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21. Regional Financial Arrangements and the International Monetary Fund: Sustaining Coherence in Global Financial Governance

Author:
C. Randall Henning
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
Cooperation and competition among regional financial arrangements (RFAs) and the International Monetary Fund (IMF) increasingly determine the effectiveness of the global financial safety net (GFSN), which many observers fear is becoming fragmented. Overlap among these crisis-fighting institutions has important benefits but also pitfalls, including with respect to competition, moral hazard, independence, institutional conflict, creditor seniority and non-transparency. The study reviews the RFAs in Latin America, East Asia and Europe to assess their relationships with the IMF and address these problems. Among other things, it concludes: institutional competition, while harmful in program conditionality, can be beneficial in economic analysis and surveillance; moral hazard depends critically on institutional governance and varies substantially from one regional arrangement to the next; secretariats should be independent in economic analysis, but lending programs should be decided by bodies with political responsibility; and conflicts among institutions are often resolved by key member states through informal mechanisms that should be protected and developed. Findings of other recent studies on the GFSN are critiqued. Architects of financial governance should maintain the IMF at the centre of the safety net but also develop regional arrangements as insurance against the possibility that any one institution could be immobilized in a crisis, thereby safeguarding both coherence and resilience of the institutional complex.
Topic:
Governance, Surveillance, Strategic Competition, and IMF
Political Geography:
Europe, Middle East, Asia, South America, Australia, North America, and Global Focus

22. Central Bank Mandates, Sustainability Objectives and the Promotion of Green Finance

Author:
Simon Dikau and Ulrich Volz
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
This paper examines the extent to which addressing climate-related risks and supporting sustainable finance fit into the current set of central bank mandates and objectives. To this end, we conduct a detailed analysis of central bank mandates and objectives, using the IMF’s Central Bank Legislation Database, and compare these to current arrangements and sustainability-related policies central banks have adopted in practice. To scrutinise the alignment of mandates with climate-related policies, we differentiate between the impact of environmental factors on the conventional core objectives of central banking and a potential supportive role of central banks with regard to green finance and sustainability. Of the 135 central banks in our sample, only 12% have explicit sustainability mandates, while another 40% are mandated to support the government’s policy priorities, which in most cases include sustainability goals. However, given that climate risks can directly affect central banks’ traditional core responsibilities, most notably monetary and financial stability, even central banks without explicit or implicit sustainability objectives ought to incorporate climate-related physical and transition risks into their core policy implementation frameworks in order to efficiently and successfully safeguard macro-financial stability.
Topic:
International Cooperation, Finance, Green Technology, Sustainability, IMF, and Banking
Political Geography:
Global Focus

23. Assessing Global Financial Stability

Author:
Tobias Adrian
Publication Date:
06-2019
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
In the decade since the global financial crisis, there has understandably been great concern about potential threats to global financial stability, and policymakers have wisely remained vigilant in watching for warning signs of possible economic risk. At the International Monetary Fund (IMF), we remain committed to providing our 189 member countries with farsighted analyses of trends in the financial markets, thus guiding them toward sound policy choices that help maintain economic stability.
Topic:
International Trade and Finance, Global Recession, Financial Crisis, Economy, Economic Growth, Risk, IMF, and Financial Stability
Political Geography:
Global Focus

24. Fiscal Space: What Is It? Who Has It? When to Use It?

Author:
James A. Haley
Publication Date:
08-2018
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
This paper reviews the concept of fiscal space, or the capacity to deploy fiscal stimulus should it be needed; identifies the key factors that determine its size; and discusses considerations relevant to its use. The paper is motivated by the remarkably rapid mobilization of fiscal stimulus in the 2008-2009 global financial crisis, coordinated by the International Monetary Fund (IMF), which was followed by the equally remarkable rapid adoption of austerity in key advanced economies. This switch from stimulus to austerity occurred despite the languid pace of the global recovery, in which growth was, as subsequently described by IMF Managing Director Christine Lagarde, “too low, for too long.” At the time, the change was justified in terms of concerns over large debt burdens and diminished capacity for future action. Curiously, however, the principled voices defending the interests of future generations were silent with respect to more recent tax cuts and the adoption of higher budgeted spending.
Topic:
Budget, Fiscal Policy, IMF, and Stimulus
Political Geography:
Global Focus

