World Economy Under Stress
global economy is facing its worst crisis in 60 years, triggering fears of
a long, deep recession. The task ahead is to design new rules and
institutions to reduce systemic risks without stifling innovation.
financial crisis has exposed the limits of the current regulatory and
supervisory frameworks. The four priorities for reforming the financial
sector—which include reducing systemic risks—are spelled out.
Mohamed A. El-Erian
financial system will not reset to what it looked like just a year ago,
and the longer-term impact will change the fundamentals of the world
economy. All this accentuates the need for urgent and bold modernization
of the multilateral framework.
most important lesson from every financial crisis since the Great
Depression is to act early, to act aggressively, and to act
comprehensively to deal with financial strains. The priority must be to
quench the fire, even if unorthodox measures are needed.
Stefan Ingves and Göran Lind
and other Nordic countries went through systemic financial crises in the
early 1990s. A crucial lesson from the Nordic experience is the need for
prominent state involvement in crisis resolution through restructuring and
asset value protection.
Kenneth Kang and Murtaza Syed
financial crisis a decade and a half ago evokes an unmistakable sense of déjà
vu amid the current turmoil. Japan's story shows that here is nothing like
a crisis to bring to light—and build popular support for—much-needed
Spence and Mahmoud Mohieldin served on a panel of
policymakers and academics that looked at what it takes to generate
sustained high economic growth rates. Archana Kumar asked them
what makes countries grow, in good times and bad.
Stijn Claessens, M. Ayhan Kose, and Marco E.
episodes of recessions, crunches, and busts are sobering, suggesting that
recessions following the current financial crisis may be more costly
because they are likely to take place alongside simultaneous credit
crunches and asset price busts.
Kenneth Kang and Jacques Miniane
hope that Asia would escape the global financial crisis has by now
evaporated. How Asia withstands the shock of both slower world growth and
a spreading financial crisis is critical not only for the region, but for
the world as a whole.
Also in This Issue
Maros Ivanic and Will Martin
trade reform in developing countries can help improve food security by
reducing the cost of food to poor people. But trade policy must be
complemented by other measures to ensure sufficient food is available.
oil producers are investing petrodollars in other Middle East
countries—a trend that should continue even as oil prices fall, as Gulf
states have learned from previous bad experiences and become more
strategic about investing their wealth.
squandered its oil windfall of the 1970s, which led to three decades of
economic stagnation. The new oil boom of the last few years has given
oil-exporting developing countries a rare shot at redemption.
Uwe Deichmann and Indermit Gill
integration means much more than preferential trade access between
neighbors. If it includes steps such as infrastructure investment and
labor market liberalization, regional trade integration helps connect
developing countries to world markets.
di Mauro on governance; Who's to blame for the free market crisis?
new liquidity facility; Exogenous Shocks Facility revamped; IMF surveillance
priorities; Loans to Ukraine and Hungary; Tanzania conference
People in Economics
of his best-selling books, economist Robert Shiller—known for identifying
speculative bubbles at an early stage—has made the case for creating new
financial markets in which individuals would be able to diversify away the
most important risks affecting them.
Natalie Ramirez-Djumena and Jair Rodriguez
fast growth is not a miracle—it is possible for developing countries, as
long as their leaders are committed to it and take advantage of the
opportunities provided by the global economy.
Back to Basics
thing people want to know about an economy is whether its total output of
goods and services is growing or shrinking. When an economy's gross domestic
product is growing, workers and businesses are generally better off than when
it is not.
Justin Yifu Lin
new data show the level of poverty across all developing countries is higher
than previously estimated, the revised statistics reveal big successes in
poverty reduction and may improve understanding of the development process.
the start of the oil boom in 2003, Saudi Arabia has achieved strong growth,
aided by high oil revenues and a rapid expansion of the non-oil private
sector. While inflationary pressures are easing, the global financial crisis
poses new risks.
Index of Articles in 2008
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