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Leveraged and inverse ETFs are 'like walking into a casino'
June 9, 2023--Providers argue they are useful, but critics say they are being used for short-term gambling
The Foreign & Colonial Government Trust listed on the London stock exchange in 1868 with the explicit aim of allowing small investors to gain exposure to a diversified portfolio of government bonds.
Since then a variety of newer, glossier structures have emerged, from mutual funds to exchange traded funds, but the raison d'être remained the same: to provide a ready-made portfolio of securities to an investor almost irrespective of their means, allowing them to tap into "the only free lunch in investing"-diversification.
IMF Working Paper-Restructuring Reforms for Green Growth
June 9, 2023--Summary:
Policymakers across the world are striving to tackle the century-defining challenge of climate change without undermining potential growth. This paper examines the impact of structural reforms in the energy sector (electricity and gas) on enviromental outcomes and green growth indicators in a panel of 25 advanced economies during the period 1970-2020.
We obtain striking results. First, while structural reforms so far failed in reducing greenhouse gas emissions per capita, there is some evidence for greater effectiveness in lowering emissions per unit of GDP. Second, although energy reforms are not associated with higher supply of renewable energy as a share of total energy supply, they appear to stimulate a sustained increase in environmental inventions and patents per capita over the medium term. We also find strong evidence of nonlinear effects, with market-friendly energy reforms leading to better environmental outcomes and green growth in countries with stronger environmental regulations. Looking forward, therefore, structural reforms should be designed not just for market efficiency but also for green growth.
OECD-Global economic outlook improving, albeit to a low growth recovery
June 7, 2023--The global economy has begun to improve, but the recovery will be weak, according to the OECD's latest Economic Outlook. The Economic Outlook projects a moderation of global GDP growth from 3.3% in 2022 to 2.7% in 2023, followed by a pick-up to 2.9% in 2024.
Lower energy prices are easing the strain on household budgets, business and consumer sentiment are recovering, albeit from low levels, and the re-opening of China has provided a boost to global activity.
Headline inflation in the OECD is projected to decline from 9.4% in 2022 to 6.6% in 2023 and 4.3% in 2024. The decline in inflation is due to tighter monetary policy taking effect, lower energy and food prices and reduced supply bottlenecks.
GDP growth in the United States is projected to be 1.6% in 2023, before slowing to 1.0% in 2024 in response to tight monetary and financial conditions. In the euro area, declining headline inflation will help to boost real incomes and contribute to a pick-up in GDP growth from 0.9% in 2023 to 1.5% in 2024. China is expected to see strong increases in GDP growth in 2023 (with 5.4%) and 2024 (with 5.1%), due to the lifting of the government's zero-COVID policy.
view A long unwinding road OECD Economic Outlook, June 2023
World Bank-Global Economy on Precarious Footing Amid High Interest Rates
June 6, 2023--Global growth to slow to 2.1% in 2023, with prospects clouded by financial risks
Global growth has slowed sharply and the risk of financial stress in emerging market and developing economies (EMDEs) is intensifying amid elevated global interest rates, according to the World Bank's latest Global Economic Prospects report.
Global growth is projected to decelerate from 3.1% in 2022 to 2.1% in 2023. In EMDEs other than China, growth is set to slow to 2.9% this year from 4.1% last year. These forecasts reflect broad-based downgrades.
Most EMDEs have seen only limited harm from the recent banking stress in advanced economies so far, but they are now sailing in dangerous waters. With increasingly restrictive global credit conditions, one out of every four EMDEs has effectively lost access to international bond markets.
view the World Bank Global Economic Prospects June 2023
How Falling Home Prices Could Strain Financial Markets as Interest Rates Rise
May 31, 2023--Countries with elevated housing prices and high household debt issued at floating rates are particularly vulnerable to monetary policy tightening
The pandemic propelled housing prices to record levels in many countries, especially advanced economies, amid low interest rates and tight property supplies. Then prices started falling late last year in many countries, while others saw the pace of gains slow.
The deterioration was more pronounced in advanced economies with signs of stretched valuations before and during the pandemic. With central banks raising interest rates to contain inflation, the average mortgage rate reached 6.8 percent in advanced economies in late 2022, more than doubling from the start of last year. Now, if borrowing costs keep rising or remain elevated for longer, demand and prices are likely to weaken further.
