## Interview with IMF Chief Economist Maurice Obstfeld

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### Macroeconomic concerns
- Primary worries set out in the World Economic Outlook: trade tensions and adjustment to differential financial conditions in an environment of much higher private and public debt than we had in the past.
- Longer-term challenge: wage and productivity growth and how to spur innovation.
- Need for a “big rethink on educational investments everywhere.”
  - Human capital investments very early in life are critical to future success.
  - Later-life human capital investments can promote greater flexibility of workers, prolong working lives, and offset effects of aging populations.
- Importance of addressing perceptions that working people have not shared in gains from growth:
  - Sense in many countries that incomes of working people have stagnated, that social mobility is lower, that opportunity is lower, that one’s children will not be better-off and may indeed be worse off.
  - “These trends poison our politics.”

### United States–China relations
- Disagreements extend beyond economics to the issue of global leadership.
- Strategic challenge for a country like the United States that has shaped global governance: manage a relationship that offers cooperation opportunities but also hazards of conflict.
- Political system differences complicate engagement.
- Reference to the Obama administration’s approach: the TPP [Trans-Pacific Partnership agreement] excluded China but included flexibility for countries (including China) to join if they subscribed to the rules — a strategy for maintaining US influence and potentially influencing through soft power the way China conducted trade.
- Current trajectory described as more confrontational, particularly in trade; concern that confrontation emphasizes that one country must “win” and be dominant rather than creating a structure for coexistence and contained conflicts.

### Surprises during Obstfeld’s IMF tenure
- Timeline and notable episodes:
  - August 2015: China devalued the yuan and changed its exchange rate regime; asset markets in turmoil.
  - December 2015: The Fed started raising US interest rates.
  - First half of 2016: Period of worry about China’s growth and stability affecting global asset markets.
  - Mid-2016: Brexit vote surprised markets.
  - Late-2016: US presidential election outcome surprised markets and set up a new dynamic with prospects of more US fiscal stimulus and increased noise about trade and renegotiation of trade relationships.
- Resulting environment: Federal Reserve gradual normalization of monetary policy leading to much tighter financial conditions for emerging markets.

### Responsibility and impact of research and advice
- Emphasis on making research “as solid and as credible as possible.”
- Greater worry about giving the right advice in crisis situations where mistakes can cause severe suffering.
- Personal anecdote: August 2015 episode before assuming the IMF role — asked in the Oval Office by President Obama, “Should I be worried?” Obstfeld’s reply: “No. The markets will find their footing, and for now I don’t think the world is coming to an end.”
- Reflection on communications: request in that meeting for people to stop tweeting.

### Areas where Obstfeld believes he moved the needle at the IMF
- Trade became a much bigger focus at the IMF.
- Consideration of inequality and inclusiveness in growth became much more mainstreamed.
- Increased work on climate issues:
  - Overcame initial skepticism about studying climate at the Fund.
  - Described climate change as truly “macro macro” and the biggest and most consequential global coordination failure the Fund should worry about.
- Desire for the Fund to incorporate a longer-term perspective into surveillance, challenging authorities to think beyond the political cycle.

### Evolving role of the IMF
- Need to think more about the long run and to exploit the Fund’s unique position as a long-lived institution with independence from day-to-day politics.
- Recommendation to learn to exploit that position more effectively and to think somewhat more broadly in surveillance work.

*Interview edited for length and clarity; retiring as chief economist of the IMF at the end of 2018, Maurice Obstfeld plans to return to the University of California, Berkeley, where he was an academic economist for 24 years; his successor at the IMF will be Harvard University’s Gita Gopinath.*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2018/december/interview-with-imf-chief-economist-maurice-obstfeld.pdf_