IMF, WORLD ECONOMIC OUTLOOK, 2010

IMF, World Economic Outlook, 2010

IMF, World Economic Outlook, 2010

Fiscal austerity programs, which this week led to the exit to the streets in tens of thousands of Europeans and expected to reach almost all advanced countries, threaten to be very painful, the IMF said. The agency, which reported on Thursday the analytical chapters of its Global Economic Prospects report, noted that long-term austerity is usually positive, but warned that short-term negative effects increase with adjustment plans are addressed by many countries together as it is today ((IMF, World Economic Outlook, 2010, p. 93).

In this regard, the IMF economist Daniel Leigh recalled that the public debt is the highest level in 50 years and warned that "pain" could be double that experienced in the past. Cost cutting also is harder, according to the IMF, when it occurs in the context of a monetary union like Europe, because the room for a drop in currency value is low (IMF, World Economic Outlook, 2010, p. 93). The report, which analyzes the impact of austerity programs in advanced economies over the past three decades, notes that the idea that fiscal consolidation boosts short-term growth is unfounded (Alesina and Ardagna, 2009, p. 9-10).

In particular, lower levels of debt reduce real interest rates, stimulating private investment. It also reduces the burden of interest payments on the debt, leaving room for tax cuts. Both factors increase investment and production in the long term. The IMF recommended such measures as strengthening of institutions and reform of pension systems and health to enhance the credibility of the process of austerity and reduce its adverse effects (Alesina and Ardagna, 2009, p. 9-10). "To the extent that these measures increase the confidence of businesses and households, and expectations about future income can help support activities during the fiscal adjustment process," concluded the organization. Reserves to face another crisis The International Monetary Fund expressed support for a global financial sector's contribution to a reserve power in case of crisis would serve to close the sources of liquidity to banks.

In a chapter of its report on financial stability in the world, published this week ends, the IMF said that before the major banks are deprived of sources of funding during a crisis, should form a common fund when they profit. "The regulatory framework concerning the systemic liquidity risk should focus on the idea of ??making banks and other entities deemed important to the liquidity and maturity extension of help to finance some insurance against systemic risk during periods of abundance”, presented the Fund. The "risk of systemic liquidity" was illustrated by the financial crisis of autumn (northern hemisphere) of 2008, when after the collapse of investment bank Lehman Brothers banks and other financial institutions refused to lend each other funds, imposing a considerable strain to the whole global financial system.

If the state increases its spending passing advantage of orders and or slope advantage of social benefits people will have a higher income so they will consume advantage so ...