ΙΜF update

 

Dear MARIA, In today's edition, we highlight: Georgieva on central banks What we've learned from last year's banking turmoil Breaking the debt supercycle Executing a soft landing in Europe Inclusive growth, behavioral economics, AI, climate, inflation, and more

MONETARY POLICY Georgieva on Central Bank Independence (Credit: ymgerman/iStock by Getty Images) Central bank independence must be strengthened to protect the world economy, writes IMF Managing Director Kristalina Georgieva in a new blog. When central banks and governments each play their roles, we have seen better control of inflation, better outcomes in growth and employment, and lower financial stability risks, she writes. "By working together—central bankers and government leaders, legislatures, and the people—we can preserve and strengthen central banks to win the fight against inflation today and foster economic stability and growth for years to come." Read the blog

FINANCIAL SECTOR More Work is Needed to Make Big Banks Resolvable (Credit: Seibertfilm/iStock by Getty Images) Further progress is required in a number of areas to ensure banks aren’t too big to fail, note the IMF’s Tobias Adrian and Marc Dobler in a new blog. Almost a year ago, Credit Suisse was sold to UBS, while Silicon Valley Bank, Signature Bank and First Republic Bank also failed. This banking turmoil represented the most significant test since the global financial crisis of ending too-big-to-fail—whereby a systemic bank can be resolved while preserving financial stability and protecting taxpayers, they write. "Last year’s bank failures provided a valuable check on the progress that policymakers are making on the reform agenda and to set course for the remaining ground to be covered." Read the blog

FINANCE & DEVELOPMENT Breaking the Debt Supercycle (Credit: Andre Laame/Sepia) The balance between what people earn and what they spend has been lost, leading to a massive debt supercycle that threatens the global economy, writes Atif Mian in IMF Finance & Development magazine. The debt supercycle is the product of an ever-increasing buildup of borrowing by consumers and governments. For example, total debt was about 140 percent of GDP between 1960 and 1980 in the United States, but has since more than doubled—to 300 percent of GDP. The same trend holds true globally, Mian writes. “An economy that relies on a constant supply of new debt to generate demand is always susceptible to disruptions in financial markets, which can trigger serious slowdowns.” Read the article

This article is from F&D’s March issue, in which we ask, Economics: How should it change? For this issue, we invited leading thinkers to share their views on how economics can rise to today’s challenges. Contributors include Angus Deaton, Atif Mian, Diane Coyle, Jayati Ghosh, John H. Cochrane, Michael Kremer, Dani Rodrik, Jeffry Frieden, Kate Raworth, Katharina Pistor, Michael Olabisi, Niall Kishtainy, Signe Krogstrup, Suresh Naidu, Ulrike Malmendier, Wendy Carlin, and many others.

BACK TO BASICS The Importance of Inclusive Growth

In this video, the IMF's Golda Lee Bruce explains the concept of inclusive growth and why it’s important for governments to reduce poverty and ensure that everyone benefits from economic growth.

IMF MANAGEMENT Sayeh Visits Uruguay and Angola (Credit: agustavop/Getty Images Signature) IMF Deputy Managing Director Antoinette M. Sayeh praised Uruguay's track-record of macroeconomic stability and strong institutions and welcomed the authorities’ efforts to support innovation and climate-resilient, green, and sustainable policies in a statement following her visit to the country. “The implementation of a new fiscal framework during the pandemic should be lauded. The authorities’ efforts to reduce debt to pre-pandemic levels amid difficult external conditions are commendable. Furthermore, Uruguay has made significant progress with upgrading its monetary policy framework.” she said. DMD Sayeh also traveled to Angola this week, where she commended the country for successfully implementing economic reforms in the areas of fiscal management, revenue mobilization, financial stability, and central bank independence. EUROPE Executing a Soft Landing for a Lasting Recovery (Credit: WitR/Getty Images) Two years after Russia’s invasion of Ukraine, a subsequent energy-price roller coaster, and the advent of a more fragmented global economy, Europe has done well, because governments acted fast and decisively, Alfred Kammer, Director of the IMF’s European Department, said in a speech in Croatia. Focusing on the central, eastern and southeastern region of Europe, Kammer noted that these economies can secure low inflation and increase the long-term growth trajectory with the right policy mix. Monetary policy should maintain a tightening bias and carefully assess the timing and speed of easing, while planned fiscal consolidation is appropriate and should help with disinflation, Kammer said. “Success in the region will require forward looking reforms now that will pay off later. This is an investment worth making—and one that we at the IMF stand ready to support.” Read the speech

