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IMF-Staff Discussion Note-A Capital Market Union For Europe
September 10, 2019--Summary:
This note weighs the merits of a capital market union (CMU) for Europe, identifies major obstacles in its path, and recommends a set of carefully targeted policy actions. European capital markets are relatively small, resulting in strong bank-dependence, and are split sharply along national lines. Results include an uneven playing field in terms of corporate funding costs, the rationing out of collateral-constrained firms, and limited shock absorption.
The benefits of integration center on expanding financial choice, ultimately to support capital formation and resilience. Capital market development and integration would support a healthy diversity in European finance. Proceeding methodically, the note identifies three key barriers to greater capital market integration in Europe: transparency, regulatory quality, and insolvency practices. Based on these findings, the note urges three policy priorities, focused on the three barriers. There is no roadblock-such steps should prove feasible without a new grand bargain.
view the IMF-Staff Discussion Note-A Capital Market Union For Europe
New Index Tracks Trade Uncertainty Across the Globe
September 9, 2019--Rising trade uncertainty is cited as a driving factor for "sluggish global growth" in the current issue of the IMF's World Economic Outlook, which describes the state of the world economy.
But how is trade uncertainty measured? How has it evolved over time? Are changes in trade uncertainty confined to specific countries and regions of the world?
A new measure of trade uncertainty finds that by this measure of uncertainty it is surging, and not just in the United States and China, where trade tensions are highest, but also in many other countries.
Platforms' best-buy active funds underperform index trackers
September 6, 2019--Questions raised over brokers' recommendations in wake of Woodford fund debacle
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Risk--free bonds threaten to be return-free, too
September 6, 2019--Investors should target the glaring mismatch between equity and debt pricing
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A Role for Financial and Monetary Policies in Climate Change Mitigation
September 4, 2019--July 2019 was the hottest month ever recorded on earth, with countries across the world experiencing record-breaking temperatures. A prolonged drought is affecting millions of people in East Africa, and in August 2019 Greenland lost 12.5 billion tons of ice in one day.
A review of the literature by IMF staff aims to spur discussion of what policies to mitigate climate change could or should include. The review suggests that, while fiscal tools are first in line, they need to be complemented by financial policy tools such as financial regulation, financial governance, and policies to enhance financial infrastructure and markets, and by monetary policy.
IMF Working Paper-Macroeconomic and Financial Policies for Climate Change Mitigation: A Review of the Literature
September 4, 2019--Summary:
Climate change is one of the greatest challenges of this century. Mitigation requires a large-scale transition to a low-carbon economy. This paper provides an overview of the rapidly growing literature on the role of macroeconomic and financial policy tools in enabling this transition.
The literature provides a menu of policy tools for mitigation. A key conclusion is that fiscal tools are first in line and central, but can and may need to be complemented by financial and monetary policy instruments. Some tools and policies raise unanswered questions about policy tool assignment and mandates, which we describe. The literature is scarce, however, on the most effective policy mix and the role of mitigation tools and goals in the overall policy framework.
IMF-Illuminating Dark Corners of the Global Economy
September 3, 2019--This issue of Finance & Development reminds me of a Sufi parable. A woman sees a mystic searching for something outside his door. "“What have you lost?" she asks. "My key," he responds. So they both kneel down to look for it. "Where exactly did you drop it?" she asks after a few minutes. "In my house," he replies. "Then why are you looking here?" "Because there is more light."
The lesson: we all search for answers where it is easiest to look.
That is why we decided to shine a spotlight on the dark web of secret transactions that enable tax evasion and avoidance, money laundering, illicit financial flows, and corruption.
Consider these estimates: bribes to the tune of $1.5-$2 trillion change hands every year. Tax evasion costs governments more than $3 trillion a year, and countless more is lost through other illicit activities. This is money that could go for health care, education, and infrastructure for millions worldwide.
IMF Working Paper-Optimal Macroprudential Policy and Asset Price Bubbles
August 30, 2019--Summary:
An asset bubble relaxes collateral constraints and increases borrowing by credit-constrained agents. At the same time, as the bubble deflates when constraints start binding, it amplifies downturns.
We show analytically and quantitatively that the macroprudential policy should optimally respond to building asset price bubbles non-monotonically depending on the underlying level of indebtedness. If the level of debt is moderate, policy should accommodate the bubble to reduce the incidence of a binding collateral constraint. If debt is elevated, policy should lean against the bubble more aggressively to mitigate the pecuniary externalities from a deflating bubble when constraints bind.