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International Monetary Fund. Research Dept.

Abstract

The following remarks by the Acting Chair were made at the conclusion of the Executive Board’s discussion of the World Economic Outlook on March 21, 2008.

International Monetary Fund. Research Dept.

Abstract

The global expansion is losing speed in the face of a major financial crisis. The slowdown has been greatest in the advanced economies, particularly in the United States, where the housing market correction continues to exacerbate financial stress. The emerging and developing economies have so far been less affected by financial market turbulence and have continued to grow at a rapid pace, led by China and India, although activity is beginning to moderate in some countries. In the baseline, the U.S. economy will tip into a mild recession in 2008 as a result of mutually reinforcing housing and financial market cycles, with only a gradual recovery in 2009, reflecting the time needed to resolve underlying balance sheet strains. Activity in the other advanced economies will be sluggish in both 2008 and 2009 in the face of trade and financial spillovers. Growth in the emerging and developing economies is also projected to slow, although it should remain above long-term trends in all regions. Risks to the global projections are tilted to the downside, especially those related to the possibility of a full-blown credit crunch, while emerging and developing economies will not be insulated from a serious downturn in the advanced economies. Against this background, policymakers in the advanced economies must continue to grapple with the task of restoring stability to housing and financial markets while addressing downside risks to growth, without jeopardizing inflation performance or longer-term policy goals. Many emerging and developing economies still face the challenge of avoiding overheating or any buildup in vulnerabilities, but policymakers should be ready to respond judiciously to a deteriorating external environment.

International Monetary Fund. Research Dept.

Abstract

As discussed in Chapter 1, a global slowdown in activity, led by a sharp downturn in the United States and the spreading crisis in financial markets, will create more difficult external conditions for all regions of the world. This chapter examines in more detail how different regions are likely to fare in this environment and the policy challenges that are likely to arise.1

International Monetary Fund. Research Dept.

Abstract

This chapter examines how innovations in housing finance systems in advanced economies over the past two decades have altered the role of the housing sector in the business cycle and in the monetary policy transmission mechanism. It concludes that these changes have broadened the spillovers from the housing sector to the rest of the economy and have amplified their impact by strengthening the role of housing as collateral. This analysis suggests that in economies with more developed mortgage markets, monetary policymakers may need to respond more aggressively to developments in the housing sector, within a risk-management approach that treats house price dynamics as one of the key factors to be considered in assessing the balance of risks to output and inflation.

International Monetary Fund. Research Dept.

Abstract

This chapter uses a global dynamic model to examine the macroeconomic and financial consequences of policies to address climate change. Although these consequences can be rapid and wide-ranging, this chapter finds that the overall costs of mitigation could be minimized if policies are well designed and accepted by a broad group of countries.

International Monetary Fund. Research Dept.

Abstract

This chapter examines the role of soaring commodity prices in contributing to emerging and developing economies’ growing trade and financial integration into the global economy. It finds that improvements in institutions and policy frameworks help explain why the current commodity price boom is proving more favorable to developing economies than previous booms, bringing rapid growth in exports (especially manufacturing exports), investment (both domestic and foreign), and output. Continued progress in trade and financial integration will require sustained efforts to further strengthen institutions and economic policies in developing countries.

Khalid ElFayoumi, Ms. Izabela Karpowicz, Ms. Jenny Lee, Ms. Marina Marinkov, Ms. Aiko Mineshima, Jorge Salas, Andreas Tudyka, and Ms. Andrea Schaechter
Many European economies have faced pressure from rental housing affordability that has widened social and economic divergence. While significant country and regional differences exist, this departmental paper finds that in many advanced European economies a large and rising share of low-income renters, the young, and those living in cities is overburdened. In several locations, middle-income groups also increasingly face rental affordability issues.