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Crisis Shakes Europe
The integration of Europe's economies has been a tremendous success story. This success could now be at risk. The trick is to manage the crisis, preserve the progress that has been made, and revamp Europe's frameworks and reform agenda.
Martin Ĉihák and Srobona Mitra
The new central and eastern European members of the European Union had it very good for a while. But the good times didn't last. The new member states' initial resilience to the global financial turmoil has given way to deep crisis in a few of them.
Erik Berglöf, Alexander Plekhanov, and Alan Rousso
Russia has not done enough to inoculate itself from recurring crises that stem, in large part, from a sharp drop in the price of oil.
Also in This Issue
M. Ayhan Kose, Prakash Loungani, and Marco E. Terrones
The current recession is easily the most severe of the postwar period: output—depending on the measure—is projected to fall between four and six times as much as it did on average in the three other global recessions, and unemployment is likely to increase twice as much.
If current plans are implemented as anticipated, the postcrisis world is likely to be one characterized by enhanced multilateralism, greater policy coordination, and a more effectively regulated financial system. In the wake of the April summit of the G-20, the IMF is set to play a key role in this new global environment.
Not all booms are alike—making the right call on which policies to deploy depends on how assets are held and who is exposed to a possible bust. A mix of policy tools is likely to be the best way of deflating a boom.
The IMF's Chief Economist, Olivier Blanchard, explains how a crisis that began in mortgage-backed securities turned into the worst recession since the 1930s. Blanchard cites four preconditions, which all combined to create the perfect (financial) storm.
F&D on the Global Crisis
See coverage of the financial crisis, including:
Suhas Ketkar and Dilip Ratha
When financing is scarce, innovative financing approaches are required to raise capital, especially for private sector borrowers in developing countries, who face even harsher credit rationing than public sector borrowers.
Herman Kamil, Bennett W. Sutton, and Chris Walker
Some Latin American companies used financial derivative contracts to place bets on currency movements—and lost big when the currencies depreciated steeply. That not only led to financial problems for the companies, but presented authorities with difficult issues in foreign exchange markets.
Nicolás Eyzaguirre, Benedict Clements, and Jorge Canales-Kriljenko
In several countries, the slowdown in private sector activity may provide room for a temporary and well-designed fiscal stimulus. In countries with low credibility, however, countercyclical fiscal policy efforts may be counterproductive.
The ongoing credit crisis has given rise to chatter and speculation about the possibility that one or more euro area countries might now choose to abandon the euro. This article weighs the implications of such a move and concludes that it is not inconceivable.
The financial—and now economic—crisis has presented the euro area with a large number of varied tests. But one thing these countries don't need to worry about is their currencies, because they don't have any. The euro works and that is no mean feat.
S. Raihan Zamil
The causes of the financial crisis are widely acknowledged, but what is less well understood in the public debate is how regulation and supervision of the global financial system played an enabling role in the runup to the current financial crisis.
People in Economics
Podcast | PDF version
Koshy Mathai and Simon Willson
There is little doubt that the U.S. Federal Reserve's dramatic expansion of the monetary base has been justified given the sharp economic downturn and the risk of deflation. But the exit strategy could be difficult.
Back to Basics
Mark Horton and Asmaa El-Ganainy
Fiscal policy is the use of government spending and taxation to influence the economy. Governments typically use fiscal policy to promote strong and sustainable growth and reduce poverty.
African policymakers can prepare to take advantage of a global economic recovery by hooking up more of their domestic economies to the most reliable and potent short-term engine of growth at their disposal: the private sector.
Thomas Helbling, Nese Erbil, and Marina Rousset
The latest sharp rise and fall in commodity prices is not the first nor the last. Historically, prices of commodities have been volatile and subject to large swings.