13 December 2013, Sweetcrude – The IMF’s top priority in the coming months is to break the cycle of subdued growth and recurrent market jitters and move toward securing strong, sustainable, balanced, and inclusive growth, says the institution’s latest work program.
The IMF Executive Board’s twice-yearly discussion of the IMF’s work agenda focused on translating the directions laid out in the Global Policy Agenda and the Communiqué of the International Monetary and Financial Committee (the IMF’s policy steering committee) in October into a concrete plan for the institution.
The work program for the next twelve months emphasizes the need to manage a series of transitions already under way in the global economy, including the normalization of global financial conditions, a shift in growth dynamics, a rebalancing of global demand, and the completion of global financial system reform.
In the following interview, Siddharth Tiwari, Director of the IMF’s Strategy, Policy, and Review Department, talks about the IMF’s priorities in the period ahead.
Emerging market economies are playing a greater role in the global economy, but they are also exposed to greater risk. How is the IMF helping these countries meet their challenges?
One major shift in the work program is an increased focus on emerging market economies. Emerging markets are rising in importance-together with developing countries, they already account for about half of global GDP in Purchasing Power Parity terms; in another decade, they will account for close to two-thirds. First, we are seeking to understand what factors drove their recent rapid growth, and why they are now slowing. We are examining to what extent the slowdown is connected with the tightening of global financial conditions, to what extent it is the result of more homegrown issues, and what these countries can do to maintain strong and well balanced growth going forward. Another part of our work agenda focuses on the role of financial deepening in emerging markets, which is important to provide greater resilience to shocks and support growth. Finally, we will also look at the consequences of the global regulatory reform agenda for the stability of emerging market economies.
What work is planned on unconventional monetary policy and the impact of its unwinding?
Issues related to the exit from unconventional monetary policy will be a key part of our work, both for advanced and developing economies. There are several immediate challenges. For advanced economies that use unconventional monetary policy, the question is quite fundamental: when and how to unwind the stimulus smoothly with minimal repercussions. For emerging and frontier economies, the episodes of market uncertainty in emerging markets over the summer following the U.S. taper talk raised important questions of how to manage the risks and implications of sudden movements of capital. These countries want to know to what extent they can calibrate monetary policy, exchange rates, and other policies, and they have questions about the broader design of policy frameworks and instruments that can provide financial insurance. After the first phase of work is done, we will take a more fundamental look at the topic with next fall’s umbrella paper “Monetary Policy: Its Role Now and in the Future,” which will discuss principles and architecture issues for the future conduct of monetary policy.
The IMF has been putting greater emphasis on the need for policy coherence across countries, taking into consideration the cross-border spillovers of policies. How is this reflected in the work program?
We will continue to analyze the multilateral consistency of members’ policies through the implementation of