The Global Economy’s Stealth Resilience
Last week, G-20 finance ministers and central-bank governors gathered in Shanghai, where they failed to agree any genuine coordinated monetary- or fiscal-policy action. But, contrary to the impression given by the IMF and the OECD, this may not be a bad thing.
OXFORD – Last week, Christine Lagarde, the International Monetary Fund’s managing director, warned that if countries do not act together, the global economy could be derailed. Likewise, the OECD has warned that countries must move “urgently” and “collectively” to boost global growth prospects. Yet the G-20 finance ministers and central-bank governors to whom these entreaties were directed failed to agree any such action at their recent meeting in Shanghai.
To be sure, the communiqué released after the meeting includes a pledge to use “all policy tools – monetary, fiscal, and structural – individually and collectively” to “foster confidence and preserve and strengthen the recovery.” But the communiqué also reflects distinct divisions – particularly with regard to the role of monetary and fiscal policy in stimulating growth – among the finance ministers and central bankers who agreed on its text.
On monetary policy, the communiqué offers the empty statement that the G-20 would “continue to support economic activity and ensure price stability, consistent with central banks’ mandates.” That avoided the central question: Should central banks be attempting to stimulate growth through “unconventional” monetary policies?