25. Shipping and Climate Change: International Law and Policy Considerations

Author:
Aldo Chicop, Meinhard Doelle, and Ryan Gauvin
Publication Date:
09-2018
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation (CIGI)
Abstract:
This report investigates the international law and policy challenges to the determination of the international shipping industry’s contribution to climate change mitigation efforts through the International Maritime Organization (IMO), a specialized agency of the United Nations and the competent international organization with respect to shipping in international law. The report sets out the international legal framework that serves as the context for the IMO initial strategy, the challenge of regulating greenhouse gas (GHG) emissions from international shipping, and the process and issues in determining the industry’s “fair share” of mitigation efforts and potential legal pathways. The report concludes with general, policy and legal considerations that have a bearing on the current and possible future directions of the nascent IMO strategy. General considerations include the observation that the complexity and uncertainty underscoring the development of the IMO strategy call for a long-term planning instrument that is integrated and systemic in scope, flexible in approach and adaptive in application. As other regimes and sectors progress in developing and delivering on mitigation efforts, care should be exercised in considering lessons and tools from other sectors for application to shipping, given its uniqueness and that other sector experiences emanate from different contexts and considerations. Given continuing significant differences on GHG issues in the IMO, it is vital for the long-term IMO strategy to be advanced and maintained on the basis of the culture of consensus that has helped shape the IMO as a successful regulatory body.
Topic:
International Law, United Nations, Policy Implementation, IMF, and Shipping
Political Geography:
Global Focus

26. Great Expectations: Is the IMF Turning Words into Action on Inequality?

Author:
Nadia Daar, Nicholas Galasso, and Chiara Mariotti
Publication Date:
10-2017
Content Type:
Policy Brief
Institution:
Oxfam Publishing
Abstract:
In recent years, the International Monetary Fund has become a global leader in highlighting the inequality crisis; consistently identifying it as a major threat to human progress and prosperity. This is a significant shift from its previously held position that rising inequality was a necessary trade-off for achieving greater economic growth. What is the IMF doing in practice to operationalize its agenda for tackling inequality? The IMF’s main initiative has been a series of pilots that integrate inequality analysis into its economic surveillance of countries. This paper outlines Oxfam’s evaluation of these pilots and finds that they are not promoting policies that reduce inequality. It gives recommendations for the IMF to systematically incorporate the fight against inequality into its research and its actions on the ground
Topic:
International Cooperation, Financial Crisis, Inequality, and IMF
Political Geography:
Global Focus

27. Monetary Credibility, Inflation, and Economic Growth

Author:
Roger W. Ferguson Jr.
Publication Date:
07-2006
Content Type:
Journal Article
Journal:
The Cato Journal
Institution:
The Cato Institute
Abstract:
By now it must be universally agreed that low and stable inflation is a primary and essential goal for monetary policy, in large part because we believe it brings stability to financial systems and fosters sustainable economic growth over the longer run. In pursuit of this goal, central banks can report some success. According to the 2005 World Economic Outlook from the International Monetary Fund (IMF 2005), consumer price inflation in the advanced economies over the decade beginning in 1997 looks set to come in at an average annual rate of less than 2 percent, down from 3.5 percent for the previous 10 years. The IMF figures for the United States show a smaller but still substantial decline in headline inflation, from about 3.75 percent to 2.5 percent. The drop in inflation for the nonindustrial economies has been more striking, with average inflation falling from double to single digits.1 As someone who started work as a monetary policymaker in 1997, I am happy to acknowledge the accomplishments of many policymakers at the Federal Reserve and in other central banks around the world. Thanks to their success in fighting inflation, the central banking profession enjoys a very high standing. And as a related matter, we might say that monetary credibility, which I would define as the perception in the private sector that central banks will do what it takes to keep inflation under control, is also quite high. This credibility is hard won, however, and can be easily lost. The Federal Open Market Committee (FOMC) at its November 1, 2005, meeting increased the federal funds rate 25 basis points, to 4 percent, and observed: The cumulative rise in energy and other costs has the potential to add to inflation pressures; however, core inflation has been relatively low in recent months and longer-term inflation expectations remain contained. . . . With underlying inflation expected to be contained, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability [FOMC 2005]. Unfortunately, however, the story over the past 20 years is not so uniformly positive for growth. Again according to IMF figures, growth among the nonindustrial economies appears to have increased to about 5.25 percent in the decade beginning in 1997, compared with growth of 3.75 percent in the previous 10 years. Growth in the United States has also moved slightly higher over the two periods, from 3 percent to 3.25 percent. However, growth in the other industrial economies has softened, to less than 2.5 percent in the recent decade from more than 3 percent in the previous one. This decline reflects slowing in some of the larger economies—Japan, Germany, Italy, and the Netherlands—as well as the effect of the Asian crisis in 1997 on newly industrialized Asian economies.2 To me, it is axiomatic that monetary credibility, by reducing the level and variability of inflation, lays the foundations for stronger and more sustained economic growth. In this article, I want to discuss anecdotal and academic evidence for the relationship between monetary policy credibility and economic growth and to do so in two segments: first, the link between monetary policy credibility and inflation performance and, second, the link
Topic:
Monetary Policy, Economic Growth, Inflation, IMF, and Credibility
Political Geography:
Global Focus