Read more about the article Orderly Sovereign Debt Restructuring: Missing in Action! (And Likely To Remain So)

Orderly Sovereign Debt Restructuring: Missing in Action! (And Likely To Remain So)

An orderly sovereign debt restructuring should place the debtor nation's public debt on a sustainable trajectory while minimizing procrastination and contagion. However, the experiences with the debt crisis of the 1980s, Russia 1998, Argentina 2001, and Greece 2010 indicate that orderly debt restructurings remain elusive, even with high-powered official intervention. When solvency problems are present, the chances of success increase if official money is lent at the risk-free rate, reflecting its low risk, and if private creditors receive an upfront haircut. The paper examines the obstacles, which include moral hazard, difficulty in distinguishing between solvency and liquidity crises, and the “political economy” resistance to upfront haircuts. Orderly sovereign debt restructurings are likely to remain elusive notwithstanding recent evidence that the official mindset may be changing.

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Read more about the article Calibrating 2014
Cocoa beans are processed into cocoa liquor at the Golden Tree cocoa processing and chocolate plant in Tema, Ghana, June 27, 2006. (Photo by Jonathan Ernst)

Calibrating 2014

The global economy looks poised to display better growth performance in 2014. Leading indicators are pointing upward – or at least to stability – in major growth poles. However, for this to translate into reality policymakers will need to be nimble enough to calibrate responses to idiosyncratic challenges.

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Read more about the article Walking on the Wild Side – Monetary Policy and Prudential Regulation

Walking on the Wild Side – Monetary Policy and Prudential Regulation

Global financial integration and the linkages between the financial and the real sides of economies are sources of huge policy challenges. This is now beyond doubt, after what we saw in the run-up to and the unfolding of the 2008 global financial crisis. As a consequence, the established wisdom regarding monetary policies and prudential regulation has been subject to a deep critical review, including a demise of the belief that they should be maintained as fully independent functions.

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Read more about the article Podcast 261 – Otaviano Canuto: Complacência nas economias emergentes

Podcast 261 – Otaviano Canuto: Complacência nas economias emergentes

  https://soundcloud.com/riobravoinvestimentos/otaviano-canuto-complacencia-nas-economias-emergentes?utm_source=soundcloud&utm_campaign=share&utm_medium=twitter Conversamos com Otaviano Canuto, o senior advisor do Banco Mundial para os BRICS, um cargo criado pelo atual presidente do banco para gerar mais pesquisas sobre as maiores…

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Read more about the article Lost in Transition

Lost in Transition

Not long ago, many economists were anticipating a switchover in the global economy's main engines, with autonomous sources of growth in developing economies compensating for the drag of struggling advanced economies. But, in the last few months, enthusiasm about these economies’ prospects has given way to bleak forecasts.

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Read more about the article Brazil, Korea: Two Tales of a Macroprudential Regulation
Kajiado, Kenya 2010

Brazil, Korea: Two Tales of a Macroprudential Regulation

There are still serious questions on how to proceed with the complementary use of prudential regulation and monetary policy. While there are already lessons from emerging markets’ use of the macroprudential policy toolkit, more experience and analysis, particularly on its interaction with monetary policy is needed.

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Read more about the article Elephants and Macro-Financial Linkages

Elephants and Macro-Financial Linkages

Emerging Markets (EMs) are more likely to suffer shocks, such as commodity-price and terms-of-trade shocks, as well as surges and sudden stops in capital flows.. Furthermore, structural and institutional features typical of most EMs tend to amplify and propagate shocks. Even when asset price-led cycles are not generated within EMs, they tend to be affected the most due to capital flows.

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Read more about the article Dealing with the Challenges of Macro Financial Linkages in Emerging Markets

Dealing with the Challenges of Macro Financial Linkages in Emerging Markets

The 2008 financial crisis has emphasized the importance of macro financial linkages. In the financial sector, attention is now focusing on macro prudential regulations that are geared toward the stability of the financial system as a whole. In the macro arena, the recognition that price stability was not sufficient to guarantee macroeconomic stability and that financial imbalances developed despite low inflation and small output gaps has highlighted the need for additional tools (macro prudential policies) to complement monetary policy in countercyclical management. Emerging markets (EMs) face different conditions and have key structural features that can have a bearing on the relevance and efficacy of policy measures. Drawing on Canuto, Otaviano, and Swati R. Ghosh, eds. 2013. Dealing with the Challenges of Macro Financial Linkages in Emerging Markets. Washington, DC: World Bank), this note discusses the challenges of dealing with macro financial linkages and explores the policy toolkit available for dealing with systemic risks, particularly in the context of EMs.

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