The IMF has just fired off a trillion-dollar “bazooka” of its own Monday morning.
In a blog post published minutes ago, IMF Director Kristalina Georgieva issued three “policy prescriptions” that she said should define a “coordinated response” from the developed economies in Europe and the US. In addition to declaring that the IMF has $1 trillion in loan capacity ready to put to work to salve the economic damage caused by the outbreak, Georgieva encouraged governments to spend more, and asked the Fed to consider bulking up its dollar FX swap lines to emerging-market central banks. She also noted that the $42 billion that investors have pulled from EM markets is one of the biggest outflows in history, and will certainly ratchet up financial stressors.
Read the full post below:
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Today, the IMF published a set of policy recommendations that can help guide countries in the difficult days ahead.
What more needs to be done?
Three action areas for the global economy:
Additional fiscal stimulus will be necessary to prevent long-lasting economic damage.
Fiscal measures already announced are being deployed on a range of policies that immediately prioritize health spending and those in need. We know that comprehensive containment measures—combined with early monitoring—will slow the rate of infection and the spread of the virus.
Governments should continue and expand these efforts to reach the most-affected people and businesses—with policies including increased paid sick leave and targeted tax relief.
Beyond these positive individual country actions, as the virus spreads, the case for a coordinated and synchronized global fiscal stimulus is becoming stronger by the hour.
During the Global Financial Crisis (GFC), for example, fiscal stimulus by the G20 amounted to about 2 percent of GDP, or over $900 billion in today’s money, in 2009 alone. So, there is a lot more work to do.
Second, monetary policy.
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