The Peterson Institute for International Economics hosted its semiannual Global Economic Prospects session on April 11, 2016. The focus was on assessing prospects for global economic activity, the risks surrounding those prospects, and the implications for economic policy.
While economic activity continues to recover at a moderate pace in most advanced economies, recent declines in global asset prices indicate elevated fears among financial market participants, perhaps to an even greater extent than warranted by economic fundamentals. Lower commodity prices have taken a toll on the economies of net commodity exporters and on investment in the energy sector, whereas the stimulus they imparted on consumption in net importers seems to have received less attention. Geopolitical developments, recessions in several large emerging economies, a slowdown in the Chinese manufacturing sector, and growing concerns about Europe's ability to undertake unified policies add to the uncertainty. Against that background, some observers have begun to wonder whether policymakers retain sufficient ammunition to respond to further shocks.
Senior Fellow Paolo Mauro, an expert on fiscal policy and growth, introduced the main themes and outlined the key sources of risk to the global outlook. Institute President Adam S. Posen presented the forecast for the United States, with a focus on the main factors likely to shape the Federal Reserve's decisions on the monetary stance during the remainder of the year. Nicholas R. Lardy, the Institute's Anthony M. Solomon Senior Fellow and author of the widely-acclaimed Markets over Mao, discussed developments and prospects for China's economic growth, with emphasis on its international competitiveness and its external current and capital account balances.