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Dear maria, In today's edition, we highlight: Managing Director in Ukraine Global economy at turning point Gold, silver and stability Crypto's promise Democracy and growth The Weekend Read will take a break next week but return on Friday, March 10.

UKRAINE Managing Director Pledges Continued Support (Credit: @KGeorgieva/Twitter) Kristalina Georgieva praised President Volodymyr Zelenskyy and his officials for their steadfast leadership and management of the economy during a visit to Ukraine’s capital, Kyiv. The IMF management director’s visit came almost one year after Russia’s invasion, which has inflicted terrible human and economic suffering, and days after Fund staff praised Ukraine’s strong performance under its monitoring program, paving the way to a full program. Georgieva, who also met leaders from civil society, parliament and the private sector, said she saw an economy that continues to function despite the challenges. “Shops are open, services are being delivered and people are going to work. This is remarkable testament to the spirit of the Ukrainian people.” The managing director reiterated the IMF’s unwavering commitment to continue supporting Ukraine. In December, Ukraine’s central bank governor Andriy Pyshnyy spoke to Country Focus in Washington about the challenges of managing a war economy.

GLOBAL OUTLOOK Global Economy at Turning Point (Credit: Prisma/Adobe Stock) Emerging economies are supplying much of the momentum for global growth and will account for about four-fifths of economic expansion this year, the IMF's managing director wrote in a blog ahead of a meeting of Group of Twenty finance ministers and central bank governors in the Indian city of Bengaluru.    Kristalina Georgieva said that this year could be a turning point for the global economy, but growth is still low, price pressures persist and too many economies are still hurting badly after three years of shocks. About 45 percent of low-income countries are at high risk of debt distress and about 25 percent of emerging economies face default-like borrowing spreads, she added. The managing director appealed for a united front to support vulnerable people and economies. “We need to find common ground even as geopolitical tensions are rising. And we need to steer clear of zero-sum policies that would only leave the world poorer and less secure.”

GLOBAL OUTLOOK Signs of resilience

The global economy is expected to slow, but there are also signs of resilience. Watch our latest Charts in Motion video to get the latest growth projections for the world economy.

ASIA PACIFIC OUTLOOK Easing Headwinds Make Way for Stronger Recovery (Credit: Michael Discenza/Unsplash) The economic headwinds that faced Asia and the Pacific last year have started to fade, making the region a bright spot in a slowing global economy, the director of the IMF’s Asia and Pacific Department, Krishna Srinivasan, writes in a blog. As global financial conditions ease, food and oil prices fall, and China’s economy rebounds, Asia’s growth is set to accelerate to 4.7 percent this year from 3.8 percent in 2022, according to the IMF’s latest regional economic outlook. But even though the short-term outlook has brightened, important longer-term challenges remain, including slower growth in China from 2024 onwards, which will weigh on growth prospects across Asia’s highly integrated supply chains and around the world. As Srinivasan says, “This will make reforms to boost productivity and long-term growth more urgent across Asia.” Read the regional outlook

FINANCE & DEVELOPMENT Gold, Silver, and Monetary Stability (Credit: Bjorn Wylezich/Adobe Stock) The shift from bimetallism—the use of both gold and silver currencies—to a gold standard among leading industrial nations in the 1870s has implications for today, writes Johannes Wiegand for Finance & Development magazine. Bimetallism operated smoothly as long as the financial environment was stable and only one country needed to sustain it. When the going got tougher, maintaining bimetallism would have been beneficial, but the required international cooperation failed, he writes. “While today’s monetary system operates very differently from that of the 19th century, monetary stability remains a global public good, which requires international cooperation.”

Coming Soon: F&D's March Edition (Credit: March Cover Pete Reynolds) With inflation resulting from the COVID-19 pandemic and Russia’s invasion of Ukraine forcing a re-think of how central banks conduct monetary policy, the March edition of F&D Magazine focuses on New Directions for Monetary Policy. Authors include Gita Gopinath, Raghuram Rajan, Markus K. Brunnermeier, Masaaki Shirakawa, Christoffer Koch, Greg Kaplan, Giancarlo Corsetti, Michael Weber, Claudio Borio, and many more.

