Derek Chen's blog

The crisis around jobs is particularly acute this time not just because 205 million people worldwide are officially unemployed, nor because the quality of available jobs are frequently perceived to be declining, especially the routine middle-grade white-collar jobs workers in the developed countries, nor is it just because skilled and talented people who are in short supply earn multiples of the average salary.  The problem in today’s post-crisis world is that policymakers and practitioners around the world are no longer sure how to create jobs, and just as and perhaps even more important, how to

The devastating impact of the global financial crisis, which consequently turned into a global economic crisis, created a consensus that pre-crisis financial regulation didn’t take the “Big Picture” of the system as a whole sufficiently into account. As a result, according to the views of many, supervisors in many markets “missed the forest for the tress”. In other words, among other mistakes, they did not take into account the macro-prudential aspects of regulation, which was not the focus of many authorities.

Looking ahead, fixing the fragilities in the global financial system is a key priority. For this reason, the World Bank Institute organized a session on “"Frontiers in Development Policy: the Role of Macro-Prudential Policies"” held in conjunction with the 12th Annual Conference of the Global Development Network, “Financing Development in a Post-Crisis World: The Need for a Fresh Look” which took place in Bogotá, Colombia, January 13 to 15, 2011.

This session focused on macro-prudential policies, which relate to the use of prudential tools to promote the stability of the financial system as a whole, not just that of individual institutions. These policies deal with the intersection of the real economy and the financial sector, providing a birds-eye view of the entire system. In our interconnected, interdependent and highly globalized world, these policies will and has become increasingly important, both in steering the global economy out of the crisis, in moving toward new sources of growth, and averting the next financial crisis.

The session provided an introduction to the basics of macro prudential policies, as well as the critical issues currently being discussed in the financial system policymaking circles. The key takeaways are as follows:

Global GDP growth and as well as GDP growth in each of the regions were lower in 2009 compared to 2007. More specifically, specifically, negative growth rates were observed during 2009 in developed countries & European Union, Central and SE Europe & CIS countries and to a lesser extent in LAC, while the growth rates for East Asia, South Asia, Middle East, North Africa and Sub-Saharan Africa were positive in 2009 but lower than in 2007.

Reflecting this, all regions experienced higher unemployment rates, with the highest being in the developed economies & EU, Central and SE Europe & CIS and LAC economies, which again all had negative GDP growth rates in 2009. The ILO estimates that the global crisis has led to 34 million more unemployed and the World Bank estimates that about 60 million people may have been pushed into poverty.