Global ETF News Older than One Year
IMF Working paper-The Consequences of Falling Behind the Curve: Inflation Shocks and Policy Delays Under Rational and Behavioral Expectations
March 1, 2024-Summary:
Central banks in major industrialized economies were slow to react to the surge in inflation that began in early 2021. The proximate causes of this surge were the supply chain disruptions associated with the easing of COVID restrictions, fiscal policies designed to cushion the economic impact of COVID, and the impact on commodity prices and supply chains of the war in Ukraine. We investigate the consequences of policy delay in responding to inflation shocks.
First, using a simple three-period model, we show how policy delay worsens inflation outcomes, but can mitigate or even reverse the output decline that occurs when policy responds without delay. Then, using a calibrated new Keynesian framework and two measures of loss that incorporate a "balanced approach" to weigh inflation and the output gap, we find that loss is monotonically increasing in the length of the delay. Loss is reduced if policy, when it does react, is more aggressive. To investigate whether these results are sensitive to the assumption of rational expectations, we consider cognitive discounting as an alternative assumption about expectations. With cognitive discounting, forward guidance is less powerful and results in a reduction in the costs of delay. Under either assumption about expectations, the costs of a short delay can be eliminated by adopting a less inertial policy rule and a more aggressive response to inflation.
Source: imf.org
IMF Working Paper-Navigating the Evolving Landscape between China and Africa's Economic Engagements
February 28, 2024-Summary:
China and Africa have forged a strong economic relationship since China's accession to the WTO in 2001. This paper examines the evolution of these economic ties starting in the early 2000s, and the subsequent shift in the relationship triggered by the commodity price collapse in 2015 and by the COVID-19 pandemic.
The potential effects on the African continent of a further slowdown in Chinese growth are analyzed, highlighting the varying effects on different countries in Africa, especially those heavily dependent on their economic relationship with China. The conclusion offers a discussion of ways how African countries and China could adapt to the changing relationship.
Source: imf.org
IMF Working Paper-Determinants of Zombie Banks in Emerging Markets and Developing Economies
February 23, 2024-Summary:
While deeply undercapitalized banks have been shown to misallocate credit to weak firms, the drivers of such zombie banks are less researched, particularly across countries. To furnish empirical evidence, we compile a dataset of undercapitalized banks from emerging markets and developing economies.
We classify zombie banks as those not receiving remedial treatment by owners or regulators or, alternatively, remaining chronically undercapitalized. Using logit regressions, we find that country-specific factors are more influential for zombie status than bank characteristics, alhough some become significant when disaggreating by region. The paper's overall findings imply the need for a proper regulatory framework and an effective resolution regime to deal with zombie banks more decisively.
Source: imf.org
Crypto exchange-traded products hit bull run levels with $67B AUM
February 20, 2024--Record year-to-date crypto product inflows, slowing outflows, and positive price action have made the perfect recipe for the swelling AUM.
A record week of inflows for crypto-derived exchange-traded products (ETPs) has pushed their combined assets under management (AUM) to levels not seen since the last bull market peak in 2021, according to CoinShares.
Crypto investment products' AUM now stands at $67 billion, "marking the highest level since December 2021," CoinShares research head James Butterfill wrote in a Feb. 19 report, pinning the AUM rise on year-to-date inflows of $5.2 billion and positive crypto market price action.
Source: cointelegraph.com
Emerging Markets Navigate Global Interest Rate Volatility
January 31, 2024--Major emerging markets have shown resilience to global rate gyrations, but more challenging times could be ahead
Global interest rates in recent months have gone on a rollercoaster, especially those on longer-term government bonds. Yields on 10-year US Treasuries are climbing again after pulling back from a 16-year high of 5 percent in October. Interest rate moves in other advanced economies had been equally prodigious.
Emerging market economies, however, saw much milder rate moves. We take a longer-term perspective on this in our latest Global Financial Stability Report, demonstrating that the average sensitivity to US interest rates of 10-year sovereign yield of Latin American and Asian emerging markets declined by two-thirds and two-fifths, respectively, during the current monetary policy tightening cycle compared with the taper tantrum in 2013.
While the lower sensitivity is in part due to the divergence in monetary policy between advanced economies’ and emerging markets’ central banks over the past two years, it nonetheless challenges findings in the economic literature that show large spillovers from advanced economies’ interest rates to emerging markets. In particular, major emerging markets have been more insulated from global interest rate volatility than would be expected based on historical experience, especially in Asia.
