The 26th Jacques Polak Annual Research Conference

IMF News, November 6, 2025

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Event: 26th Annual Research Conference
Speech: Opening Remarks by IMF First Deputy Managing Director, Dan Katz
Date: November 6, 2025
Purpose: Introduce the conference theme “The Evolving Landscape of Global Trade and Financial Integration” and frame key questions for research and policy discussion.

Framing:
- Trade has been a cornerstone of economic development and the rise in global living standards following World War II and the establishment of the Bretton Woods Institutions.
- Current transformations driven by geopolitics, new technologies, and rethinking of assumptions about international economic integration.
Core questions posed:
- When state interventions inhibit economic flexibility and persistently distort comparative advantages, do the gains from trade still hold?
- Can trade remain a driver of sustainable and balanced growth among countries with fundamentally different models for state influence on the economy?
- How should economists evaluate trade-offs involved in export controls on advanced technologies like leading edge semiconductors, especially given AI’s potential role in productivity growth?
- Will increasing use of export controls on legacy inputs (e.g., rare earth magnets) reshape global trade and production more than changes in tariff levels?
Policy-relevant observations:
- Tariffs change relative prices and tend to be less distortionary than non-tariff barriers, including quantity interventions like export controls.
- Export controls that cut off critical inputs risk production shutdowns that could cascade across supply chains and ripple through the economy and the financial system.

Context and recent development:
- The increase in excess imbalances in 2024 was the largest in a decade.
- Historical reference to the global savings glut “twenty years ago,” when current account deficits widened while fiscal deficits did not.
Core questions posed:
- To what extent do domestic macroeconomic imbalances in savings and investment drive external imbalances, and when are domestic actions sufficient to reduce external imbalances?
- Could causation run both ways, with external imbalances influencing domestic imbalances that are themselves products of other countries’ domestic policies?
- What should countries do if domestic measures are insufficient to rebalance and other countries are unwilling to address domestic imbalances that cause spillovers?
- Are capital flows to deficit countries slowing the adjustments needed to address excessive imbalances?
- How concerned should policymakers be about systemic risks from stock imbalances—net foreign asset positions deviating significantly from sustainable or desirable levels—even if flow imbalances are addressed?
Policy recommendations implied for discussion:
- Progress toward investment expansion in Germany and fiscal consolidations in the United Kingdom and the United States as examples of domestic actions that could reduce external imbalances.
- Consideration of both flow and stock dimensions of external positions in assessing systemic risk.

Observations:
- Supply chains are reordering and new trading blocs are emerging; regionalization appears to be on the rise.
- More stable and harmonious regional relations can be intertwined with closer economic integration.
Core questions posed:
- Could deeper integration paradoxically create distortions, disruptions, and vulnerabilities that negatively impact geopolitical stability?
- To what extent is within-country integration—especially in larger economies with significant internal frictions—a potentially more attractive pathway?
- Should policymakers differentiate between types of specialization; are there economic activities that a successful modern economy cannot outsource?
- Could sectoral imbalances, even absent excessive aggregate imbalances, lead to resource misallocation and exacerbate security concerns?
Policy implications:
- The degree of security, economic, and political compatibility across neighbors matters for the durability and benefits of integration.
- Policymakers need to weigh trade-offs between the benefits of integration and potential geopolitical or sectoral vulnerabilities.

Research priorities highlighted:
- Cutting edge research on trade dynamics, global value chains, capital flows, and policy tradeoffs.
- A modern take on financial repression in the Mundell‑Fleming Lecture.
- A Policy Panel to bring practitioners and academics together to weigh trade‑offs and political realities.
Call to action:
- Participants are encouraged to challenge speakers and one another; the best insights emerge from dialogue across disciplines and perspectives.
- The Opening Remarks invite follow-on sessions starting with Gian Maria Milesi-Ferretti’s first session, “Tariffs and Global Imbalances.”

Opening Remarks by Dan Katz, First Deputy Managing Director, November 6, 2025.