The G20 and the (Non)Pursuit of Financial Stability

One of the legacies of the response to global financial crisis was supposed to be a renewed focus on international financial stability. A manifestation of this effort was the transformation of the Financial Stability Forum by the Group of Twenty (G20) into the Financial Stability Board (FSB) to oversee the development of global financial and regulatory standards. A “board,” […]

Dealing with the Fallout from U.S. Policies

The divergence of monetary policies in the advanced economies continues to roil financial markets. The Federal Reserve has reacted to better labor market conditions by ending its quantitative easing policy. The Bank of Japan, on the other hand, will expand its purchases of securities, and the European Central Bank has indicated its willingness to undertake […]

Volatility in the Emerging Markets

Volatility has returned to the financial markets. Stock prices in the U.S. have fallen from their September highs, and the return on 10-year Treasury bonds briefly fell below 2%.  Financial markets in emerging markets have been particularly hard hit,. The Institute for International Finance estimates that $9 billion was withdrawn from equity markets in those countries in October, […]

Martin Wolf’s Warning

It is time for the 2014 Globie—a (somewhat fictitious) prize I award once a year to a book that deserves recognition for its treatment of the consequences of globalization. (Previous winners can be found here.) The financial turmoil of the last week makes this year’s award-winner particularly appropriate: Martin Wolf for The Shifts and the Shocks: What […]

International Debt and Financial Crises

The latest issue of the IMF’s World Economic Outlook has a chapter on global imbalances that discusses the evolution of net foreign assets (also known as the net international investment position) in debtor and creditor nations. The authors warn that increases in the foreign holdings of domestic liabilities can raise the probability of different types of financial crises, including […]

The IMF and Sovereign Debt

The continuing inability of the Eurozone economies to break out of their current impasse means that any optimistic projections of declining debt to GDP ratios are unlikely to be achieved. As long as European governments continue to raise funds in the financial markets on favorable terms, the current situation remains sustainable.  But the IMF is […]

European Doldrums

European economies are faltering.  The German economy contracted in the second quarter, as did those of France and Italy. Growth in Spain and the Netherlands was not enough to offset the slowdown in the Eurozone’s largest members.  An escalation in the confrontation with Russia would send shockwaves rippling from the Ukraine westwards that world worsen the situation. […]

The BRICS and the Bretton Woods Twins

The World Cup was not the only event of global significance to take place in Brazil this summer. The leaders of Brazil, Russia, India, China and South Africa met in the city of Fortaleza and announced the formation of two new financial institutions. One is the New Development Bank (NDB), which will finance “sustainable development” projects, […]

China’s Outward FDI

According to the United Nations Conference on Trade and Development’s latest World Investment Report Overview 2014, foreign direct investment (FDI) inflows to China reached $124 billion last year, while outflows rose to $101 billion. The Report anticipates that outflows will surpass inflows within the next few years, changing China from a net recipient of FDI to a net supplier. […]

The ECB’s Daunting Task

Mario Draghi, head of the European Central Bank, and the members of the ECB’s Governing Council are receiving praise for the initiatives they announced last week to avoid deflation (see here and here). The immediate impact of the announcement was a rise in European stock prices. But the approval of the financial sector does not mean that the ECB […]