PARTICIPANTS
Agustín Carstens, Manuel Amador, John Cogan, Paul Gregory, John Gunn, Steve Haber, Marc Hafstead, Kurt Hauser, Nick Hope, Pitch Johnson, Catherine Johnson, Anne Krueger, Ron McKinnon, William Ratliff, Myron Scholes, Ken Scott, George Shultz, Kenneth Singleton, Kiron Skinner, Tom Stephenson, Johannes Stroebel, John Taylor, Ian Wright, Maricarmen Barrios, Gabriela Calderón, Eugenio Cárdenas, Gustavo Robles
ISSUES DISCUSSED
Agustín Carstens, Governor of the Central Bank of Mexico and former Finance Minister of Mexico, discussed the differing speeds of financial crisis recovery apparent in emerging and developed world economies. He began by arguing that a country’s recovery from the financial crisis depends on reasons why the crisis spread within the country and that these same reasons will continue to be reflected in the business cycle unless corrected. Carstens documented a number of quantitative measures by which he claimed emerging economies generally appear to be more economically healthy than advanced economies, including the fiscal balance, gross public debt, output gap and industrial production. He also warned downside risks that may hinder recovery still exist for both advanced and emerging economies. Additionally, Carstens argued that few long-term corrections are being made in advanced economies, which hinders consumer confidence. Until fundamentals are dealt with via policy consistency, and in a way that inspires consumer confidence, recovery will be slowed and more crises may result.
Carstens explained that Mexico has recovered well due to a strong, consistent macroeconomic policy base, no signs of macro and financial imbalances, and stable inflation. Mexico is still funding projects in sensible ways, and their commercial banks’ capital adequacy ratio and other measures are fully Basel III compliant. He said authorities have gone out of their way to inform the public that bank branches are doing very well, which has led to increased confidence.
With regard to the United States and Europe, Carstens shared his feeling that economic and political uncertainty has caused recovery time to be lengthened, policy response to be lagged and the political process to be fatigued. To achieve recovery and prevent future problems, Carstens recommended setting and maintaining credible policy strategies so policy makers are trusted and consumer confidence is inspired.
