The United States: Spillover Report: 2011 Article IV Consultation
IMF Staff Country Reports, July 25, 2011
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- The United States: Spillover Report: 2011 Article IV Consultation
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Bibliographic details
- Published: July 25, 2011
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781462317349.002
Overview
- The size of the U.S. economy and, in particular, the global dominance of its financial markets creates uniquely large policy spillovers.
- Concerns that the end of QE2 could lead to a rapid reversal of emerging market capital flows appear overblown.
- A credible plan for a gradual U.S. fiscal consolidation would likely have limited short-term spillovers and substantial longer-term benefits.
- Overall, U.S. and foreign goals appear better aligned for U.S. fiscal and financial policies than for monetary policies.
- Fiscal consolidation and sounder financial regulation will help.
Key findings
- U.S. economic scale and global financial market dominance generate uniquely large international spillovers.
- Termination of QE2 is unlikely to cause a rapid reversal of emerging market capital flows.
- A credible, gradual U.S. fiscal consolidation offers limited short-term spillovers and substantial longer-term benefits.
- Alignment between U.S. and foreign objectives is stronger for fiscal and financial policies than for monetary policy.
Policy recommendations and implications
- Implement a credible plan for gradual fiscal consolidation in the United States to minimize short-term spillovers and maximize longer-term benefits.
- Strengthen financial regulation to reduce international vulnerabilities arising from U.S. financial market dominance.
- Consider the differing international alignment of U.S. policies: prioritize coordination on fiscal and financial regulation where interests are better aligned, and manage monetary policy spillovers recognizing potential misalignment.
Relevant topics and keywords
- Banking; Emerging and frontier financial markets; Exports; Financial crises; Financial markets; Financial sector policy and analysis; Financial services; International trade; Spillovers; Yield curve
- Keywords appearing in the material: asset price; banking sector; Central America; CR; credit default swap; Emerging and frontier financial markets; Europe; exchange rate risk; Exports; financial market; Global; global bond; interest rate; ISCR; market response; risk premium; Spillovers; Treasury yield; Yield curve
International Monetary Fund. The United States: Spillover Report: 2011 Article IV Consultation. July 25, 2011.