World Bank-Record High Revenues From Global Carbon Pricing Near $100 Billion
May 23, 2023--Direct carbon pricing instruments, key policy to decarbonization, now cover almost a quarter of global greenhouse gas emissions, according to a new World Bank report
Revenues from carbon taxes and Emissions Trading Systems (ETS) have reached a record high, about $95 billion, finds the World Bank's annual "State and Trends of Carbon Pricing" report released today.
This is despite the challenging context for governments facing high inflation, fiscal pressures, and energy crises.
"Carbon pricing can be an effective way to incorporate the costs of climate change into economic decision making, thereby incentivizing climate action." said Jennifer Sara, Global Director for Climate Change at the World Bank. "The good news from this report is that even in difficult economic times, governments are prioritizing direct carbon pricing policies to reduce emissions. But to really drive change at the scale needed, we will need to see big advances both in terms of coverage and price."
view the World Bank State and Trends of Carbon Pricing 2023
OECD-Of bytes and trade: Quantifying the impact of digitalisation on trade
May 23, 2023--This paper provides an overview of the evolving nature of digital trade and digital trade policies. It shows that digital trade has been growing faster than "non-digital" trade. By 2018, 24% of global trade (USD 5.1 trillion) could be considered digital trade. In parallel, countries have embraced digital trade provisions in trade agreements and new digital economy agreements have emerged.
The empirical analysis shows that growing digital connectivity delivers a double dividend, increasing both domestic and international trade. It also shows that digital trade chapters have the potential to double the effect of trade agreements, while reductions in domestic barriers affecting digital trade have a strong export-enhancing effect, particularly in digitally-deliverable services. Overall, the results suggest that digital connectivity and digital trade policies play a significant and growing role in reducing trade costs and increasing trade across countries at all levels of development. The paper calls for wider participation and ambition in discussions at the WTO.
IMF Working Paper-Spillovers to Emerging Markets from US Economic News and Monetary Policy
May 19, 2023--Summary:
When the U.S. economy sneezes, do emerging markets catch a cold? We show that economic news, and not just monetary policy, in the United States affects financial conditions in emerging markets. News about U.S. employment has the strongest effects, followed by news about economic activity and about vaccines during the COVID-19 pandemic.
News about inflation has instead limited effects on average. A key channel of international transmission of U.S. economic news appears to be the risk perceptions or risk aversion of international investors. We also show that some of the transmission of U.S. economic news occurs independently of the U.S. monetary policy reaction. Finally, we expand on evidence that financial conditions in the U.S. and emerging markets respond differently to U.S. monetary policy surprises, depending on the reaction of US stock prices.
World Bank-Cities Key to Solving Climate Crisis
May 18, 2023--Innovation and investment in lower-income cities essential to achieving global net-zero emissions by 2050
Cities-home to more than half of the world's population and responsible for about 70% of global greenhouse gas emissions- are at the heart of the climate challenge.
A new World Bank report, "Thriving: Making Cities Green, Resilient, and Inclusive in a Changing Climate," investigates the crucial role cities play in both stopping climate change and protecting people from its impacts.
Drawing on data from more than 10,000 cities across the world, this new analysis casts a spotlight on cities' pivotal role in creating wealthier, healthier, and safer lives for people, and reversing the negative effects of climate change on food, water, biodiversity, and more. It also examines how cities contribute to climate change through greenhouse gas (GHG) emissions and how urban households will be impacted by the increasing frequency and intensity of weather events such as droughts, floods and cyclones.
Emerging market debt hits record high of $100tn
May 17, 2023--Emerging market debt has hit a record high of over $100tn, a third higher than pre-pandemic levels, as concerns mount about financial leverage in a world of higher interest rates.
Global debt rose by $8.3tn in the first three months of the year to $306.3tn, the highest level since the first quarter of last year and second-highest quarterly reading ever, according to the Institute of International Finance, in its quarterly global debt monitor.
Global debt is now $45tn higher than its pre-pandemic level and is "expected to continue increasing rapidly," said the IIF, owing to ageing populations, rising healthcare costs, higher national spending on defence and substantial climate finance gaps.