IMF WEO UPDATE

The IMF has recently updated its global economic forecasts. These provide a useful launchpad for our first session so please try to have a look at their briefing before we meet on Monday.

To structure our discussion we might tackle the following questions:

  • Is the IMF too optimistic? or too pessimistic?
  • Where do the numbers come from and do you think the IMF has adequately stressed the uncertainties going forward?
  • The Covid GDP recession has been one of the worst on record but bankruptcies are much lower than in the GFC (Great Financial Crisis). Why?
  • How significant are the regional variations? China versus other EMEs…the US versus Europe
  • Is the IMF being too complacent about inflation pressures?
  • What would you advise on policies going forward? Should the focus be on demand or supply? Can governments afford the huge rises in public debt?
  • What does the IMF mean by “output gaps” and “scarring”?

Of course, we cannot expect to answer all these (and many other) questions. But some important themes are raised in the IMF’s latest report which we can flag for further investigation throughout the course. Notably,

  • lingering structural problems such as low productivity growth (Sessions 3 and 4), inequality (Session 5) and the challenges of climate change ( Sessions 2 and 3)
  • the importance of public institutions and globalisation in shaping long-run supply trends (Session 5)
  • the potential pressures on inflation if pent-up demand outstrips supply (Session 6)
  • the macroeconomic importance of domestic finance (Session 7), interest rates (Session 8) and international capital flows (Sessions 12 and 13) 
  • model uncertainties and the presentation of forecasts and simulations (Sessions 11 and 14)
  • required support from fiscal (Session 9) and monetary/macro-financial policy (Session 10)

SPH
28 Jan 2021