Negative Rates – Part 2: A Policy Too Far?

Negative Rates – Part 2: A Policy Too Far?

Negative Reality Debt can only be reduced by strong growth, inflation, currency devaluation (where the borrowing is from foreigners) or default. All the strategies other than growth involve some level of transfer of value from savers either by reduction in the nominal value returned or decreased purchasing power. Growth and inflation are low. Devaluation is […]

Long-Term Finance and BNDES Tapering in Brazil

Long-Term Finance and BNDES Tapering in Brazil

  One major policy issue in Brazil is how to boost productivity, while following a path of fiscal consolidation that will take at least a decade to bring the public-debt-to-GDP ratio back to 2000 levels (Canuto, 2016a). The productivity-boosting agenda includes not only the implementation of a full range of structural reforms, but also recovering […]

Negative Rates Part 1: Beyond the Zero Bound

Negative Rates Part 1: Beyond the Zero Bound

  Interest in negative rates, at least as can be judged from hyper activity from commentators, has diminished. But a number of European central banks still have negative official rates. The European Central Bank (“ECB”) deposit rate is minus 0.30%. Switzerland’s policy rate is minus 0.75%. Sweden’s policy rate is minus 0.35%. The Bank of […]

Capital Flows and Domestic Responses

Capital Flows and Domestic Responses

photo: Tax Credits The international impact of financial shocks became apparent during the global financial crisis. But how do financial flows affect economic conditions during non-crisis times? And are there ways to shelter the domestic economy from these flows? Some new evidence from the IMF seeks to answer these questions. IMF economists Bertrand Gruss, Malhar Nabar […]

The Role of Fiscal Policy When Private Debt is High

The Role of Fiscal Policy When Private Debt is High

  photo: familytreasures Excessive private debt is a major headwind against the global recovery. Where fiscal space is available, a more active role of fiscal policies can facilitate an orderly private deleveraging while minimizing its output costs. However, fiscal policy cannot do it alone; it has to be supported by complementary policies within credible frameworks. Globally, […]

Are Rising Interest Rates Really Good for Banks?

Are Rising Interest Rates Really Good for Banks?

photo: Brook Ward As the stock market soars to one record high after another, analysts do not hesitate to tell us why. One popular explanation is that expectations of higher interest rates are pushing up the stocks of banks and other financial companies  (example). Yet not so long ago, the same analysts were telling us that […]

What Are Development Corridor Strategies, and Do They Work?

What Are Development Corridor Strategies, and Do They Work?

photo: Marwa Morgan Across large swaths of the developing world, a new trend is taking hold: governments are targeting public and private investments in specific geographic areas in the hopes of creating spatial “development corridors.” These strategies are guided by the belief that concentrating and co-locating infrastructure investments in specific locations can create clusters of interconnected […]

Creating a Thriving Capitalist Society – Understanding Wages, Poverty, Government, and Business

Creating a Thriving Capitalist Society – Understanding Wages, Poverty, Government, and Business

photo: Aschevogel INTRODUCTION We receive a stream of financial information in the news, with a jumble of statistics and varied interpretations, and this creates a confusing picture that is very challenging to sort out. If the minimum wage is raised, is this an overall good or bad thing? Will it inhibit business? What should we make […]

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