After a deep global recession, economic growth has turned positive, as wide-ranging public intervention has supported demand and lowered uncertainty and systemic risk in financial markets. Nonetheless, the recovery is expected to be slow, as financial systems remain impaired, support from public policies will gradually have to be withdrawn, and households in economies that suffered asset price busts will continue to rebuild savings. Risks to the outlook remain on the downside. Premature exit from accommodative monetary and fiscal policies is a particular concern because the policy-induced rebound might be mistaken for the beginning of a strong recovery. The key requirement remains to restore financial sector health while maintaining supportive macroeconomic policies until the recovery is on a firm footing. At the same time, policymakers need to begin preparing for an orderly unwinding of extraordinary levels of public intervention. Policies also need to facilitate a rebalancing of global demand, because economies that experienced asset price busts will need to raise saving rates, and there is a need to bolster potential growth in advanced economies, which has suffered as a result of the major financial shocks. Rising unemployment and setbacks to progress in poverty reduction pose social challenges that also must be addressed.
The global economy seems to be on the verge of recovery. The advanced economies, hit particularly hard by financial crises and the collapse in world trade, are showing signs of stabilization, driven mainly by an unprecedented public policy response. The shape of the recoveries will vary, however, with economies that suffered financial crises likely to experience weaker recoveries than those that were affected mainly by the collapse in global demand. The rebound in emerging and other developing economies is being led by a resurgence in Asia, most notably in China and India, fuelled by policy stimulus and a turn in the global manufacturing cycle. Other emerging economies are benefiting from commodity priceincreases, as we11 as from policy frameworks that are stronger than during previous crises. However, recovery in the Commonwealth of Independent States (CIS) and emerging Europe is likely to be difficult, especially for economies most affected by sharply falling capital flows and domestic financial sector turmoil.
The current crisis gives occasion to revisit an old question: should monetary policy be used to prevent asset price busts? The question has at least three aspects, each of which is addressed in this chapter. First, we examine the historical evidence in search of consistent macroeconomic patterns that could be used as reliable leading indicators of asset price busts. Second, we examine the role of monetary policy in the buildup to the current crisis. In particular, we assess the validity of accusations that policymakers created the current crisis by reacting insufficiently to growing inflation pressure or that they raised the likelihood of an asset price bust by placing insufficient weight on credit and asset prices when setting interest rates. Third, we consider whether the goal of monetary policy should be expanded beyond just the stability of goods price inflation, how this could be done, and the potential tradeoffs involved.
The global economy is beginning to recover from the most severe financial crisis since the Great Depression and the deepest recession since World War II. Global economic activity is starting to pick up, but financial systems remain impaired and domestic and external imbalances persist in many economies. The recovery is expected to be slow, and there are concerns about the prospect of long-term damage to the path of global output, as financial institutions and markets worldwide struggle to restore their ability to intermediate and unemployment rises to high levels. In this context, the aftermath of past financial crises may provide useful insights into the medium-term prospects for economies now in the midst of financial crisis and for the global economy.
International Monetary Fund. External Relations Dept.
Recovery from the deepest recession in 60 years has started. But sustaining it will require delicate rebalancing acts, both within and across countries. IMF chief economist Olivier Blanchard writes in our lead article that the turnaround will not be simple. The crisis has left deep scars that will affect both supply and demand for many years to come. This issue of F&D also looks at what’s next in the global crisis and beyond. We look at ways of unwinding crisis support, the shape of growth worldwide after the crisis, ways of rebuilding the financial architecture, and the future of reserve currencies. Jeffrey Frankel examines what’s in and what’s out in global money, while a team from the IMF’s Research Department looks at what early warning systems can be expected to deliver in spotting future problems. In our regular People in Economics profile, we speak to Nobel prize winner Daniel Kahneman, whose work led to the creation of the field of behavioral economics, and our Picture This feature gives a timeline of how the Bank of England’s policy rate has fallen to its lowest level in 300 years. Back to Basics gives a primer on monetary policy, and Data Spotlight looks at how the crisis has affected the eastern European banking system.
This 2018 Article IV Consultation highlights that Norway is in the midst of a healthy recovery from the oil downturn, supported by positive trends in oil prices and a strengthening labor market. In addition, banks remain profitable and well capitalized. However, household debt continues to increase and house prices have resumed their rise, especially in the Oslo area, after a correction during 2017. Mainland growth is projected to increase from 2 percent in 2017 to 2.5 percent in each 2018 and 2019, underpinned by solid consumption, stronger business investment and an export recovery. Petroleum investment will also pick up. As a result, output will likely start to exceed potential in 2019.
En esta edición de Perspectivas de la economía mundial se abalizan las perspectivas de crecimiento tras la crisis financiera mundial. La fragilidad de la recuperación planteará muchos desafíos, como la necesidad de políticas monetarias, fiscales y financieras constantes y sólidas, los esfuerzos en curso para restablecer la salud del sector financiero, el fortalecimiento de la demanda privada y los preparativos para las estrategias de repliegue en los frentes fiscal, monetarios y financiero. En el primero de los dos capítulos analíticos de esta edición, “Fluctuaciones de precios delos activos: Lecciones para la política monetaria” se examina si la política montería puede servir para evitar los desplomes de los precios de los activos. En el segundo, “¿Cuáles han sido los daños? Dinámica del producto a mediano plazo después de una crisis financiera”, se estudia el efecto de shocks económicos importantes en el producto y la composición de esos shocks, como las variaciones en función de las condiciones iniciales, el tipo de shock y las políticas económicas.
Cette édition des Perspectives de l'économie mondiale est consacrée aux possibilités de croissance au lendemain de la crise financière. La fragilité de la reprise présentera de nombreux défis : maintenir des politiques monétaires, budgétaires et financières robustes, poursuivre les efforts visant à remettre le secteur financier en état, stimuler la demande privée, et préparer des stratégies de sortie sur les plans budgétaire, monétaire et financier. Le premier chapitre analytique de cette édition, intitulé « Les enseignements à tirer des fluctuations des prix des actifs pour la politique monétaire », pose la question suivante : faut-il recourir à la politique monétaire pour prévenir les effondrements des prix des actifs ? Le second chapitre, intitulé « Quelle est l'ampleur des dégâts ? La dynamique de la production à moyen terme après les crises financières », s'intéresse aux effets des gros chocs économiques sur la production et sur la structure de celle-ci, y compris les variations liées aux conditions initiales, aux types de chocs et aux politiques économiques.