Global ETF News Older than One Year
Developing Countries Paid Record $443.5 Billion on Public Debt in 2022
December 13, 2023-Poorest countries face risk of debt crises as borrowing costs surge
Amid the biggest surge in global interest rates in four decades, developing countries spent a record $443.5 billion to service their external public and publicly guaranteed debt in 2022, the World Bank's latest International Debt Report shows.
The increase in costs shifted scarce resources away from critical needs such as health, education, and the environment.
Debt-service payments-which include principal and interest-increased by 5 percent over the previous year for all developing countries. The 75 countries eligible to borrow from the World Bank's International Development Association (IDA)-which supports the poorest countries-paid a record $88.9 billion in debt-servicing costs in 2022. Over the past decade, interest payments by these countries have quadrupled, to an all-time high of $23.6 billion in 2022. Overall debt-servicing costs for the 24 poorest countries are expected to balloon in 2023 and 2024-by as much as 39 percent, the report finds.
Source: worldbank.org
Why Digital Trade Should Remain Open
December 13, 2023--Policymakers should consider the benefits of international rules that promote a predictable policy environment, including continued tariff-free digital imports
Digital trade, from software sales to streaming movies, plays a bigger role than ever in the global economy.
Yet with many developing countries struggling to fully participate in digital trade, now is the time for policy reforms that promote inclusion, starting with retaining the current tariff-free environment.
Digital trade has several unique benefits beyond traditional gains from trade. Software trade helps to digitalize the economy, increasing efficiency and boosting productivity. Trade in digital media, such as subscriptions to foreign journals, promotes interconnectivity, communication, and the transmission of knowledge and innovation. Finally, digital marketplaces, such as app stores or freelance programming websites, foster inclusion by reducing trade barriers for small firms and women-led businesses.
Source: imf.org
IMF Working Papers-The Dark Side of the Moon? Fintech and Financial Stability
December 8, 2023-Summary:
Rapid advances in digital technology are revolutionizing the financial landscape. The rise of fintech has the potential to make financial systems more efficient and competitive and broaden financial inclusion. With greater technological complexity, however, fintech also poses potential systemic risks.
In this paper, I use a novel dataset to trace the development of fintech (excluding cryptocurrencies) and empirically assess its impact on financial stability in a panel of 198 countries over the period 2012-2020. The analysis provides interesting insights into how fintech correlates with financial stability: (i) the impact magnitude and statistical significance of fintech depend on the type of instrument (digital lending vs. digital capital raising); (ii) the overall effect of all fintech instruments together turns out to be negative because of the overwhelming share of digital lending in total, albeit statistically insignificant; and (iii) while digital capital raising is estimated to have a positive effect on financial stability in advanced economies, its effect is negative in developing countries. Fintech is still small compared to traditional institutions, but rapidly expanding in riskier segments of the financial sector and creating new challenges for policymakers.
Source: imf.org
IMF-History's Inflation Lessons by Ari and Ratnovski
December 1, 2023--A study of 100 inflation shocks since the 1970s provides valuable pointers for policymakers today
In the early 1970s, conflict in the Middle East set off a spike in oil prices that left central banks around the world scrambling to control inflation.
After a year or so, oil prices stabilized and inflation started to retreat. Many countries believed they had restored price stability and loosened policy to revive their recession-hit economies only to see inflation return. Could history repeat?
World inflation reached historic highs in 2022 after Russia's invasion of Ukraine triggered a terms-of-trade shock akin to that of the 1970s. Disruptions to Russian oil and gas supplies added to COVID supply-chain problems to drive prices higher. In advanced economies, prices rose at the fastest pace since 1984. In emerging market and developing economies, the price increase was the largest since the 1990s.
Source: imf.org
IMF Working Papers-Housing Affordability: A New Dataset
December 1, 2023-- Summary:
The rapid increase in house prices in the past few years, including during the COVID-19 pandemic, raises concerns about housing affordability. The price-to-income ratio is a widely-used indicator of affordability, but does not take into account important factors such as the cost of financing.
The aim of this paper is to construct a measure of housing affordability that takes these factors into account for a large set of countries and long period of time. The resulting dataset covers an unbalanced panel of 40 countries over the period from 1970Q1 to 2021Q4. For each country, the index measures the extent to which a median-income household can qualify for a mortgage loan to purchase an average-priced home. To gauge the performance of the constructed indices, we compare them to other readily-available mesures of affordability and examine the evolution of the indices over time to understand the relevant drivers, including in a regression analysis to assess the extent to which government housing programs could contribute to improving affordability.
