The Challenges of Achieving Financial Stability

The end of the bubble in 2000 led to a debate over whether central banks should take financial stability into account when formulating policy, in addition to the usual indicators of economic stability such as inflation and unemployment. The response from many central bankers was that they did not feel confident that they could identify price […]

Protesting the IMF’s Madame Lagarde

The protests at Smith College that led to the withdrawal of Christine Lagarde, Managing Director of the International Monetary Fund, as this year’s commencement speaker have been widely denounced as a manifestation of intolerance. They also demonstrate a lack of understanding of the IMF and the many changes that have taken place at that institution in the last […]

China’s Trilemma Maneuvers

China’s exchange rate, which had been appreciating against the dollar since 2005, has fallen in value since February. U.S. officials, worried about the impact of the weaker renminbi upon U.S.-China trade flows, have expressed their concern. But the new exchange rate policy most likely reflects an attempt by the Chinese authorities to curb the inflows of short-run capital […]

Can the U.S. Rebalance Without Raising Inequality?

Last week’s estimate of an anemic U.S. GDP first-quarter growth rate of 0.1% will be revised. Moreover, the good news regarding job growth in April suggests that the U.S. economy is expanding at a quicker pace in the second quarter. But a closer look at the first quarter data reveals a disturbing drop in investment and net exports that […]

Recovery in Europe?

Greece has returned to the bond market, issuing $4.2 billion of five-year bonds at an interest rate of 4.95%. The government’s ability to borrow again is a “reward” for posting a surplus on its primary budget (although the accounting that produced the surplus has been questioned).  This has been viewed as a sign, albeit fragile, of recovery. Portugal […]

China’s Place in the Global Economy

Last week’s announcement that China’s GDP grew at an annualized rate of 7.4% in the first quarter of this year has stirred speculation about that country’s economy. Some are skeptical of the data, and point to other indicators that suggest slower growth.  Although a deceleration in growth is consistent with the plans of Chinese officials, policymakers may respond with […]

Capital Liberalization and Inequality

Inequality, which has drawn a great deal of comment and analysis following the publication of Thomas Piketty’s Capital in the Twenty-First Century, has sometimes been seen as a byproduct of increased international trade. But now other international economic linkages are being investigated. The International Monetary Fund’s Managing Director, Christine Lagarde, has acknowledged the need to take distributional consequences into […]

The IMF and Ukraine

The International Monetary Fund last week announced an agreement with Ukraine on a two year Stand-By Arrangement. The amount of money to be disbursed depends on how much other financial support the country will receive, but will total at least $14 billion. Whether or not this IMF program will be fully implemented (unlike the last two) depends […]

Tapering and the Emerging Markets

The response of the exchange rates of emerging markets and their equity markets to the Federal Reserve’s “taper,” i.e., reduction in asset purchases, continues to draw comment (see, for example, here). Most analysts agree that these economies are in better shape to deal with capital outflows than they were in the past, and that the risk […]

Bank Lending: Too Much of a Good Thing?

Global banks do not have much to cheer about these days. Earnings are falling, and the banks are responding by cutting jobs. The Federal Deposit Insurance Corporation has charged 16 banks of colluding to rig the London Interbank Offer rate (LIBOR). And theFederal Reserve has approved a rule that requires foreign banks with $50 billion of assets […]