Global ETF News Older than One Year
The BIS presents a vision for the future monetary system
June 21, 2022--A monetary system based on central bank public goods, using a digital version of sovereign currency as its foundation, could foster innovation while safeguarding stability and security.
As part of a two-tiered monetary system, central bank digital currencies and fast payments systems could enhance efficiency and financial inclusion, while buttressing data privacy.
Recent turmoil in the crypto universe is a reminder of cryptocurrencies' financial vulnerabilities, but their deeper structural inadequacies have been apparent for some time, the report warns.
The Bank for International Settlements (BIS) today set out a blueprint for a future digital monetary system. In a special chapter of its Annual Economic Report 2022, the BIS said a system grounded in a digital representation of central bank money could combine innovation with essential attributes such as safety, stability, accountability, openness and efficiency. Such a system would be capable of adapting continuously to serve the public interest. This vision is built on the foundation of trust in central banks, with a digital version of sovereign currencies at its core.
Source: bis.org
The Role of Non-bank Financial Institutions in the Intermediation of Capital Flows to Emerging Markets
May 16, 2022--Abstract
This paper compares the behaviour of banks with that of non-bank financial institutions (NBFIs) in the intermediation of portfolio flows to emerging market economies (EMEs). Our analysis shows that investment funds, a key component of NBFIs, tend to reduce their exposure to EMEs more than banks during periods of financial turmoil, such as the Covid-19 pandemic. Moreover, passive funds and exchange-traded funds (ETFs) are more responsive to global shocks than active funds.
Global funds show a lower elasticity to financial volatility than regional funds, while the behaviours of institutional and retail funds are quite similar. Regarding the currency composition of portfolio investments in EMEs, investment funds cut their assets denominated in USD in response to global shocks more than those in other currencies. Finally, the portfolio inflows to EMEs with a higher share of portfolio liabilities held by investment funds rather than by banks and other financial intermediaries tend to be more sensitive to the global financial cycle.
Source: papers.ssrn.com
Too Many ESG Funds Mislead Investors
June 20, 2022--Regulatory reckoning with ESG funds does not go far enough.
Regulators are cracking down on ESG funds that pretend to want to save the planet without actually investing in green stocks- an all-too-common practice known as greenwashing.
The European Union has recently adopted a corporate sustainability reporting directive that includes guidelines for funds targeting the ESG market. Similarly, the Securities and Exchange Commission (SEC) is proposing rules requiring ESG funds to disclose information about their strategies.
However, even without greenwashing, investors are too often misled by ESG fund promoters. A typical ESG fund advertisement reads like this: "Investors in the fund will reduce global warming, without giving up returns."
Source: knowledge.insead.edu
ETFs and Asset Management
June 19, 2022--Traditional asset management groups are racing to expand their offerings in alternative investments as they seek to boost profitability and head off competition from private equity giants.
Direct indexing products are rising in popularity and even some of the bigger firms are warming up to crypto, despite its volatility. Meanwhile, China's population provides a huge potential market for western asset managers
Source: ft.com
IMF Working Paper-Policy Space Index: Short-Term Response to a Catastrophic Event
June 17, 2022--Summary:
What policy space does a country have for a short-term response to a catastrophic event? To quantify this space, the paper proposes a policy space index. The index combines a quantitative, albeit relatively limited and narrow, fiscal space concept with the indicators of nominal monetary space and reserve space.
Each nominal policy space indicator is then adjusted for individual country's institutional features, such as the status of its currency, income group, access to capital markets, debt distress level, and the exchange rate regime. The final policy space index is derived as a composite of the three nominal policy space indicators, each adjusted for five institutional features. This index is different from the approach to measure fiscal space at the IMF and requires more work before it can be used operationally. The proposed index allows measuring the overall policy space in each country directly in percent of GDP. By way of illustration, the paper applies the index to the Covid-19 crisis.