Alan Blinder, former Fed vice chair and one of the world’s most influential economists, says cooperation between monetary and fiscal policy is crucial, but it's not always the case.

CRYPTO ASSETS Technology Behind Crypto Can Provide a Public Good (Credit: Xijian/iStock by Getty Images) Crypto assets have been more of a disappointment than a revolution for many users, and global bodies including the IMF and the Financial Stability Board urge tighter regulation. Yet some of the rapidly evolving technology behind crypto may hold greater promise, Tobias Adrian, director of the IMF’s Monetary and Capital Markets Department, writes in a blog. The the public sector should leverage technology to upgrade its payment infrastructure and ensure interoperability, safety, and efficiency in digital finance, as Adrian and co-authors noted in a recent paper. “Crypto was fueled by an attempt to circumvent intermediaries and public oversight,” Adrian says. “Ironically, its real value may come from the technology that the public sector can leverage to upgrade payments and financial infrastructure for the public good”. Read the paper

Persistent growth in wages and prices may feed off one other, leading to a wage-price spiral in which inflation rises ever higher. However, as the Chart of the Week shows, only a few episodes with dynamics similar to those seen in advanced economies after the pandemic were followed by wage-price spirals. In most cases, nominal wages caught up while inflation ticked down over several quarters, allowing inflation-adjusted wages to gradually recover. A sustained acceleration of wages and prices was rare.  See the interactive chart

Weekly Roundup SPECIAL DRAWING RIGHTS New Holders The Caribbean Development Bank, the Development Bank of Latin America, the European Bank for Reconstruction and Development, the European Investment Bank, and the Inter-American Development Bank have become prescribed holders of Special Drawing Rights. Prescribed holders may acquire, hold and use SDRs in operations with other prescribed holders and participants in the SDR Department, which currently includes all IMF members.  STAFF PAPER Democracy is Good for Growth Major collapses in economic outlook are costly and frequent in the developing world. A new IMF staff paper finds that growth is more likely to be sustained under democracy than under autocracy; output collapses are more persistent under autocracy; and stagnation under autocracy can give way to outright collapse. Democratic countries appear to be more resilient. STAFF PAPER Crypto’s Risks and Benefits A new IMF staff paper focuses on recent experience with crypto assets and central bank digital currencies in Latin America and the Caribbean. Crypto assets imply more risks than benefits but should be expected to continue to be part of the payment system’s landscape. By contrast, CBDCs could help achieve some public policy objectives, including facilitating remittances, the authors say. STAFF PAPER Clean Air and Mental Health A new IMF staff paper uses life satisfaction data to help inform the design of climate mitigation policies in the United Kingdom. Results show that increases in nitrogen dioxide and particulate matter significantly decrease the odds of long-term happiness and short-term mental health wellbeing. The willingness to pay for clean air is also significant and increases with level of education.

Thank you again very much for your interest in the Weekend Read! Be sure to let us know what issues and trends we should have on our radar.

