Global ETF News For The Past Year
Higher-for-Longer Interest Rate Environment is Squeezing More Borrowers
October 10, 2023--Elevated inflation means central banks may have to keep policy rates higher in a way that stretches the capacity of borrowers to repay debt
The world's central banks have unleashed the steepest series of interest-rate increases in decades during their two-year drive to tame inflation-and they may not be done yet. Policymakers have raised rates by about 400 basis points on average in advanced economies since late 2021, and around 650 basis points in emerging market economies.
Most economies are absorbing this aggressive policy tightening, showing resilience over the past year, but core inflation remains elevated in several of them, especially the United States and parts of Europe. Major central banks therefore may need to keep interest rates higher for longer.
In this environment, risks to the world economy remain skewed to the downside, as we detail in in our < a href="https://www.imf.org/en/Publications/GFSR/Issues/2023/10/10/global-financial-stability-report-october-2023?cid=pr-com-AM2023-GFSREA2023002" TARGET="_blank">Global Financial Stability Report. Though this latest assessment of vulnerabilities is similar to what we noted in April, the acute stress we saw in some banking systems has since subsided. However, we now see indications of trouble elsewhere. view more
IMF Working Paper-Monetary Policy Transmission through Commodity Prices
October 10, 2023--Summary:
Monetary policy influences inflation dynamics by exerting impact on a diverse array of commodity prices. At high frequencies, we show that a 10 basis points increase in US monetary policy rate reduces commodity prices between 0.5% and 2.5%, after 18 to 24 business days. Beyond the dollar appreciation channel, the effects are larger for highly storable and industrial commodities, consistent with the cost of carry and the expected demand channel.
We then study the quantitative importance of the commodity-price channel of monetary policy on domestic and international inflation at longer horizons (6-36 months). The results indicate that the response of commodity prices-oil, base metals, and food prices-to monetary policy accounts for 47% of the total effect of US monetary policy on US headline inflation, and 57% of the effect of US monetary policy on other countries' headline inflation. The commodity price channel on core inflation is smaller and mainly driven by base metal prices. Finally, the commodity-price channel of ECB monetary policy is smaller, and it mainly operates through its effect on energy prices.
WTO lowers 2023 trade growth forecast amid global manufacturing slowdown
October 5, 2023--Projections for growth in global merchandise trade in 2023 have been scaled back by WTO economists amid a continued slump that began in the fourth quarter of 2022, according to the latest WTO trade forecast released on 5 October. The volume of world merchandise trade is now expected to grow by 0.8% this year, less than half the 1.7% increase forecasted in April.
The 3.3% growth projected for 2024 remains nearly unchanged from the previous estimate.
The WTO furthermore expects real world GDP to grow by 2.6% at market exchange rates in 2023 and by 2.5% in 2024, as set out in the WTO's "Global Trade Outlook and Statistics-Update: October 2023."
World trade and output slowed abruptly in the fourth quarter of 2022 as the effects of persistent inflation and tighter monetary policy were felt in the United States, the European Union and elsewhere, and as strained property markets in China prevented a stronger post COVID-19 recovery from taking root. Together with the consequences of the war in Ukraine, these developments have cast a shadow over the outlook for trade. The trade slowdown appears to be broad-based, involving a large number of countries and a wide array of goods.
How Managing Inflation Expectations Can Help Economies Achieve a Softer Landing
October 4, 2023--Expectations increasingly drive inflation dynamics. Improvements in monetary policy frameworks can better inform people's inflation expectations and thereby help reduce inflation at lower output cost.
Inflation around the world reached multi-decade highs last year. While headline inflation is coming down steadily, core measures-which exclude food and energy-are proving stickier in many economies and wage growth has picked up.
Expectations about future inflation play a key role in driving inflation, as those views influence decisions about consumption and investment which can affect price and wages today. How best to inform people's views on inflation became an even more crucial consideration as the surge in prices fueled concern that inflation could become entrenched.
Geoeconomic Fragmentation Threatens Food Security and Clean Energy Transition
October 3, 2023--Providing corridors for food staples and critical minerals could avert food crises and help keep the green transition on track.
Russia's invasion of Ukraine in 2022 fragmented major commodity markets. Countries have since restricted trade in commodities, with a more than twofold increase in new policy measures relative to 2021.
Commodities, particularly minerals critical for the green transition and some highly traded agricultural goods, are especially vulnerable in the event of more severe geoeconomic fragmentation, as we show in a chapter of our latest World Economic Outlook.
IMF Working Paper-Geoeconomic Fragmentation and Commodity Markets
October 3, 2023--Summary:
This paper studies the economic impact of fragmentation of commodity trade. We assemble a novel dataset of production and bilateral trade flows of the 48 most important energy, mineral and agricultural commodities.
We develop a partial equilibrium framework to assess which commodity markets are most vulnerable in the event of trade disruptions and the economic risks that they pose.
We find that commodity trade fragmentation- which has accelerated since Russia's invasion of Ukraine-could cause large price changes and price volatility for many commodities. Mineral markets critical for the clean energy transition and selected agricultural commodity markets appear among the most vulnerable in the hypothetical segmentation of the world into two geopolitical blocs examined in the paper. Trade disruptions result in heterogeneous impacts on economic surplus across countries. However, due to offsetting effects across commodity producing and consuming countries, surplus losses appear modest at the global level.
WEF-Costing the earth: What will it take to make the green transition work?
September 29, 2023--Achieving net zero by 2050 requires a complete overhaul of the world's energy, transport and industry, as well as agriculture and forestry.
The green transition will also require a lot more investment than the world is currently providing, but reaching the levels needed is not impossible.
The green transition will also require a lot more investment than the world is currently providing, but reaching the levels needed is not impossible.
Here are three aspects key to understanding the investment needed and how the world can help fund and facilitate a successful green transition.
Here are three aspects key to understanding the investment needed and how the world can help fund and facilitate a successful green transition.
For the green transition to achieve net zero by 2050 requires a complete overhaul of the world's energy, transport and industrial systems, as well as the transformation of agricultural and forestry practices.
It will also require a lot of investment-much more than the world is currently providing- but it is not impossible.
IMF Working Paper-New Evidence on Spillovers Between Crypto Assets and Financial Markets
September 29, 2023--Summary:
We analyze returns and volatility spillovers among a representative set of crypto and financial assets. The magnitude of spillovers increases during periods of heightened turbulence due to negative economic-financial news, crypto market events, or exogenous shocks.
There is evidence of increasing spillovers over time, with a peak during the COVID-19 pandemic, implying growing interdependence. Crypto assets predominantly transmit spillovers to financial markets, though reversals occur during periods of financial stress. The increased correlation during risk-off episodes suggests that crypto assets could serve as important conduits for financial market shocks, generating financial stability risks.
IMF Working Paper-Assessing Macrofinancial Risks from Crypto Assets
September 29, 2023--Summary:
Failures in the crypto space-including the fall of Terra USD and the FTX debacle-have sparked calls for strengthening countries' policy frameworks for crypto assets, including by enhanced regulation and supervision. How have these heightened concerns about crypto assets been picked up in systemic risk assessment, and what can be done going forward?
In this paper, we introduce a conceptual macrofinancial framework to understand and track systemic risks stemming from crypto assets. Specifically, we propose a country-level Crypto-Risk Assessment Matrix (C-RAM) to summarize the main vulnerabilities, useful indicators, potential triggers and potential policy responses related to the crypto sector. We also discuss how experts and officials can weave in specific vulnerabilities stemming from crypto asset activity into their assessment of systemic risk, and how they can provide policy advice and take action to help contain systemic risks when needed.
