Archive for September, 2004
The IMF published today its Global Financial Stability Report, its semi annual assessment of financial markets and vulnerabilities. It is a high quality document with lots of food for thought. Compared to previous times, the IMF seems to be less concerned about the risks of a “systemic financial crisis”. It argues:
“While it is obviously feasible that one or the other financial institution, such as a hedge fund or even a bank, might succum to serious mistakes in risk management or to outright fraud, such incidents should be isolated cases with limited, if any, contagion to the system as a whole.
Short of a major and devastating geopolitical incident or a terrorist attack undermining, in a significant and lasting way, consumer confidence, and hence financial asset valuations, it is hard to see where systemic threats could come from in the short run.”
My new book with Brad Setser on “Bailouts or Bail-ins? Responding to Financial Crises in Emerging Economies” is now in print.
The book has been published by the Institute for International Economics, jointly with the Council on Foreign Relations; see this link for a preview of the book.
All the chapters of the book are available in Read-Only PDF format online from the IIE site. This means that you can read them online but not print them. Thus, to have a hard copy you will have to purchase the book.
My new paper with Brad Setser on “The U.S. as a Net Debtor: The Sustainability of the U.S. External Imbalances”
I have just finished and posted online a new paper with Brad Setser on “The U.S. as a Net Debtor: The Sustainability of the U.S. External Imbalances”.
Brad and I just published this week our book on financial crises in emerging market economies. But the U.S. is increasingly looking like a vulnerable emerging market economy given its huge current account deficits and unsustainable external debt accumulation. Thus, it seemed appropriate for us to focus our attention on the financial vulnerabilities of the U.S., after having studied for years the financial vulnerabilities of emerging markets.
Here is below the Executive Summary of the paper. The full text of the paper can be found on my Global Macro Web Site at:
Most of the media reporting on the new CBO budget forecast has concentrated on Bush administration failure to cut the deficit by half over the next four years. Based on the CBO forecast, the deficit will fall from 3.6% of GDP this year to 2.1% of GDP in five years; and it will be equal to a cumulative deficit of $2.29 trillion in the decade to 2014. However, what has been missed by most reporters, but is clear from the details of the CBO report, is that the deficit will be much larger than 2.1% of GDP in 2008 and that the cumulative deficit over the next ten years is more likely to be $6.35 trillion rather than $2.29 trillion. Based on the more realistic scenarios about fiscal policy outlined by the CBO itself, the 2014 budget deficit will be equal to 5% of GDP (or $894 billion), sharply up from the 2004 forecast of $422 (3.6% of GDP).
The academic school year is starting this week at Stern/NYU and I will teach an MBA course on International Macroeconomic Policy: Theory and Evidence from Financial Crises. The course has its own home page; syllabus, lecture notes, handouts, materials, links are all online at