It is time to consider significant reforms to the way the Olympics are pursued, prepared for, and hosted

When Tokyo won the right to host the 2020 Summer Olympics back in 2013, it was seen as a great honor and an opportunity to showcase the city to the world. Celebrations rang out in the streets of the Japanese capital as the city began to prepare to host the event for the first time since 1964. But the golden sheen has worn off the coming games. The Japanese government has declared a state of emergency because of the COVID-19 pandemic, which will result in most events being held without spectators, and a majority of Tokyo citizens now want the Olympics delayed or canceled altogether. It is tempting to say that Tokyo is simply a victim of bad luck related to the ongoing global pandemic, but even before COVID-19 struck, forcing the one-year postponement of the games, the Tokyo Olympics were already suffering from massive cost overruns and were well on their way to...

Overall current account deficits and surpluses widened in 2020 to 3.2 percent of world GDP. The IMF’s multilateral approach suggests that global excessive imbalances were broadly unchanged in 2020 at about 1.2 percent of world GDP. The external outlook for 2021 is highly uncertain given the divergent economic prospects across countries.

Unprecedented government borrowing to finance health care and economic support has had uneven effects on current account balances. The impact on the current account balances depends on a country’s relative fiscal policy stance compared with that of its trading partners.

The outlook for global current account balances is a gradual narrowing during 2022–26, mainly reflecting a narrowing of the US deficit and China’s surplus to below pre-pandemic levels. Over the medium term, collective action is needed to reduce global imbalances in a growth-friendly manner.

By Aqib Aslam and Maria Coelho

On June 5, 2021, Finance Ministers from the Group of Seven major industrialized nations committed to a global minimum corporate tax rate on multinationals of at least 15 percent. While there are a number of details yet to be hammered out in broader global discussions, this historic agreement heralds an important step forward on the road to international corporate tax reform.

It also highlights the role minimum taxes can play at the global level to help reverse nearly four decades of falling global corporate tax rates and reduce the incentives for large multinational firms to shift profits to low-tax jurisdictions to reduce their worldwide tax liability.

Our new study examines how different types of domestic minimum tax regimes can help countries preserve their corporate tax base and mobilize revenue.

Minimum taxation over the decades

There is an unusual tension in the world of corporate taxation. On the one...

Overall current account deficits and surpluses widened in 2020 to 3.2 percent of world GDP. The IMF’s multilateral approach suggests that global excessive imbalances were broadly unchanged in 2020 at about 1.2 percent of world GDP. The external outlook for 2021 is highly uncertain given the divergent economic prospects across countries.

Unprecedented government borrowing to finance health care and economic support has had uneven effects on current account balances. The impact on the current account balances depends on a country’s relative fiscal policy stance compared with that of its trading partners.

The outlook for global current account balances is a gradual narrowing during 2022–26, mainly reflecting a narrowing of the US deficit and China’s surplus to below pre-pandemic levels. Over the medium term, collective action is needed to reduce global imbalances in a growth-friendly manner.

Let’s start from the beginning – What is an SDR? Is it money? Special Drawing Rights (SDRs) are an asset, though not money in the classic sense because they can’t be used to buy things. The value of an SDR is based on a basket of the world’s five leading currencies – the US dollar, euro, yuan, yen and the UK pound. The SDR is an accounting unit for IMF transactions with member countries – and a stable asset in countries’ international reserves.

Why are SDRs important for reserves? International reserves are like large national savings accounts in foreign currencies— typically managed by the central bank—that ensure that a country has the foreign currencies it needs to trade with the world (e.g., to pay for imports). Adding SDRs to a country’s international reserves makes it more resilient financially. In times of crisis, a country can dip into its savings for urgent needs (e.g., to pay for importing vaccines).

So, how will a new SDR allocation help countries? The...

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. To date, a total of SDR 660.7 billion (equivalent to about US$943 billion) have been allocated. This includes the largest-ever allocation of about SDR 456 billion approved on August 2, 2021 (effective on August 23, 2021). This most recent allocation was to address the long-term global need for reserves, and help countries cope with the impact of the COVID-19 pandemic. The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.

In today's edition we focus on Special Drawing Rights, the political economy of climate change, challenges facing fragile and conflict states, the economics of social unrest, IMF support for Lebanon, the Kyrgyz Republic and COVID-19, and much more. With that, let's begin.

Overall current account deficits and surpluses widened in 2020 to 3.2 percent of world GDP. The IMF’s multilateral approach suggests that global excessive imbalances were broadly unchanged in 2020 at about 1.2 percent of world GDP. The external outlook for 2021 is highly uncertain given the divergent economic prospects across countries.

Unprecedented government borrowing to finance health care and economic support has had uneven effects on current account balances. The impact on the current account balances depends on a country’s relative fiscal policy stance compared with that of its trading partners.

The outlook for global current account balances is a gradual narrowing during 2022–26, mainly reflecting a narrowing of the US deficit and China’s surplus to below pre-pandemic levels. Over the medium term, collective action is needed to reduce global imbalances in a growth-friendly manner.

Exceptional policy support prevented a global economic depression, even as the pandemic took a heavy toll on lives and livelihoods. The global reaction, as seen in major shifts in travel, consumption, and trade, also made the world a more economically imbalanced place as reflected in current account balances—a record of a country’s transactions with the rest of the world.

