New Analysis Should be Staple of IMF Toolkit—Experts

New 'spillover' reports help better detect financial, economic risks between countries

Call for exercise to be permanent part of IMF policy advice, crisis prevention toolkit

Interconnected approach to economic issues should be systematic

The new emphasis on spillovers—the impact of policies in one country on another because of trade and financial linkages—was motivated by the desire to strengthen the IMF’s economic analysis in the wake of the global economic crisis.

“Improving our understanding of the interconnected nature of the world economy can support better policy collaboration at the global level,” said Reza Moghadam, head of the IMF’s Strategy Policy and Review Department, who chaired the seminar.

The September 23 event was part of a broader Program of Seminars held during the Annual Meetings.

Value added

Seminar participants all agreed that spillover reports had added value to surveillance by bringing more granularity to the way IMF monitors, assesses, and advises on economic and financial policies.

“The spillover reports have made good progress in bridging the gap between the domestic focus of bilateral surveillance and the broad sweep of multilateral surveillance,” said Prasarn Trairatvorakul, Governor of the Bank of Thailand. Mexican central bank governor Agustín Carstens thought the reports a “very important new product” that addressed a very fundamental issue for those affected by the systemic economies.

Reflecting on his involvement in the discussions on the United Kingdom spillover report, Deputy Governor of the Bank of England Paul Tucker said that, “The interactions with Fund staff on this were terrifically engaging, and focused and actually meaningful.”

Kemal Derviş, Vice President and Director of the Brookings Institution, argued that strengthening the dialogue with the countries concerned and making that analysis transparent to other members, made the IMF “a truly global institution.”

Crisis prevention

Since the 2008 global financial crisis, economists and policymakers have become more aware of the risks and potential destabilizing effects that policies and shocks in major economies have on the rest.

Carstens likened the undetected crisis in 2008 to high blood pressure: the problem lurks silently, with no apparent effect—until one day it’s too late. Spillover reports are one way for the IMF to do more to take global economy’s blood pressure.

“Certainly I would call for this to be part of the toolkit of the...