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Lower for Longer: Rising Vulnerabilities May Put Growth at Risk
October 16, 2019--The pace of global economic activity remains weak, and financial markets expect rates to stay lower for longer than anticipated in early 2019. Financial conditions have eased even more, helping contain downside risks and support the global economy in the near term. But loose financial conditions come at a cost: they encourage investors to take more chances in a quest for higher returns, so risks to financial stability and growth remain high in the medium term.
The latest edition of our Global Financial Stability Report highlights elevated vulnerabilities in the corporate and non-bank financial sectors in several large economies. These and other weak spots could amplify the impact of a shock, such as an intensification of trade tensions or a no-deal Brexit, posing a threat to economic growth.
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view the IMF Global Financial Stability Report: Lower for Longer
Basel Committee reports on Basel III implementation progress
October 16, 2019--The pace of global economic activity remains weak, and financial markets expect rates to stay lower for longer than anticipated in early 2019. Financial conditions have eased even more, helping contain downside risks and support the global economy in the near term.
But loose financial conditions come at a cost: they encourage investors to take more chances in a quest for higher returns, so risks to financial stability and growth remain high in the medium term.
The Basel Committee on Banking Supervision has today issued the Seventeenth progress report on adoption of the Basel regulatory framework. As noted by the Group of Central Bank Governors and Heads of Supervision, the Committee's oversight body, member jurisdictions are expected to ensure a full, timely and consistent implementation of the finalised Basel III reforms.
Basel Committee reports on Basel III implementation progress
October 16, 2019--The Basel Committee on Banking Supervision has today issued the Seventeenth progress report on adoption of the Basel regulatory framework. As noted by the Group of Central Bank Governors and Heads of Supervision, the Committee's oversight body, member jurisdictions are expected to ensure a full, timely and consistent implementation of the finalised Basel III reforms.
The progess report sets out the adoption status of Basel III standards for each Committee member jurisdiction as of end-September 2019. It includes the Basel III post-crisis reforms published by the Committee in December 2017 and the finalised minimum capital requirements for market risk in January 2019. These reforms will take effect from 1 January 2022.
Fiscal Monitor: How to Mitigate Climate Change
October 16, 2019--This report emphasizes the environmental, fiscal, economic, and administrative case for using carbon taxes, or similar pricing schemes such as emission trading systems, to implement climate mitigation strategies. It provides a quantitative framework for understanding their effects and trade-offs with other instruments and applies it to the largest advanced and emerging economies.
Alternative approaches, like "feebates" to impose fees on high polluters and give rebates to cleaner energy users, can play an important role when higher energy prices are difficult politically. At the international level, the report calls for a carbon price floor arrangement among large emitters, designed flexibly to accommodate equity considerations and constraints on national policies. The report estimates the consequences of carbon pricing and redistribution of its revenues for inequality across households. Strategies for enhancing the political acceptability of carbon pricing are discussed, along with supporting measures to promote clean technology investments.
The World Economy: Synchronized Slowdown, Precarious Outlook
October 15, 2019--The global economy is in a synchronized slowdown and we are, once again, downgrading growth for 2019 to 3 percent, its slowest pace since the global financial crisis.
Growth continues to be weakened by rising trade barriers and increasing geopolitical tensions. We estimate that the US-China trade tensions will cumulatively reduce the level of global GDP by 0.8 percent by 2020. Growth is also being weighed down by country-specific factors in several emerging market economies, and by structural forces, such as low productivity growth and aging demographics in advanced economies.
In the October World Economic Outlook, we are projecting a modest improvement in global growth to 3.4 percent in 2020, another downward revision of 0.2 percent from our April projections. However, unlike the synchronized slowdown, this recovery is not broad-based and remains precarious.
view moreview the World Economic Outlook, October 2019 Global Manufacturing Downturn, Rising Trade Barriers
FSB updates on market fragmentation work
October 14, 2019--The Financial Stability Board (FSB) today published an update on its work on market fragmentation. The update has been delivered to G20 Finance Ministers and Central Bank Governors for their meeting in Washington D.C. later this this week.
In its June report on market fragmentation, the FSB identified four areas for further work to address market fragmentation: (i) deference; (ii) pre-positioning of capital and liquidity; (iii) regulatory and supervisory coordination and information-sharing; and (iv) market fragmentation as part of the evaluation of reforms, starting with the FSB's ongoing "too-big-to-fail" evaluation.
Gold-backed ETFs surge to fresh high
October 13, 2019--The price of gold has risen 17.5 per cent this year to $1,507 an ounce, breaking above $1,550 an ounce in September 2019 for the first time since April 2013.
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Global Banks May Grow More Vulnerable to a Dollar Disruption
October 11, 2019--When a Mexican airline buys Brazilian airplanes, it's likely to finance the purchase with a US dollar loan obtained from a non-US bank. That's just one example of the dollar's outsize role in international financial transactions between non-US counterparts.
What happens if non-US banks suddenly find themselves short of dollars? That was the case during the global financial crisis of 2007-2008, when US financial firms were reluctant to lend dollars to their foreign counterparts. To prevent the collapse of the global financial system, the Federal Reserve provided more than $500 billion in emergency funds to overseas central banks, which could then on-lend the money to their dollar-starved home-country banks.
IMF Working Paper-Macroeconomic Effects of Reforms on Three Diverse Oil Exporters: Russia, Saudi Arabia, and the UK
Summary:
We build and estimate open economy two-bloc DSGE models to study the transmission and impact of shocks in Russia, Saudi Arabia and the United Kingdom. After accounting for country-specific fiscal and monetary sectors, we estimate their key policy and structural parameters.
Our findings suggest that not only has output responded differently to shocks due to differing levels of diversification and structural and policy settings, but also the responses to fiscal consolidation differ: Russia would benefit from a smaller state foot-print, while in Saudi Arabia, unless this is accompanied by structural reforms that remove rigidities, output would fall. We also find that lower oil prices need not be bad news given more oil-intensive production structures. However, lower oil prices have hurt these oil producers as their public finances depend heavily on oil, among other factors. Productivity gains accompanied by ambitious structural reforms, along with fiscal and monetary reforms could support these economies to achieve better outcomes when oil prices fall, including via diversifying exports.
Pension Policies Must Keep Up with Rapidly Aging Societies, says World Bank
October 10, 2019-New Publication Presents Evidence to Further Understanding of Pension Reform Options
A new publication on pension reform examines nonfinancial defined contribution (NDC) pension schemes as an approach to help policymakers meet the challenges brought on by rapidly aging populations and the changing nature of work, says the World Bank.
In a world in which working lives will be increasingly longer, and demands for social care services will expand, pension systems will need to be reformed to ensure workers are protected and do not fall into poverty in old age.
Titled "Progress and Challenges of Nonfinancial Defined Contribution Pension Schemes", this publication brings together evidence on NDCs pension schemes and reforms more broadly to bear on today's labor market. NDC is a type of public pension system in which workers pay contributions to finance the benefits of current retirees, similar to traditional public pension schemes. However, unlike the latter, the NDC approach factors in automatic adjustments based on demographic changes, a key advantage given the increased aging and decreased fertility in many societies today.