Nick Owen Editor IMF Weekend Read nowen@IMF.org

Dear maria, We just published a new blog—please find the full text below.  In Major Economic Shocks, Best Response Combines All-Out, Large-Scale Policies (Credit: fotoVoyager/iStock by Getty Images) By Divya Kirti, Maria Soledad Martinez Peria, Prachi Mishra, and Jan Strasky Economists will be studying the pandemic for generations to learn from the dramatic global downturn and the ensuing credit crunch, but one important lesson about the scope of action needed to contain the next global crisis is already coming into focus. During the pandemic, countries often used all-out responses that combined large fiscal, monetary, and prudential policies like grants, credit facilities, and relaxed capital requirements. As we demonstrate in a new working paper, this kind of expansive response may be needed to support corporate borrowing and credit growth in major future crises that combine global supply and demand shocks. Our findings are based on an analysis using a dataset we made available last year tracking national announcements of economic and financial policy responses to the pandemic. Over the course of 2020, countries most frequently used packages of more than one fiscal, monetary, or prudential policy, while standalone policy announcements were rare. As credit growth tanked early during the pandemic, policymakers in many countries aimed to stabilize bank lending to support their economies. Our analysis indicates that all-out packages boosted credit growth by a sizable 5 percentage points per quarter. Both size and scope were critical: even packages combining all types of policies, but where only some were large, were less effective. Highlighting the importance of broad policy packages, all granular policy tools we tracked were more prevalent in successful packages than in others. These all-out responses may have been effective because—faced by a large, unexpected, global shock—they pulled all levers relevant for credit growth. They eased binding constraints by shifting regulatory requirements. They incentivized incremental lending by addressing heightened concerns about credit risk. And they supported credit demand by lowering borrowing costs. Within banks, the impact of policies was greater for those constrained by thin capital buffers. Packages combining large fiscal, monetary, and prudential measures also translated into additional access to liquidity for bank-dependent firms. This allowed them to cover expenses—like wage bills—for two additional months while health measures limited sales. While COVID-19 economic and financial policy packages were broadly targeted, they do not appear to have disproportionately benefited firms with poor performance prior to the pandemic. Lessons for future crises Our results underscore the importance of decisive action in terms of breadth and intensity of pandemic policy responses. In future crises that combine—as the pandemic did—negative supply and demand shocks with significant uncertainty, a similarly concerted, coordinated, all-out approach may have an important role to play in supporting the economy. While there are benefits of an aggressive approach in response to a global shock like COVID-19, not all countries could respond in such a fashion. In particular, emerging and developing economies will likely continue to be more constrained, as they were in this episode. To be sure, an all-out approach could also have unintended consequences. Large fiscal and monetary packages could support credit and the economy but also fuel sharp inflationary pressures. In countries with high debt, an increase in discretionary spending could strain debt sustainability. More work is needed to better understand how to calibrate the appropriate all-out response to minimize such costs. —This blog includes research contributions by Yang Liu. Dear maria, We just published a new blog—please find the full text below.  Wage-Price Spiral Risks Still Contained, Latest Data Suggests (Credit: Oneinchpunch/Adobe Stock) By Jorge Alvarez and Niels-Jakob Hansen Persistent wage and price growth in the latest data may raise concern that wages and prices are feeding on each other and likely to accelerate over a sustained period, an outcome known as a wage-price spiral. If such a spiral emerges, the fear is that inflation would keep rising and expectations become unanchored. However, in similar episodes from the past, this worry turned out to be unfounded, according to our earlier analysis highlighted in paper and chapter of the October 2022 World Economic Outlook Updating that analysis to include the latest data through the third quarter of last year, we still conclude that wage-price spiral risks remain contained. In our study, we specifically looked for historical episodes similar to today for a rich set of advanced economies going back to the first quarter of 1960 for some and ending in the third quarter of last year. As the Chart of the Week shows, only a few episodes with dynamics like those in advanced economies during the post-pandemic recovery were followed by wage-price spirals, defined as sustained periods of both price and nominal wage accelerations. In most cases, nominal wages caught up while inflation ticked down over several quarters, allowing inflation-adjusted wages to gradually recover. A sustained acceleration of wages and prices was rare. View the interactive version here. When plotting recent wage and price inflation up to the third quarter of 2022 for the median economy in our sample, we see that even though inflation last year rose more than during the sample of past episodes, nominal wage growth has failed to keep up. As a result, real wages have decreased in most advanced economies in our sample. Unemployment rates remained stable or fell in most countries, as labor demand picked up after the pandemic-induced pause. Tighter labor markets have coincided with nominal wage growth increases in most of the world. However, nominal wage growth has not been abnormally above what would be expected based on the historical experience. Our conclusion is that wage-price spiral risks still appear contained. The historical evidence from past, similar episodes also points to what we might expect going forward: increases in nominal wage growth can happen alongside a deceleration in consumer prices, allowing real wages to start growing again. Monetary policy tightening followed most of the past episodes, which helped to keep inflation contained. If this average historical pattern holds, we expect nominal wage growth may remain elevated or pick up even while inflation declines. This could recover some of the purchasing power lost last year. Importantly, history tells us that this expected recovery of real wage growth would not by itself signal the start of wage-price spiral. —This blog reflects research by Jorge A. Alvarez, John Bluedorn, Niels-Jakob H. Hansen, Youyou Huang, Evgenia Pugacheva and Alexandre Sollaci.   Jeff Kearns Managing Editor IMF Blog jkearns@IMF.org   Thank you again for your interest in IMF Blog. Read more of our latest content here. Take good care!