In this podcast, Ulrike Malmendier, Edward and Mollie Arnold Professor of Finance and Professor of Economics at the University of California - Berkeley, and journalist Rhoda Metcalfe discuss how behavioral economics is helping to build better economic models.

Weekly Roundup ARTIFICIAL INTELLIGENCE Transforming Economies in Sub-Saharan Africa During her visit to Ghana last week, IMF Managing Director Kristalina Georgieva took part in a panel discussion exploring the challenges and opportunities that Artificial Intelligence (AI) presents for emerging economies in Sub-Saharan Africa, particularly focusing on Ghana’s digitalization and AI readiness. She was joined by Hon. Ursula Owusu-Ekuful, the Minister for Communications & Digitalization, Dr. Patrick Awuah, President of the Ashesi University, and Dr. Jason Hickey, Head of Google’s AI Research Centre. IMF DATA Global Portfolio Asset Holdings on a Path to Recovery Last Wednesday's release of the IMF's Coordinated Portfolio Investment Survey (CPIS) shows a 4.8% rise in global foreign portfolio investment holdings to $68.8 trillion in the first half of 2023. The increase is largely attributed to higher investments between advanced economies. Standout contributors include the United States, Ireland, Luxembourg, and Germany, which collectively fueled 2.5 percentage points of the global increase in holdings. Irish and French securities experienced increases of 7.7% and 5.2%, underscoring the dynamic shifts in investment flows. While this marks a recovery from 2022's downturn, foreign portfolio investment holdings have yet to eclipse their 2021 highs. STAFF PAPER Climate Variability and Worldwide Migration A new staff paper estimates global, regional, and country-by-country emigration flows using different population and climate scenarios. There is ample archaeological evidence that people have migrated in response to environmental changes. Historical evidence has, however, little relevance for present-day societies because socio-economic conditions are very different now compared to centuries ago. It is, therefore, unclear if climate change will lead to a higher number of international migrants. Understanding how people may move in response to climate change is very important because migration has both large positive and negative welfare effects on migrants, origin countries, and destination countries alike.  STAFF PAPER High Inflation in the Baltics A new staff paper identifies and quantifies the drivers of inflation dynamics in the three Baltic economies and assesses the effectiveness of fiscal policy in fighting inflation. It also analyzes the macroeconomic impact of inflation on competitiveness by focusing on the relationship between wages and productivity in the tradeable sector. The results reveal that inflation in the Baltics is largely driven by global factors, but domestic demand matters as well, suggesting that fiscal policy can play a role in containing inflation.

MARK YOUR CALENDAR MARCH 27, 2024, 8AM ET The Africa Cheetah Run: Transforming Obstacles into Economic Opportunities Tune in for the latest episode of Africa Perspectives, featuring a conversation between Carlos Lopes, Professor from the Mandela School of Public Governance at the University of Cape Town, and Abebe Aemro Selassie, Director of the IMF's African Department. Professor Lopes will share his insights on the key obstacles to Africa’s economic performance–what he calls “the static model” based on commodity dependence–and how this model can be transformed to pioneer a new type of development. From the negative perceptions and representations of Africa to the current state of development, he will also discuss the imperative that Africa embraces green and clean energy, which—in his vision—have the potential to industrialize the continent and ensure that it becomes champion of climate solutions. Watch here

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.

Miriam Van Dyck Editor IMF Weekend Read mvandyck@IMF.org