Modigliani and Miller at the IMF

Modigliani and Miller at the IMF

In a paper on tax policy, leverage and macroeconomic stability published on 10 November, the IMF staff address the issue of excessive leverage or the so-called “debt bias” that poses risks for financial and macroeconomic stability. The “debt bias” has been largely created by more favorable tax treatment of debt relatively to equity. In most […]

An Important Step for China and the World

On 30 November the Board of the IMF decided to include the Chinese RMB in the Special Drawing Rights (SDR) basket from 1 October 2016. SDR is the unit used in transactions between IMF member states and the Fund. RMB will thus become the fifth currency in this basket of global reserve currencies, joining the […]

Is the Minimum Wage an Effective Way to Reduce Poverty or Inequality?

There is a growing interest in increasing the federal minimum wage in the U.S. and minimum wages at the state and city level (News and Observer). President Obama has already decreed a higher minimum for workers on Federal contracts, and he has proposed raising the Federal minimum from $7.25 to $10.10. Interest in the minimum […]

Consequences of the World Oil Glut

Forecasting crude oil prices has been difficult. Forecast errors have been large, especially for the end of 2014, when typical forecasts were more than $40 per barrel too high. A panel of Wall Street Journal analysts forecast $94.65 per barrel, but the actual price was $53.27 per barrel. Forecasts implicit in oil futures contracts exhibited […]

Why is Corruption More Prominent in Some Countries Than Others?

Corruption is widely acknowledged to be a serious problem in many countries. Ukraine has experienced a series of corrupt governments, and revulsion against widespread corruption is one factor that brought about the ouster of the Yanukovych administration last February (Poroshenko). Chinese officials have recently acknowledged corruption to be a serious problem.  Extreme levels of corruption […]

Do Free Trade Agreements with the EU Promise Higher Incomes for the Eastern Partnership Countries?

A year ago ( we analysed the real convergence during last two decades in both the 13 member states that joined the EU on or after 2004 and the EU Eastern Partnership countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine). The new EU members that were relatively poor a generation ago showed more significant improvement […]

Is Postponing the EU Trade Agreement Harmful to Ukraine?

The Parliament of Ukraine and the European Parliament are both expected to ratify the EU-Ukraine association agreement in a simultaneous session today. However, last week it was announced that the entry into force of the deep and comprehensive free trade area (DCFTA) between the EU and Ukraine, initially planned for November of this year, will […]