Source: imf.org
Global Economy Approaches Soft Landing, but Risks Remain
January 30, 2024--Policy focus must shift to repairing public finances and improving medium-term growth prospects
The clouds are beginning to part. The global economy begins the final descent toward a soft landing, with inflation declining steadily and growth holding up. But the pace of expansion remains slow, and turbulence may lie ahead.
Global activity proved resilient in the second half of last year, as demand and supply factors supported major economies.
On the demand side, stronger private and government spending sustained activity, despite tight monetary conditions. On the supply side, increased labor force participation, mended supply chains and cheaper energy and commodity prices helped, despite renewed geopolitical uncertainties.
This resilience will carry over. Global growth under our baseline forecast will steady at 3.1 percent this year, a 0.2 percentage point upgrade from our October projections, before edging up to 3.2 percent next year.
Source: imf.org
Gen-AI: Artificial Intelligence and the Future of Work
January 14, 2024--Summary:
Artificial Intelligence (AI) has the potential to reshape the global economy, especially in the realm of labor markets. Advanced economies will experience the benefits and pitfalls of AI sooner than emerging market and developing economies, largely due to their employment structure focused on cognitive-intensive roles.
There are some consistent patterns concerning AI exposure, with women and college-educated individuals more exposed but also better poised to reap AI benefits, and older workers potentially less able to adapt to the new technology.
Labor income inequality may increase if the complementarity between AI and high-income workers is strong, while capital returns will increase wealth inequality. However, if productivity gains are sufficiently large, income levels could surge for most workers. In this evolving landscape, advanced economies and more developed emerging markets need to focus on upgrading regulatory frameworks and supporting labor reallocation, while safeguarding those adversely affected. Emerging market and developing economies should prioritize developing digital infrastructure and digital skills
Source: imf.org
Housing Affordability Remains Stretched Amid Higher Interest Rate Environment
January 11, 2024--Prospective home buyers face high prices and elevated borrowing costs, while homeowners refrain from listing their properties
As global central banks raised interest rates to tame inflation, home prices have cooled relative to the start of the hiking cycle.
However, despite the sensitivity of the residential market to higher policy rates, prices are still above historical averages. Home prices in advanced economies, including most European Union countries, as well as Africa and the Middle East are 10 percent to 25 percent higher than pre-pandemic levels.
Rising interest rates have passed swiftly to residential mortgage markets, impeding affordability for current and prospective home buyers. Additionally, scarce home supply is limiting purchases in some regions. In all, housing affordability is more stretched amid still-elevated home prices and higher interest rates.
Source: imf.org
WEF-Global Risks Report 2024
January 10, 2024--Global growth is projected to be in line with the April 2024 World Economic Outlook (WEO) forecast, at 3.2 percent in 2024 and 3.3 percent in 2025.
The Global Risks Report, developed in collaboration with Marsh McLennan and Zurich Insurance Group, explores some of the most severe risks we may face over the next decade, against a backdrop of rapid technological change, economic uncertainty, a warming planet and conflict.
As cooperation comes under pressure, weakened economies and societies may only require the smallest shock to edge past the tipping point of resilience.
A deteriorating global outlook
Looking back at the events of 2023, plenty of developments captured the attention of people around the world-while others received minimal scrutiny. Vulnerable populations grappled with lethal conflicts, from Sudan to Gaza and Israel, alongside record-breaking heat conditions, drought, wildfires and flooding. Societal discontent was palpable in many countries, with news cycles dominated by polarization, violent protests, riots and strikes.
Although globally destabilizing consequences - such as those seen at the initial outbreak of the Russia-Ukraine war or the COVID-19 pandemic- were largely avoided, the longer-term outlook for these developments could bring further global shocks.
Source: weforum.org
High demand for energy-related critical minerals creates supply chain pressures
January 10, 2024--Critical minerals, such as cobalt, copper, lithium, nickel and rare earths, play a crucial role in the production of clean energy technologies, from wind turbines to electric cars. Over the past 20 years, annual trade in energy-related critical minerals has increased from US$ 53 billion to US$ 378 billion. However, the high demand for clean technology goods is putting pressure on the supply chains for these minerals.
Critical minerals are particularly in demand for the production of batteries for electric cars, with each battery requiring as much as 200kg of critical minerals. The battery sector is responsible for 70 per cent of the global demand for cobalt. It also requires aluminium, copper, lithium, nickel and rare earths. Electrolysers-crucial for green hydrogen production-rely on a variety of critical minerals, including platinum and iridium, two of the world’s rarest and most expensive metals. Rare earth elements are needed in particular for magnets, a vital component in many electrical machines, especially the most energy-efficient ones.
Source: wto.org
