{
  "title": "Reflections on International Spillovers and Cooperation",
  "publication": "IMF News, November 1, 2018",
  "sourceUrl": "https://www.imf.org/en/news/articles/2018/11/01/sp110118-international-spillovers-and-cooperation-opening-remarks",
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  "summary": "Opening Remarks to 19th Annual Research Conference",
  "publishDate": "2018-11-01",
  "sections": [
    {
      "heading": "Introduction and Purpose",
      "content": "- Opening Remarks to 19th Annual Research Conference\n- IMF First Deputy Managing Director David Lipton\n- November 1, 2018\n- Conference focus: international spillovers and cooperation; bringing together academics and policymakers to address these issues."
    },
    {
      "heading": "Context and Risks to Global Integration",
      "content": "- Technological advances, rapid growth of trade, and the explosion of gross capital flows have produced cross-border integration over the past 75 years.\n- Current threats to global interconnectedness highlighted:\n  - an escalating tariff war\n  - heightened restrictions on investment\n  - concerns about intellectual property\n  - risk of dismantling global supply chains\n- Political developments are forcing attention on dislocations from increased trade and globalization, including broader discussions of inequality and stagnant middle class incomes, at least in the West.\n- Emphasis: a renewed commitment to international cooperation is more essential than ever."
    },
    {
      "heading": "The Growth of Trade — Findings and Implications",
      "content": "- Trade in goods and services increased from around 40 percent of global GDP in 1990 to about 60 percent now.\n- Production has become fragmented across borders; a significant share of trade comprises intermediate goods and related services.\n- Key implications:\n  - Shocks are likely to spread more widely across borders and within countries due to reliance on parts and services from producers in many countries.\n  - Example cited: the 2011 earthquake in Japan disrupted the automobile supply chain and produced global reverberations.\n  - Once supply chains are established, imposing trade barriers can trigger a costly adjustment process; uncertainty alone may lead to adjustments in investment and trade patterns.\n  - Technology transfer and intellectual property have been key elements of trade expansion; uncertainties about policies are casting shadows on investment.\n  - The future of e-commerce may become an issue (example: debate about how online payment systems like China’s Alipay will or will not be allowed to expand across borders)."
    },
    {
      "heading": "Capital Flows and Financial Stability — Findings and Policy Questions",
      "content": "- Cross-border holdings of financial assets are now at around 200 percent of global GDP, compared with about 70 percent in 1995.\n- Potential spillovers and financial stability risks have grown exponentially.\n- Observations:\n  - The Global Financial Crisis illustrated how interconnected counterparty risk threatened the world economy.\n  - A “global financial cycle” can produce globally synchronized fluctuations in capital flows and asset prices.\n  - Balance sheets of global banks are an important transmission channel for spillovers from monetary policy; going forward, balance sheets of asset managers may be the driving force of cross-border spillovers.\n  - Since the crisis, advanced economy monetary policy (unprecedented loosening, then normalization and episodes like the Taper Tantrum) has had consequences for the rest of the world.\n  - Capital flow boom-and-bust cycles remain a challenge; many countries face uncomfortable levels of corporate and sovereign debt.\n  - The increased role of non-bank institutions is an important new development for policy consideration.\n- Policy questions raised:\n  - How to think about monetary, exchange rate, capital flow management, and macroprudential measures in a coherent and integrated way.\n  - The Fund’s institutional view on liberalizing and managing capital flows will be integrated with a broader set of policy questions in collaboration with policymakers and academics.\n- Current account imbalances:\n  - The External Sector Report found that approximately half of last year’s global current account balances were excessive, and that they pose risks to global stability.\n  - It is essential that countries work together to reduce them."
    },
    {
      "heading": "International Cooperation Under Stress — Analysis and Recommendations",
      "content": "- Symbolism: conference logo (sailors’ knots) representing connections and cooperation; analogy to danger if knots come undone during storms.\n- Achievements of cooperation to date:\n  - coordinated monetary policies in the aftermath of the Global Financial Crisis\n  - the response to the European debt crisis\n  - financial reforms enacted under the umbrella of the Financial Stability Board\n  - constructive regional collaboration (example: ASEAN)\n- Current challenge:\n  - Rise of distrust and discord, risk of fragmentation.\n  - Need to hear voices of those left behind by global integration and do more to ensure benefits of globalization are retained and widely shared.\n- IMF stance:\n  - At the IMF annual meetings in Bali, the Managing Director reiterated the Fund’s call for a new multilateralism that is “more inclusive, more people-centered, and more results-oriented.”\n  - The IMF supports efforts to reform parts of the multilateral framework that may be outdated or in need of modernizing, including with respect to trade.\n  - Reform has been central to IMF work for the past 20 years, affecting governance, lending, policy advice, and analytic capabilities.\n  - A results-oriented multilateralism must be based on a clear understanding of the facts on the ground; research and conferences are timely and important for this purpose."
