Perspectives connected to the research.
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Slowing credit offered Turkey a route away from consumption driven external imbalances in early 2021. Robin Brooks, Jonathan Fortun and Ugras Ulku connect the previous year’s credit expansion with reserve losses and a wider current account deficit. They argue that preventing excessive lira appreciation would help redirect the economy toward exports and investment.
Read the workLow borrowing costs improve fiscal sustainability, but do not make deficits unlimited. Jonathan Fortun and Sergi Lanau examine the limits of that argument in February 2021: interest rates below economic growth help debt dynamics, yet sufficiently large deficits can overwhelm the benefit. Their assessment suggests that low rates could make primary deficits of 3 to 4 percent of GDP feasible in developed economies, rather than removing the need to assess fiscal constraints.
Read the workThe report uses prime-age employment to assess economic slack after Covid-19 and to place conventional output-gap estimates in context.
Read the workIndia’s budget offered an immediate spending boost after a limited fiscal response to the pandemic in 2020. Jonathan Fortun and coauthors expected that support to strengthen growth in the first quarter of 2021, followed by a broadly neutral budgetary contribution. Their assessment links the wider medium term deficit target to debt stabilization, while stressing that a high debt burden would continue to constrain room for fiscal policy.
Read the workThe authors use inflation evidence to assess economic slack in Italy and Spain, comparing their estimates with IMF output gaps and emphasizing measurement uncertainty.
Read the workDebt securities dominated portfolio inflows into emerging markets in January 2021. Jonathan Fortun reports $44.2 billion entering debt and $9.4 billion entering equities, with Chinese stocks receiving $6.2 billion of the equity flows. The composition shows how heavily the continued recovery depended on bond investment.
Read the workLarge pandemic deficits were set to keep government funding requirements elevated even as emerging economies recovered. Jonathan Fortun and Sergi Lanau develop a framework to monitor those needs and the currency composition of debt service. Their February 2021 assessment identifies Brazil and South Africa as facing the highest public financing requirements that year.
Read the workThe authors compare US and euro-area output-gap estimates with core inflation using Phillips curves, highlighting the uncertainty involved in measuring economic slack.
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