Source: imf.org
IMF Working Paper-Policy Space Index: Short-Term Response to a Catastrophic Event
June 17, 2022--Summary:
What policy space does a country have for a short-term response to a catastrophic event? To quantify this space, the paper proposes a policy space index. The index combines a quantitative, albeit relatively limited and narrow, fiscal space concept with the indicators of nominal monetary space and reserve space.
Each nominal policy space indicator is then adjusted for individual country's institutional features, such as the status of its currency, income group, access to capital markets, debt distress level, and the exchange rate regime.
The final policy space index is derived as a composite of the three nominal policy space indicators, each adjusted for five institutional features. This index is different from the approach to measure fiscal space at the IMF and requires more work before it can be used operationally. The proposed index allows measuring the overall policy space in each country directly in percent of GDP. By way of illustration, the paper applies the index to the Covid-19 crisis.
Source: imf.org
IMF Working Paper-Sovereign Debt
June 17, 2022--Summary:
This paper surveys the literature on sovereign debt from the perspective of understanding how sovereign debt differs from privately issue debt, and why sovereign debt is deemed safe in some countries but risky in others. The answers relate to the unique power of the sovereign.
One the one hand, a sovereign has the power to tax, making debt relatively safe; on the other, it also has control over its territory and most of its assets, making debt enforcement difficult.
The paper discusses debt contracts and the sovereign debt market, sovereign debt restructurings, and the empirical and theoretical literatures on the costs and causes of defaults. It describes the adverse impact of sovereign default risk on the issuing countries and what explains this impact. The survey concludes with a discussion of policy options to reduce sovereign risk, including fiscal frameworks that act as commitment devices, state-contingent debt, and independent and credible monetary policy.
Source: imf.org
How Crypto and CBDCs Can Use Less Energy Than Existing Payment Systems
June 16, 2022--Environmentally conscious design can make a major difference in the energy efficiency of digital currencies.
Most of the world's central banks have already agreed they should help fight climate change, a critical challenge that necessitates reductions in both energy consumption, which is our focus here, and the carbon emissions associated with the energy consumed.
To meet these aims, it's important to pay attention to the energy used by the payment systems that central banks regulate and oversee. Monetary authorities now have a unique opportunity to improve efficiency as the way people pay is undergoing rapid changes worldwide. Digital currencies, from crypto assets to central bank digital currencies, can play a role in the transformation that policymakers envision.
Source: imf.org
OECD G20 GDP growth continues to slow in the first quarter of 2022-First quarter of 2022, OECD
June 14. 2022--In the first quarter of 2022, gross domestic product (GDP) in the G20 area rose by 0.7% quarter-on-quarter according to provisional estimates, down from the 1.3% increase recorded in the fourth quarter of 2021.
The slowdown in the G20 area in Q1 2022 mainly reflects weaker performance in the United States,1 where GDP contracted by 0.4% quarter-on-quarter after rising by 1.7% in Q4 2021. This was mainly due to changes in net trade (exports minus imports) and decreases in inventory investment (destocking) and in government spending on COVID-19 assistance.
In Australia and Indonesia, growth slowed by more than 2 percentage points between Q4 2021 and Q1 2022. Growth slowed to a lesser extent in Canada, China, India, Italy, Korea, Turkey andthe United Kingdom in Q1 2022, while in France and Japan there were GDP contractions of 0.2% and 0.1% respectively.
Source: OECD
The Price of War OECD Economic Outlook, June 2022
June 10, 2022--The world is paying a heavy price for Russia's war in Ukraine. It is a humanitarian disaster, killing thousands and forcing millions from their homes. The war has also triggered a cost-of-living crisis, affecting people worldwide. When coupled with China's zero-COVID policy, the war has set the global economy on a course of slower growth and rising inflation-a situation not seen since the 1970s.
Rising inflation, largely driven by steep increases in the price of energy and food, is causing hardship for low-income people and raising serious food security risks in the world's poorest economies.
Here are the three key take-aways:
The war is slowing the recovery
Inflationary pressures have intensified
The cost of living crisis will cause hardship and risks famine
Source: OECD
