Monthly Archives: October 2009

By Eswar Prasad

The financial crisis has taught us a painful lesson that global macroeconomic imbalances can wreak enormous damage on the world economy. Indeed, the centrepiece of the recent G20 Summit in Pittsburgh was agreement on a framework for balanced and sustainable growth to forestall a resurgence of imbalances as the economic recovery gets underway. At the recent IMF-World Bank annual meetings, G20 leaders gave the IMF a mandate to manage this framework by providing hard-nosed evaluations of their countries’ macroeconomic policies. Read more

Elinor Ostrom and Oliver Williamson won the prize today for their work on how economic transactions operate outside markets in common spaces and within companies. Prof Ostrom is the first woman to win the prize.

Further information on the winners: Read more

From the FT:

Wolfgang Münchau: Making the case for a weaker dollar Read more

By Thomas Palley

Over the past year the global economy has experienced a massive contraction, the deepest since the Great Depression of the 1930s. But this spring, economists started talking of “green shoots” of recovery and that optimistic assessment quickly spread to Wall Street. More recently, on the anniversary of the Lehman Brothers crash, Ben Bernanke, Federal Reserve chairman, officially blessed this consensus by declaring the recession is “very likely over”. Read more

“Our country is facing the largest budget deficit in our modern history.” Thus did George Osborne, shadow chancellor of the exchequer in the Conservative party, start his speech at the party conference this week. He was right. The questions are what to do, how and when. Read more

From the FT:

Dave Shellock: Overview: gold hits record high as dollar tumbles Read more

Ingram Pinn illustration

A year ago, the world economy fell into a deep recession. Now, happily, we see financial stabilisation and economic recovery. But we must not declare victory. The world could still make two mistakes: first, we might withdraw stimulus too soon; second, we might lose the opportunity for reform. We must avoid both dangers. That is the lesson I learnt at the annual meetings of the International Monetary Fund and World Bank in Istanbul. So where are we and where do we need to go? Think of this in terms of five ‘r’s: rescue; recovery; rebalancing; regulation; and reform. Read more

From the FT:

Michael Milken: Prosperity rests on human and social capital Read more

The four most dangerous words in finance are “this time is different”. Thanks to this masterpiece by Carmen Reinhart of the university of Maryland and Kenneth Rogoff of Harvard, no one can doubt this again.

As the authors note, “If there is one common theme to the vast range of crises we consider in this book, it is that excessive debt accumulation, whether it be by government, banks, corporations or consumers, often poses greater systemic risks than it seems [to do] during a boom”. Read more

This post, published on Martin Wolf’s Economists’ Forum, argues that the risk of an “oil curse” to Brazil is exaggerated.  Read more

By Per Kurowski

There is no reason to believe the world would be better if financial regulators provided extra incentives to those who, perceived as having a lower default risk, are already favoured by lower interest rates, or punish further those who, perceived as more risky, are already punished by higher interest rates. In fact, the opposite is probably true. Read more