Global ETF News Older than One Year
IMF Fintech Note-Regulating the Crypto Ecosystem: The Case of Unbacked Crypto Assets
September 26, 2022--Summary:
Unbacked crypto assets are the oldest and most popular type of crypto assets, relying not on any backing asset for value but instead on supply and demand. They were originally developed to democratize payments but are mostly used for speculation.
Crypto assets were designed to disintermediate financial services, but centralized entities, such as exchanges and wallet providers, offer key functions to users and sustain the necessity of trust in one or several entities.
At present, many of these entities are not covered by existing conduct, prudential, or payment regulations and can generate risks to market integrity, market conduct, and potential financial stability. We recommend that global bodies work to develop common taxonomies that can inform global and cross-sectoral standards while improving data insights. Standards should be risk-based, with greater requirements on entities and activities that generate more risk. Crypto asset service providers that deliver core functions and generate key risks should be licensed, registered, or authorized.
Source: IMF.org
IMF Working Paper-OPEC and the Oil Market
September 16, 2022-Summary:
This paper studies the historical importance of OPEC for oil price fluctuations. An event-study approach is used to identify the effects of OPEC announcements on oil price fluctuations. Results show that price volatility is higher than typical around OPEC meetings. Also, members' compliance, a proxy for credibility, has strongly fluctuated over time.
An ordered multinomial logit framework identifies the main factors that explain OPEC's decisions to cut, maintain, or boost members' oil production and is able to successfully predict OPEC meeting outcomes 66 percent of the time, between 1989 and 2019. Cyclical oil price fluctuations (as opposed to persistent shifts in levels) drive OPEC's decisions, suggesting that OPEC's objective is to stabilize the oil price rather than countering fundamental shifts in demand and supply. Low OPEC's market share reduces the probability of a production cut. Finally, the transparency of OPEC's statements has modestly improved between 2002 and 2019.
Source: imf.org
IMF-Stress Testing the Global Economy to Climate Change-Related Shocks in Large and Interconnected Economies
September 16, 2022--Summary:
We stress test the global economy to extreme climate change-related shocks on large and interconnected economies.
Our analysis (i) identifies large and interconnected economies vulnerable to climate change-related shocks; (ii) estimates these economies' external financing needs-at-risk due to these shocks, and (iii) quantifies the spillovers to the global economy using a global network model. We show that large and interconnected economies vulnerable to climate change could trigger a drain of $1.8 trillion in international reserves (2 percent of 2019's global GDP). Domestic and multilateral macroeconomic policies can help reduce these global lossess to about $0.8 trillion. The scenario highlights the importance of considering global spillovers when assessing the impact of climate change-related shocks.
Source: IMF.org
World Bank-Risk of Global Recession in 2023 Rises Amid Simultaneous Rate Hikes
September 15, 2022--Study Highlights Need for Policies to Curb Inflation Without Exacerbating Recession Risk
As central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023 and a string of financial crises in emerging market and developing economies that would do them lasting harm, according to a comprehensive new study by the World Bank.
Central banks around the world have been raising interest rates this year with a degree of synchronicity not seen over the past five decades-a trend that is likely to continue well into next year, according to the report. Yet the currently expected trajectory of interest-rate increases and other policy actions may not be sufficient to bring global inflation back down to levels seen before the pandemic. Investors expect central banks to raise global monetary-policy rates to almost 4 percent through 2023-an increase of more than 2 percentage points over their 2021 average.
view the World Bank Is a Global Recession Imminent? study Justin Damien
Source: WorldBank.org
BIS Working Papers-Cyber risk in central banking
September 14, 2022--Summary
Focus
Cyber attacks are becoming ever more frequent and sophisticated, and firms and policymakers list cyber risk as a major concern. Financial institutions and financial market infrastructures are especially at risk, and the financial industry ranks consistently as one of the most-attacked industries.
While there have been several studies and surveys on cyber threats for the private sector-and firms in the financial sector in particular- little is known about central banks' assessment of cyber risk. Contribution
We use a survey conducted in 2021 among the members of the Global Cyber Resilience Group to provide an overview on cyber risk in the central bank community.
Source: BIS
Bassanese Bites-Consumer price index (CPI) watch
September 12, 2022--All eyes on the US CPI this week.
Week in review
After several weeks of losses, global stocks bounced back last week on little new fundamental news, likely reflecting end-of-month rebalancing and profit taking from short sellers.
