IMF,update

 

Dear MARIA, In today's edition, we highlight: Dollar dominance Bangladesh Country Focus Adam Posen on Geopolitics June 2024 F&D Magazine Catherine Mann on capital flows, and much more

FINANCIAL MARKETS Update on Dollar Dominance (Credit: Blue Planet Studio/iStock by Getty Images) Dollar dominance – the outsized role of the US dollar in the world economy – has been brought into focus recently, as the robustness of the US economy, tighter monetary policy, and heightened geopolitical risk have contributed to a higher greenback valuation. At the same time, economic fragmentation and the potential reorganization of global economic and financial activity into separate, nonoverlapping blocs could encourage some countries to use and hold other international and reserve currencies, note Serkan Arsanalp, Barry Eichengreen, and Chima Simpson-Bell in a new IMF blog. Recent IMF data point to an ongoing gradual decline in the dollar’s share of allocated foreign reserves of central banks and governments. However, the reduced role of the US dollar over the past 20 years has not been matched by increases in the shares of the other “big four” currencies – the euro, yen, and pound. “Rather, it has been accompanied by a rise in the share of what we have called nontraditional reserve currencies, including the Australian dollar, the Canadian dollar, Chinese renminbi, South Korean won, Singaporean dollar, and the Nordic currencies,” the authors note. The nontraditional reserve currencies are attractive to reserve managers for several reasons, including the fact that they have become increasingly easy to buy, sell and hold with the development of new digital financial technologies, say the authors. Read the Blog

COUNTRY FOCUS Bangladesh Must Invest in Women for Growth, Climate Resilience (Credit: Ibnul Asaf, rchphoto, & Nazrul Islam/iStock by Getty Images) Bangladesh has made major gains for its population, including a seven-fold rise in per capita incomes over the past three decades and a drastic reduction in poverty levels. This progress has been driven in part by greater labor force participation by women. However, there are still large gaps between women and men when it comes to labor force participation, according to a new IMF Country Focus article. “Notably, women’s labor force participation is only half the rate of men,” say the authors. “Prior IMF research shows that closing this gap could increase the country’s economic output by nearly 40 percent. Women also remain less likely than men to obtain tertiary education, and they face greater barriers in accessing financial services. Remedying both factors could raise the entire economy’s productivity.” Bangladesh’s extreme vulnerability to climate change and natural disasters takes a toll on efforts to bridge the gender gap, as Bangladeshi women are disproportionately impacted by related economic shocks compared to men, the authors note. Fortunately, Bangladesh recognizes the need to integrate gender perspectives in its climate change strategy and has adopted a climate change and gender action plan. Renewed efforts will be needed to ensure successful implementation of the plan and achieve simultaneous progress on climate action and gender equality, the authors say. Read the Article

FINANCE & DEVELOPMENT Geopolitics is Corroding Globalization (Credit Illustration by Melinda-Beck) As the IMF turns 80, its core macroeconomic mission still deserves to be pursued and prioritized, according to Adam S. Posen, president of the Peterson Institute for International Economics. The increasing politicization of international finance and commerce has put at risk the IMF’s ability to assist member countries, Posen writes in the June issue of F&D magazine. “Stability will not be achieved by broadening the institution’s remit in an effort to pander to the changing whims of the largest shareholders, though that response might be understandable as a short-term political approach. “Instead, the IMF must emphasize its unique role as a multilateral conditional lender and a truth teller regarding international debt and monetary issues. This role justifies greater operational independence, along the lines of central banks.” Read the Article

The world has changed markedly since the IMF was founded 80 years ago. In F&D’s June issue, we explore how the IMF can adapt to remain effective. Authors include Kristalina Georgieva, Ceyla Pazarbasioglu, Raghuram Rajan, Mia Amor Mottley, William Ruto, Pablo García-Silva, Harold James, Martin Wolf, Adam S. Posen, Edwin M. Truman, Masood Ahmed, Axel A. Weber, Anna Postelnyak, Réka Juhász, Nathan Lane, Mark Aguiar, James M. Boughton, Atish Rex Ghosh, Andrew Stanley, Adam Jakubik, Elizabeth Van Heuvelen, Henny Sender, Melinda Weir, Vivek Arora, Douglas A. Irwin, and Lisa Kolovich.

Central banks worldwide share common practices in how they operate, but the UK’s central bank is unique in how it makes its rate decisions. Catherine Mann is a Professor of the Practice at Brandeis University and one of four external voting members of the Monetary Policy Committee at the Bank of England. In this podcast, Mann says the pickup in capital flows in neighboring countries earlier this year required careful consideration by the BOE, and the broader range of backgrounds on its board helped to make the right monetary policy decisions.

Weekly Roundup DATA INNOVATION The IMF’s Data Gaps Initiative Over 140 officials from G20 economies, the IMF, and other international organizations came together at the IMF’s Data Gaps Initiative (DGI-3) Global Conference in Brasilia June 11 – 13, to discuss the transformative power of data and its role in addressing some of the most pressing global challenges of our time. IMF Managing Director Kristalina Georgieva reminded the G20 data producers of the impact of previous data gaps initiatives in guiding policymakers to steer their economies through the covid-19 pandemic and maintaining global financial stability after the global financial crisis. FED-IMF-WORLD BANK CONFERENCE  Policy Challenges for the Financial Sector Speaking at the US Federal Reserve-IMF-World Bank 23rd Annual International Conference on Policy Challenges for the Financial Sector, IMF Managing Director Kristalina Georgieva said the international regulatory and supervisory community was a model of cooperation and stressed the need for vigilance in the period ahead. The IMF’s Tobias Adrian also spoke at the event, underscoring the need to make progress in implementing international standards (the “Basel Standards”) in banking supervision. CAPACITY DEVELOPMENT Building Macroeconomic Capacity in Anglophone West Africa and Cabo Verde From assisting with the establishment of the Liberia Revenue Authority in post-conflict Liberia to enhancing fiscal transparency in Cabo Verde and developing forecasting and policy analysis in Ghana and The Gambia, the IMF's regional technical assistance center for West Africa 2 has helped enhance macroeconomic capacity in the region during its first decade of operations. Find out more in this anniversary publication and video featuring IMF Managing Director Kristalina Georgieva and center staff ahead of the center’s anniversary conference on June 18 in Cabo Verde.   STAFF PAPER How Weather Shocks Intensify Conflict The relationship between climate change and conflict has gained increasing attention from academics and policymakers in recent years. A new IMF staff paper finds that weather shocks – in particular higher temperatures – significantly worsen conflict. While weather shocks may not trigger the onset of new conflict, they exacerbate the intensity of conflict where it already exists. The paper provides insights into the effect of weather shocks – measured as fluctuations in temperature and precipitation – on conflict, to promote an understanding of the human toll and to better inform appropriate policy responses. STAFF PAPER AI and Occupational Mobility The adoption of artificial intelligence promises to bring about a wave of structural transformation that could reshape both the economy and society. As industries increasingly integrate AI technologies, the repercussions of this shift are expected to be most acutely felt in the labor market. A new IMF staff paper aims to provide insights on the ability of workers to transition across occupations that are expected to be positively and negatively affected by AI, appraising the technological impact of this technological change on their career trajectories and lifetime earnings.

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