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In RealTime posts, PIIE senior staff and colleagues discuss the fast-moving economic news, financial developments, and public policy choices confronting the United States and the world.
The European Union’s finance ministers are furiously debating a piece of legislation known as CRD4/CRR (the acronyms stand for the fourth Capital Requirements Directive and the Capital Requirements Regulation). The measure is intended to implement the Basel III accord on bank capital, leverage, liquidity and risk management, which was adopted at the global level by [...]
In Jackson Hole last week, Christine Lagarde, the new managing director of the International Monetary Fund (IMF), decided to step on the toes of her former colleagues at the top of Europe’s financial policymaking community. This is good news. It illustrates that Lagarde, a former finance minister of France, is evidently not treating Europeans with [...]
Over the past year, the international financial community has revisited the complex issues raised by international capital flows and policies affecting them. Collective attention is appropriate because the flows, and actual or possible tightening of controls on them, create externalities for many countries. While not all of the attention to this topic over the past [...]
If nothing else, the financial crisis of 2007–10 has reinforced the general proposition that unbridled capital flows can pose a potential problem for the global financial system. The seriousness of that problem depends on economic and financial circumstances, including the strength and quality of macroeconomic and prudential institutions and policy tools. Therefore, a respectable case [...]
On February 19, 2010, the International Monetary Fund released a “Staff Position Note” on capital controls as a policy instrument.1 The paper concluded that, subject to four conditions, controls on capital inflows can be justified. The four conditions are: the economy is operating near potential, there is an adequate level of reserves, the exchange rate [...]
Paul Krugman, in a column last month for the New York Times, endorsed a tax on financial transactions, proposed recently by Adair Turner, Britain’s top financial regulator. It is important to distinguish this Turner proposal from the original Tobin tax on international flows and these two taxes in turn from the kind of coordinated capital [...]