The main conclusions are (briefly) as follows:
- Inflation risks remain elevated, especially in EM, policy failure to address this risk may worsen inflation output trade-off in the future
- Banking sector crises tend to produce recessions. They are deeper when households are highly leveraged, when prior to shock housing prices were going sharply up and with growing arms-length financing. Conclusions: US is facing recession, Europe will do better. Another conclusion: recapitalize banks and avoid moral hazard. I wish Mr Paulson and Senate read WEO before they did what they did.