Euro Area(Photo: kontrast-fotodesign/iStock by Getty Images) Economic policies in the euro area have supported household incomes and protected corporate balance sheets, while high levels of vaccination and increasing adaptation to the pandemic have also helped to foster a strong economic recovery, the IMF’s Europe Department says in a new Country Focus article. Drawing on a staff report released on Monday, the authors say that the challenge is to coordinate the normalization of economic policy in the face of elevated uncertainty, including the evolution and legacies of the pandemic, as well as ongoing geopolitical tensions. –Inflation Risks: Under the baseline, medium-term inflation dynamics are expected to remain weak. But upside inflation risks have clearly increased, and the European Central Bank should stand ready to adjust course as needed. Some euro area countries could tighten their macroprudential stance given stretched asset valuations, especially in real estate markets. –Labor Recovery: The labor market recovered rapidly but unevenly across sectors. Policies need to facilitate labor reallocation and protect the vulnerable, which includes reskilling and upskilling workers, using hiring subsidies, and enhancing targeted safety nets. 📺 Watch the Director of the IMF’s European Department, Alfred Kammer, update the European Parliament on the outlook, and download the presentation here. Digital Currencies(Photo: Justhavealook/iStock by Getty Images) Around the world, central banks are pondering whether to issue their own digital currencies to the public. A new IMF Fintech Note shares insights, lessons and questions from six countries at the CBDC frontier, from China to Sweden. Speaking at the launch of the note on Wednesday, IMF Managing Director Kristalina Georgieva said that central banks have moved beyond the conceptual stage and were now experimenting with digital currencies. “Central banks are rolling up their sleeves and familiarizing themselves with the bits and bytes of digital money,” she said in opening remarks to the event, hosted by the Atlantic Council. Around 100 countries are exploring CBDCs in one way or another. In the Bahamas, the Sand Dollar has been in circulation for over a year. And in China, more than a hundred million people use the digital renminbi. –Common Lessons: Kristalina said there were three common lessons: there is no universal case for CBDCs because each economy is different; financial stability and privacy considerations are paramount to the design of CBDCs; and introducing a CBDC is about finding a balance between developments on the design front and on the policy front. 📺 Watch a video of the event, also featuring Tobias Adrian, Director of the IMF’s Monetary and Capital Markets Department, and find all the IMF’s Fintech Notes along with blogs, videos and other related content here. F&D(Image: Porter Gifford) Ever since she produced a report on elephants in the first grade, Amy Finkelstein knew she would be a scholar like her parents. But it wasn’t until her senior year at Harvard College that she chose economics. Majoring in political science, she decided to take a course in applied microeconomics. “That was a totally transformative experience for me,” Finkelstein says. “It opened my eyes to the idea that one could use data to inform what had otherwise seemed like ideological debates.” In the years since, Finkelstein, who now teaches at the Massachusetts Institute of Technology (MIT), has established herself among the country’s preeminent health economists. Her work ranges from estimating the welfare benefits of alternative social insurance programs to the effectiveness of mammogram screening. The common thread: using large data sets to test economic models—and arriving at conclusions that often challenge conventional wisdom. Coming Soon: F&D March Issue “Rethinking Fiscal”Our upcoming issue of Finance & Development will focus on how the pandemic has forced a rethink of fiscal policy. Fresh insights and analysis from Vitor Gaspar, Olivier Blanchard, Ceyla Pazarbasioglu, Carmen Reinhart, Arminio Fraga, Ricardo Reis, Emmanuel Saez, Felipe Larraín, and more will delve into issues of spending, debt and the role of government in economic life. The issue will also explore how some countries are innovating in areas of climate, transparency, and digitalization; the role of taxation; and how fiscal policy can be used to curb inequalities. Want to get a print copy delivered to your home or office? Click here to subscribe. | 