If there was one possible fundamental reason, it was a couple of Fed speakers (Brainard and Mester) acknowledging that the aggressive pace of policy tightening will eventually ease as growth slows and inflation declines.
Wall Street leapt on the glimmer of good news. That said, most of their other comments remained hawkish, suggesting rates needed to rise to restrictive levels and stay there for some time. Fed chair Powell also chimed in with another barrage of aggressive comments. Indeed, US 2-year bond yields actually rose last week, reaching new high for the year at 3.56%.
Source: betashares.com.au
The Fear Economy: A Theory of Output, Interest, and Safe Assets
September 9, 2022--Summary:
This paper presents a fear theory of the economy, based on the interplay between fear of rare disasters and the interest rate on safe assets. To do this, I study the macroeconomic consequences of government-administered interest rates in the neoclassical real business cycle model. When the government has the power to fix the safe real interest rate, the gap between the 'sticky real safe rate' and the 'neutral rate' can generate far-reaching aggregate distortions.
When fear exogenously rises, the demand for safe assets rise and the neutral rate falls. If the central bank does not lower the safe rate by the same amount, savings rise leading to a decline in consumption and aggregate demand. The same mechanism works in reverse, when fear falls. Quantitatively, I show that a single fear factor can simultaneously (i) generate cross-correlations in output, labor, consumption, and investment consistent with the postwar US economy; and (ii) generates variation in equity prices, bond prices, and a large risk premium in line with the asset pricing data. Six novel insights emerge from the model: (1) actively regulating the safe interest rate (in both directions) can mitigate the fluctuations generated by fear cycles; (2) recessions will be deeper and longer when central banks accept the zero lower bound and are unwilling to use negative rates; (3) a commitment to use negative rates in recessions-even if never implemented-raises both the short- and long-run real neutral rates, and moderates the business cycle; (4) counter-cyclical fiscal policy can act as disaster insurance and be expansionary by reducing fear; (5) quantitative easing can be narrowly effective only when fear is high at the lower bound; and (6) when fear is high, especially at the lower bound, policies that boost productivity also help fight recessions.
Source: IMF.org
How Food and Energy are Driving the Global Inflation Surge
September 9, 2022--Global inflation was generally moderating when the pandemic began, and the downward trend continued into the early months of the crisis. But surging prices since late 2020 have pushed inflation steadily higher. The average global cost of living has risen more in the 18 months since the start of 2021 than it did during the preceding five years combined.
Food and energy are the main drivers of this inflation, as our Chart of the Week shows. Indeed, since the start of last year, the average contributions just from food exceed the overall average rate of inflation during 2016-2020. In other words, food inflation alone has eroded global living standards at the same rate as inflation of all consumption did in the five years immediately before the pandemic. A similar story holds for energy costs, which show up both directly and indirectly, through higher transportation costs. This is not to say that prices of other items are not rising too. For example, services inflation has increased in the United States and the euro area. And the relative impact of food, energy, and other items in driving inflation varies considerably across countries.
Source: IMF.org
The state of the world's economies and markets in 2022-in charts
September 6, 2022--2022 has already been an eventful and often tumultuous year-and it's not over yet.
Rising inflation and uncertainty, fueled by the war in Ukraine, alongside increasing food and shipping costs, are affecting the economic outlook.
Here are 10 charts to illustrate what is happening in the world's economies and markets.
A strong chart that distills a compelling visualization of our world goes a long way toward helping illustrate what's happening in the world's economies and markets.
That’s why our Chart of the Week blog series features a new way to look beyond the numbers. Today's edition compiles top 10 by readership so far in 2022.
Source: weforum.org
World Economic Forum-Can the economy grow for ever?
September 1, 2022--Just like the universe, economies have been growing seemingly for ever. But what happens if they stop?
This animated video explainer by TEDEd and the World Economic Forum inspects the arguments for going 'post growth' in order to save the planet.
The global economy has been growing for the past 200 years. Traditionally, that's been seen as a good thing-a larger pile of money that would lead to a larger pile of opportunities for everyone.
But the 'tide that lifts all boats' theory feels less substantial with every new economic crisis. As a global recession looms, and as we veer closer to the limits of our natural resources, and as inequality spirals around the world - a new billionaire was minted every 26 hours during the pandemic- we have to ask: is infinite growth possible on a finite planet?
Source: weforum.org