In our latest External Sector Report we found that the global reaction to the pandemic further widened global current account balances—the sum of absolute deficits and surpluses among all countries—from 2.8 percent of world GDP in 2019 to 3.2 percent of GDP in 2020. Those balances are set to widen further as the pandemic continues to rage in much of the world.

If not for the crisis, global current account balances would have continued to decline. While external deficits and surpluses are not necessarily a cause for concern, excessive imbalances—larger than warranted by the economy’s...

By Davide Furceri, Michael Ganslmeier, and Jonathan D. Ostry

Few issues have sparked more attention than how to avoid environmental and human catastrophe from climate change. But even in the wake of massive public protests and an ambitious agenda since the 2015 Paris Agreement, governments are wary of the political costs of enacting climate mitigation policies.

In recent IMF staff research, we identify strategies that can minimize or even eliminate such challenges.

In the first analysis of its kind, we combined information on the political aftermath (governmental popular support) of policy changes with information on the policy changes themselves in a sample of 31 OECD countries. Our data on political support comes from the private consultancy PRS Group’s International Country Risk Guide.

We found that climate change policies—especially market-based measures such as a carbon tax on fossil fuels, which are the most effective to limit pollution...

By IMFBlog

Women remain underrepresented in economics, yet many have made an outsized impact on the field. Whether it’s in working to eliminate poverty, reinventing development economics, examining social safety nets, or improving democratic institutions, Finance & Development magazine has regularly highlighted the contributions made by women economists.

In F&D’s People in Economics series, the work of women economists has featured prominently. To add to your summer reading list, below are some of the profiles from recent years of the important thinkers who are leaving a mark.

The number of people at work is generally closely related to whether an economy is growing at a reasonable rate

Ceyda Oner

Back in the depths the global financial crisis in 2009, the International Labour Office announced that global unemployment had reached the highest level on record. More than 200 million people, 7 percent of the global workforce, were looking for jobs in 2009.

It was not a coincidence that the global economy experienced the most severe case of unemployment during the worst economic crisis since the Great Depression. Unemployment is highly dependent on economic activity; in fact, growth and unemployment can be thought of as two sides of the same coin: when economic activity is high, more production happens overall, and more people are needed to produce the higher amount of goods and services. And when economic activity is low, firms cut jobs and unemployment rises. In that sense, unemployment is countercyclical, meaning that it rises...

Overall current account deficits and surpluses widened in 2020 to 3.2 percent of world GDP. The IMF’s multilateral approach suggests that global excessive imbalances were broadly unchanged in 2020 at about 1.2 percent of world GDP. The external outlook for 2021 is highly uncertain given the divergent economic prospects across countries.

Unprecedented government borrowing to finance health care and economic support has had uneven effects on current account balances. The impact on the current account balances depends on a country’s relative fiscal policy stance compared with that of its trading partners.

The outlook for global current account balances is a gradual narrowing during 2022–26, mainly reflecting a narrowing of the US deficit and China’s surplus to below pre-pandemic levels. Over the medium term, collective action is needed to reduce global imbalances in a growth-friendly manner.

Let’s start from the beginning – What is an SDR? Is it money? Special Drawing Rights (SDRs) are an asset, though not money in the classic sense because they can’t be used to buy things. The value of an SDR is based on a basket of the world’s five leading currencies – the US dollar, euro, yuan, yen and the UK pound. The SDR is an accounting unit for IMF transactions with member countries – and a stable asset in countries’ international reserves.

Why are SDRs important for reserves? International reserves are like large national savings accounts in foreign currencies— typically managed by the central bank—that ensure that a country has the foreign currencies it needs to trade with the world (e.g., to pay for imports). Adding SDRs to a country’s international reserves makes it more resilient financially. In times of crisis, a country can dip into its savings for urgent needs (e.g., to pay for importing vaccines).

So, how will a new SDR allocation help countries? The...

By Davide Furceri, Michael Ganslmeier, and Jonathan D. Ostry

Few issues have sparked more attention than how to avoid environmental and human catastrophe from climate change. But even in the wake of massive public protests and an ambitious agenda since the 2015 Paris Agreement, governments are wary of the political costs of enacting climate mitigation policies.

In recent IMF staff research, we identify strategies that can minimize or even eliminate such challenges.

In the first analysis of its kind, we combined information on the political aftermath (governmental popular support) of policy changes with information on the policy changes themselves in a sample of 31 OECD countries. Our data on political support comes from the private consultancy PRS Group’s International Country Risk Guide.

We found that climate change policies—especially market-based measures such as a carbon tax on fossil fuels, which are the most effective to limit pollution...

August 3, 2021

The Kyrgyz Republic was the first country to receive IMF emergency funding to tackle the COVID-19 crisis. IMF Country Focus spoke with the mission chief, Nikoloz Gigineishvili, about the pandemic’s impact on the economy and how the IMF supported the recovery.

Economic analysis can shine a revealing light on the causes and consequences of social unrest

The past decade was marked by a series of high-profile social protests—the Arab Spring, Black Lives Matter, the Gilets Jaunes, and Occupy Wall Street, to name just a few. Yet while there has been a lot of soul-searching about their causes and consequences, and even though many commentators have pointed their fingers at economic forces, the economics profession has been relatively slow to respond. Indeed, rigorous quantitative economic analysis of social unrest is scant, with evidence limited to isolated cases until recently. However, a new body of IMF staff research is filling this gap by analyzing the risks and economic costs of social unrest.