Supply Chain Disruptions and Bottlenecks Dampen the Global Economic Recovery
Higher inflation has been a global phenomenon, even if with different intensities and multiple determinants
Quantitative Tightening and Capital Flows to Emerging Markets
How complementary - or substitute - will be movements in interest rates and central bank balance sheet downsizing? What are their likely consequences on capital flows to emerging markets?
Slowbalization, Newbalization, Not Deglobalization
“the death of globalization was an exaggerated announcement”
Dollarization of Argentina: Revival of a Zombie Idea
Last March, a proposal of dollarizing Argentina’s economy arrived at its Congress.
Emerging economies, global inflation, and growth deceleration
Emerging market and developing economies face a common set of external shocks but the impacts have been heterogeneous
Argentina Avoids Falling into Arrears with the IMF
Last Friday, announcements of understanding between Argentine government authorities and the IMF staff about a new support program were made from both sides. Meanwhile, in addition to the payment of an amortization due on Friday, another payment is also expected this week, both referring to the previous package, approved in 2018 and substantially disbursed afterward. Non-payment could sour relations at a critical moment for a new program to be approved by the IMF's board of executive directors in time for disbursements to cover larger obligations due in March.
The Post-Pandemic Great Reset
The pandemic has accelerated history by reinforcing some previous trends, leading the world to a “great reset”. Among the enduring consequences of the pandemic, four of them are here highlighted: digital transformation has been speeded up; globalization will be reshaped; higher public debt will be a legacy from the crisis; and some economic scarring from the pandemic in labor markets may be expected.
Decarbonization and “Greenflation”
Accelerating the transition toward low or net-zero carbon emissions is necessary to keep global warming at theoretically safe levels. That will likely bring price shocks associated with rising metal prices, energy costs, and carbon taxes – what has been called “greenflation”. Greening the economy will also require public spending and redistributive policies.
The Metamorphosis of Finance and Capital Flows to Emerging Market Economies
The decade after the Great Financial Crisis of 2007–09 brought significant changes in the volume and composition of capital flows in the global economy. Portfolio investments and other non-bank financial intermediaries are responsible for an increasing share of foreign capital flows, while banking flows have shrunk in relative terms. This paper considers the implications of such a metamorphosis of finance for capital flows to emerging market economies (EMEs). After examining capital flows from the global financial crisis to the 2020-21 pandemic crisis, we analyze the extent to which a normalization of monetary policies in advanced economies may lead to shocks in those flows, as well as why exchange rate fluctuations between the U.S. dollar and other major currencies can affect capital flows to EMEs. Finally, we assess the range of policy instruments that EME policymakers tend to resort to manage risks derived from capital-flow volatility.
Could the U.S. and China Spoil Latin America’s Rebound?
The last year has seen some good news for Latin American economies. The region’s recovery has been stronger than expected, and growth forecasts by the World Bank and IMF have improved since six months ago. Vaccination campaigns and fiscal support have sparked an economic rebound since the second half of last year, despite an apparent loss of momentum in the third quarter of this year. But the future looks uncertain. Latin America is caught between two major global forces that threaten the region’s growth: a potential drop in capital flows from the U.S. as pandemic stimulus tapers off; and decreasing growth in China, where an energy crunch is hitting just as the country’s exhausted property markets begin to go into reverse. To weather the storm, countries in the region will have to target their fiscal support and signal that medium-term frameworks will be followed, while doing what it takes to ensure a private-sector recovery can compensate for policy contraction.