Source: imf.org
The AI Awakening
November 30, 2023--Generative AI has introduced tantalizing new possibilities. Yet the initial excitement surrounding AI has given way to genuine and growing concerns. This issue is an early attempt to understand AI's implications for growth, jobs, inequality, and finance.
Full disclosure: This issue of Finance & Development was produced entirely with human intelligence.
But someday soon at least parts of this magazine may be assisted by artificial intelligence-a topic that has dominated global discourse since ChatGPT's introduction one year ago.
Generative AI has introduced tantalizing new possibilities in both the public and private spheres. Think how these "machines of the mind" can improve health care diagnoses, close education gaps, tackle food insecurity with more efficient farming, drive planetary exploration-not to mention eliminate the drudgery of work.
Yet the initial excitement surrounding AI has given way to genuine and growing concerns-including about the spread of misinformation that disrupts democracy and destabilizes economies, threats to jobs across the skills spectrum, a widening of the gulf separating the haves and have-nots, and the proliferation of biases, both human and computational.
Source: IMF.org
Digital Technologies Fast Track Climate Solutions
November 29, 2023--Digital technologies are transforming the way the world works and addresses climate change, from cutting emission across industries, to facilitating greener transport networks and mitigating impacts with early warning systems. As governments are looking for solutions that match the urgency and scale of the climate crisis-digital technologies are a key tool in this effort.
A World Bank report, Green Digital Transformation: How to Sustainably Close the Digital Divide and Harness Digital Tools for Climate Action, underscores how digital tools can boost sustainability across industries but must also reduce their own carbon footprint. For example, WEF estimates show that digital technologies could cut emissions by up to 20 percent by 2050 in the three highest-emitting sectors: energy, materials, and mobility. And two thirds of countries include technology as part of their national climate plans to help adapt to or mitigate the impacts of climate change.
Source: worldbank.org
IMF Staff Climate Note-Energy Transition and Geoeconomic Fragmentation: Implications for Climate Scenario Design
November 28, 2023--Summary:
The transition to a low-carbon economy, which is needed to mitigate climate change and meet the Paris Agreement temperature goals, has been affected by the supply chain and energy supply disruptions that originated during the COVID-19 pandemic, the Russian invasion of Ukraine, and the subsequent energy crisis and exacerbation of geopolitical tensions.
These developments, and the broader context of the ongoing "polycrisis," can affect future decarbonization scenarios. This reflects three main factors: (1) pullbacks in climate mitigation policies and increased carbon lock-in in fossil fuel infrastructure and policymaking; (2) the decreasing likelihood of continuous cost reduction in renewable energy technologies; and (3) the likely intensification of macroeconomic shocks amid increasing geoeconomic fragmentation, and the associated policy responses.
In this context, the note assesses the implications of the polycrisis for hypothetical scenarios used to assess climate-related financial risks. Following an analysis of the channels through which these effects are likely to materialize over short- and long-term horizons and some policy implications, the note proposes potential adjustments to the design of the climate scenarios used by financial institutions, central banks, and financial sector supervisors and regulators within their risk management frameworks.
Source: imf.org
Middle Corridor* through Central Asia, Caucasus Can Boost Trade, Connectivity and Supply Chain Resilience, Says New Report
November 27, 2023-- With the right policies, the Middle Corridor linking Chinese and European markets via Central Asia and the Caucasus can invigorate regional trade and boost connectivity for countries along the route. The corridor can also provide resilience and route diversification for the China-Europe container trade, shielding countries and supply chains from geopolitical shocks, according to a new World Bank report released today.
The Middle Trade and Transport Corridor-Policies and Investments to Triple Freight Volumes and Halve Travel Time by 2030, which focuses on Kazakhstan, Azerbaijan, and Georgia, identifies priority measures that can transform this multimodal rail and maritime corridor into a vital and dependable trade route.
The report notes that with the right investments and policies, the Middle Corridor could triple trade volumes while halving travel time along the route by 2030. This would benefit local and regional economies and broader communities, creating employment opportunities, spurring demand for supporting industries, and attracting businesses.
Source: worldbank.org
IMF Working Papers-Monetary Policy Design with Recurrent Climate Shocks
November 24, 2023--Summary:
As climate change intensifies, the frequency and severity of climate-induced disasters are expected to escalate. We develop a New Keynesian Dynamic Stochastic General Equilibrium model to analyze the impact of these events on monetary policy. Our model conceptualizes these disasters as left-tail productivity shocks with a quantified likelihood, leading to a skewed distribution of outcomes.
This creates a significant trade-off for central banks, balancing increased inflation risks against reduced output.
Our results suggest modifying the Taylor rule to give equal weight to responses to both inflation and output growth, indicating a gradual approach to climate exacerbated economic fluctuations.
Source: imf.org
