.

But we have also seen a flip side. Poverty, of course, but inequality as well remain stubbornly high in most developing countries, including in Africa, and too often success is not shared by all. 

Redesigning Argentina’s Economic Landscape

By Roberto Cardarelli

Versions in Português (Portuguese), and Español (Spanish)

Most people know Argentina as the land of tango, Malbec, and some of the greatest soccer players of all times. But Argentina is also famous for being home to some of the most diverse and extreme landscapes of the world—from subtropical rainforests and Iguazu Falls in the north to the glaciers of Perito Moreno in the south, and from the lowest site in South America (Laguna del Carbón) to the highest elevation in the Americas (Aconcagua mountain).

The Whole Can Be Greater Than the Sum of its Parts

By Vitor Gaspar, Maurice Obstfeld and Ratna Sahay

There are policy options to bring new life into anemic economic recoveries and to counteract renewed slowdowns.  Our new paper, along with our co-authors, debunks widespread concerns that little can be done by policymakers facing a vicious cycle of (too) low growth, (too) low inflation, near-zero interest rates, and high debt levels.

China’s Rebalancing Explained in 6 Charts

By Longmei Zhang

Version in 中文 (Chinese)

The word “rebalancing” is often used to describe China’s economic transition. But what does it mean? And how much is China rebalancing? A recent IMF paper attempts to answer these questions. 

Reducing Inequality in Asia: Sharing the Growth Dividend

By Sonali Jain-Chandra, Kalpana Kochhar and Tidiane Kinda

Versions in 中文 (Chinese), 日本語 (Japanese)

Asia continues to be the world’s growth leader, but the gains from growth are less widely shared than before. Until about 1990, Asia grew rapidly and secured large gains in poverty reduction while simultaneously achieving a fairly equitable society. Since the early 1990s, however, the region has witnessed widening income inequality that has accompanied its robust expansion—a break from its own remarkable past.

This matters because elevated levels of inequality are harmful for the pace and sustainability of growth. What can be done? Our research finds that policies could substantially reverse the trend of rising inequality. In particular, given limited social safety nets, well-designed fiscal policies may be able to alleviate inequality without stifling the region’s wealth-creating growth.

Japan: Time to Load a Fourth Arrow—Wage Increases

By Luc Everaert and Giovanni Ganelli

(Version in 日本語)

Everybody agrees: wages need to grow if Japan is to make a definite escape from deflation. Full- time wages have increased by a mere 0.3 percent since 1995! For example, despite its record profits, Toyota increased its base salary only by 1.1 percent last year. The average of 219 Keidanren firms managed just 0.44 percent. Clearly, an increase in base wages, colloquially referred to as “base up”, is long overdue.

It’s Getting Hot in Here: Climate Change

by iMFdirect

World leaders are meeting in Paris to forge a new climate deal.  We interviewed two  leading thinkers on climate, Nick Stern and Christiana Figueres.

The Price of Oil and the Price of Carbon

By Rabah Arezki and Maurice Obstfeld

(Versions in عربي, 中文, Français, 日本語,  Русский, and Español)

“The human influence on the climate system is clear and is evident from the increasing greenhouse gas concentrations in the atmosphere, positive radiative forcing, observed warming, and understanding of the climate system.” —Intergovernmental Panel on Climate Change, Fifth Assessment Report

Fossil fuel prices are likely to stay “low for long.” Notwithstanding important recent progress in developing renewable fuel sources, low fossil fuel prices could discourage further innovation in and adoption of cleaner energy technologies. The result would be higher emissions of carbon dioxide and other greenhouse gases.

Policymakers should not allow low energy prices to derail the clean energy transition. Action to restore appropriate price incentives, notably through corrective carbon pricing, is urgently needed to lower the risk of irreversible and potentially devastating effects of climate change. That approach also offers fiscal benefits.