Friday, October 03, 2008
The IMF on the financial crisis
Posted by David Smith at 01:45 PM
Category: Thoughts and responses

Ahead of its annual meeting next week, the IMF has released some early chapters from its World Economic Outlook. Here's a taster: "The current financial market meltdown being witnessed in the United States and other advanced economies will likely lead to longer and deeper economic downturns in some of these countries, according to new IMF research."

"Economies like the United States, with more arms-length or market-based financial systems, seem to be particularly vulnerable to sharp contractions in activity in the face of financial stress," Charles Collyns, Deputy Director in the IMF's Research Department, said at a press briefing today. Citing the chapter, "Financial Stress and Economic Downturns," he added that "this is because leverage tends to be more procyclical in these economies, which means that when a shock hits the financial system, the process of deleveraging can be more severe, and the risks of a credit crunch are greater." The research is here.

Meanwhile, US non-farm payrolls declined by 159,000 in September, their biggest monthly fall for five years.