Staff Discussion Notes

December 12, 2013

Obstacles to International Policy Coordination, and How to Overcome Them

Description: In bilateral and multilateral surveillance, countries are often urged to consider alternative policies that would result in superior outcomes for the country itself and, perhaps serendipitously, for the world economy. While it is possible that policy makers in the country do not fully recognize the benefits of proposed alternative policies, it is also possible that the existing policies are the best that they can deliver, given their various constraints, including political. In order for the policy makers to be able and willing to implement the better policies some quid pro quo may be required—such as a favorable policy adjustment in the recipients of the spillovers; identifying such mutually beneficial trades is the essence of international policy coordination. We see four general guideposts in terms of the search for globally desirable solutions. First, all parties need to identify the nature of spillovers from their policies and be open to making adjustments to enhance net positive spillovers in exchange for commensurate benefits from others; but second, with countries transparent about the spillovers as they see them, an honest broker is likely to be needed to scrutinize the different positions, given the inherent biases at the country level. Third, given the need for policy agendas to be multilaterally consistent, special scrutiny is needed when policies exacerbate global imbalances and currency misalignments; and fourth, by the same token, special scrutiny is also needed when one country’s policies has a perceptible adverse impact on financial-stability risks elsewhere.

December 1, 2013

Women, Work, and the Economy: Macroeconomic Gains from Gender Equity

Description: The proposed SDN discusses the specific macro-critical aspects of women’s participation in the labor market and the constraints that prevent women from developing their full economic potential. Building on earlier Fund analysis, work undertaken by other organizations and academic research, the SDN presents possible policies to overcome these obstacles in different types of countries.

Notes: Full text also available in Arabic, Chinese, Japanese, Russian, and Spanish,
Executive summary also available in French.

September 25, 2013

Toward A Fiscal Union for the Euro Area

Description: This is on a highly topical issue and addresses a key policy issue for Europe—namely, reinforcing EMU institutional architecture along with the Banking Union. Some proposals have emerged in Europe, and it will be important to put out staff views on this issue. In that context, publication as an SDN is appropriate, given the high profile nature and relevance of the topic—much like the Banking Union paper done a few months ago.

Notes: Technical Note

September 24, 2013

Anchoring Growth: The Importance of Productivity-Enhancing Reforms in Emerging Market and Developing Economies

Description: Fostering and sustaining robust economic growth is an imperative across advanced, emerging, and low-income countries alike. Countries will need to focus on supply-side reforms to raise their potential output and anchor medium-term growth prospects. This SDN will emphasize the role of structural reforms and supportive policy and institutional frameworks for boosting productivity–a key engine of economic growth–in the wake of the crisis. By examining a broad spectrum of reforms that eliminate impediments to growth, the paper will seek to highlight a differentiated policy agenda across countries.

Notes: Technical Note

September 23, 2013

Dealing with High Debt in an Era of Low Growth

Description: task has become particularly challenging in European advanced economies where expectations of low growth and limits to monetary policy support are shifting the burden of adjustment onto fiscal consolidation. The SDN will investigate the main drivers behind successful past debt reversals, focusing on macroeconomic and financial market conditions, the speed and form of fiscal adjustment, and the institutional policy setting, among other things. Its policy conclusions will depend on the emerging stylized facts but are likely to include considerations on the design and pace of fiscal consolidation, taking into account country-specific as well as regional economic, institutional, and political factors.

June 21, 2013

Macroprudential and Microprudential Policies: Toward Cohabitation

Description: Effective arrangements for micro and macroprudential policies to further overall financial stability are strongly desirable for all countries, emerging or advanced. Both policies complement each other, but there can also be potential areas of overlap and conflict, which can complicate this cooperation. Organizing their very close interactions can help contain these potential tensions. This note clarifies the essential features of macroprudential and microprudential policies and their interactions, and delineates their borderline. It proposes mechanisms for aligning both policies in the pursuit of financial stability by identifying those elements that are desirable for effective cooperation between them. The note provides general guidance. Actual arrangements will need take into account country-specific circumstances, reflecting the fact that that there is no “one size fits all.”

May 14, 2013

Creating a Safer Financial System: Will the Volcker, Vickers, and Liikanen Structural Measures Help?

Description: The U.S., the U.K., and more recently, the E.U., have proposed policy measures directly targeting complexity and business structures of banks. Unlike other, price-based reforms (e.g., Basel 3 and G-SIFI surcharges), these proposals have been developed unilaterally with material differences in scope, design and implementation schedules. This may exacerbate cross-border regulatory arbitrage and put a further burden on consolidated supervision and cross-border resolution. This paper provides an analysis of the potential implications of implementing different structural policy measures. It proposes a pragmatic and coordinated approach to development of these policies to reduce risk of regulatory arbitrage and minimize unintended consequences. In doing so, it also aims to identify a set of common policy measures that countries could adopt to re-scope bank business models and corporate structures.

April 15, 2013

Rethinking Macro Policy II: Getting Granular

Description: This note explores how the economic thinking about macroeconomic management has evolved since the crisis began. It discusses developments in monetary policy, including unconventional measures; the challenges associated with increased public debt; and the policy potential, risks, and institutional challenges associated with new macroprudential measures. Rationale: The note contributes to the ongoing debate on several aspects of macroeconomic policy. It follows up on the earlier “Rethinking” paper, refining the analysis in light of the events of the past two years. Given the relatively fluid state of the debate (e.g., recent challenges to central bank independence), it is useful to highlight that while many of the tenets of the pre-crisis consensus have been challenged, others (such as the desirability of central bank independence) remain valid.

March 29, 2013

Labor Market Policies and IMF Advice in Advanced Economies during the Great Recession

Description: This paper does two things. First, it articulates what are the main implications of theoretical and empirical research for design of labor market policies and labor market institutions. Second, in this light, the paper analyzes the IMF’s labor market recommendations since the beginning of the crisis, both in general, and more specifically in program countries

February 12, 2013

A Banking Union for the Euro Area

Description: The SDN elaborates the case for, and the design of, a banking union for the euro area. It discusses the benefits and costs of a banking union, presents a steady state view of the banking union, elaborates difficult transition issues, and briefly discusses broader EU issues. As such, it assesses current plans and provides advice. It is accompanied by three background technical notes that analyze in depth the various elements of the banking union: a single supervisory framework; a single resolution and common safety net; and urgent issues related to repair of weak banks in Europe.

Notes: Technical Notes