    },
    {
      "heading": "Institutional and Personal Acknowledgments",
      "content": "- Tribute to Maury Obstfeld for vision and intellectual leadership in addressing spillovers at the Annual Research Conference.\n- Under his leadership, the Research Department prepared high-impact World Economic Outlook chapters on:\n  - the post-crisis global economy\n  - the wage and inflation puzzles\n  - the macroeconomic effects of climate change\n  - the weakness of global trade\n- The External Sector Report has received greater prominence; the Research Department produced a trade paper with the World Bank and the WTO.\n- Transition of leadership:\n  - Gita Gopinath will take over as Economic Counsellor in the New Year.\n\nReflections on International Spillovers and Cooperation — Opening Remarks to 19th Annual Research Conference, IMF First Deputy Managing Director David Lipton, November 1, 2018.\n\n---\n\n Content in this bundle\n\n- 093018-reinvigorating-trade-and-inclusive-growth\n  - 093018-reinvigorating-trade-and-inclusive-growth (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 093018-reinvigorating-trade-and-inclusive-growth (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- David Lipton\n- People's Republic of China and the IMF\n- Japan and the IMF\n- Speeches\n- PRESS CENTER\n- Annual Research Conference\n- External Sector Report\n- World Economic Outlook\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2018/11/01/sp110118-international-spillovers-and-cooperation-opening-remarks"
    }
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    "Published: November 1, 2018",
    "Opening Remarks to 19th Annual Research Conference",
    "IMF First Deputy Managing Director David Lipton",
    "November 1, 2018",
    "Conference focus: international spillovers and cooperation; bringing together academics and policymakers to address these issues.",
    "Technological advances, rapid growth of trade, and the explosion of gross capital flows have produced cross-border integration over the past 75 years.",
    "Current threats to global interconnectedness highlighted:",
    "Political developments are forcing attention on dislocations from increased trade and globalization, including broader discussions of inequality and stagnant middle class incomes, at least in the West.",
    "Emphasis: a renewed commitment to international cooperation is more essential than ever.",
    "Trade in goods and services increased from around 40 percent of global GDP in 1990 to about 60 percent now.",
    "Production has become fragmented across borders; a significant share of trade comprises intermediate goods and related services.",
    "Key implications:",
    "Cross-border holdings of financial assets are now at around 200 percent of global GDP, compared with about 70 percent in 1995.",
    "Potential spillovers and financial stability risks have grown exponentially.",
    "Observations:",
    "Policy questions raised:",
    "Current account imbalances:",
    "Symbolism: conference logo (sailors’ knots) representing connections and cooperation; analogy to danger if knots come undone during storms.",
    "Achievements of cooperation to date:",
    "Current challenge:",
    "IMF stance:",
    "Tribute to Maury Obstfeld for vision and intellectual leadership in addressing spillovers at the Annual Research Conference.",
    "Under his leadership, the Research Department prepared high-impact World Economic Outlook chapters on:",
    "The External Sector Report has received greater prominence; the Research Department produced a trade paper with the World Bank and the WTO.",
    "Transition of leadership:",
    "**093018-reinvigorating-trade-and-inclusive-growth**",
    "[David Lipton](http://www.imf.org/external/np/omd/bios/dl.htm)",
    "[People's Republic of China and the IMF](http://www.imf.org/external/country/CHN/index.htm)",
    "[Japan and the IMF](http://www.imf.org/external/country/JPN/index.htm)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[Annual Research Conference](https://www.imf.org/en/News/Seminars/Conferences/2018/02/08/19th-annual-research-conference-on-international-spillovers-and-cooperation)",
    "[External Sector Report](https://www.imf.org/en/Publications/ESR/Issues/2018/07/19/2018-external-sector-report)",
    "[World Economic Outlook](https://www.imf.org/en/publications/weo)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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