What Happened to World Trade?
Capital Finance International, spring 2016 World trade suffered another disappointing year in 2015, experiencing a contraction in merchandise trade volumes during the first half and only a low recovery…
Has the Global Trade-Development Link Peaked?
Trade has been a key driver of global growth, income convergence, and poverty reduction. Both developing countries and emerging market economies have benefited from opportunities to transfer technology from…
Whither Emerging Markets Foreign Exchange Reserves
After a exponential rise in foreign exchange reserves accumulation by emerging markets from 2000 onwards, the tide seems to have turned south since mid-2014. Changes in capital flows and commodity prices have been major factors behind the inflection, with the new direction expected to remain, given the context of the global economy going forward. Although it is too early to gauge whether the on-going relative unwinding of such reserves defenses will lead to vulnerability in specific emerging markets, the payoff from strengthening domestic policies has broadly increased.
Procyclical emerging market policy: New evidence
Industrialised and developing countries have differing fiscal strategies for dealing with the business cycle. But are countries’ strategies different according to whether they are industrialised? This column presents new…
When it comes to fiscal policy, it’s better to save for a rainy day than to let it pour
While pro-cyclical fiscal policies – ie. expansionary fiscal policies in booms and contractionary fiscal stances in downturns – remain a common feature among developing countries, some countries have recently…
Liquidity Glut, Infrastructure Finance Drought and Development Banks
The world economy faces huge infrastructure financing needs that are not being matched on the supply side. Emerging market economies, in particular, have had to deal with international long-term…
China and Emerging Markets: Riding Wild Horses
The 2014 baseline for the global economy still appears to be trending upwards, but the Year of the Horse may be jumpy.
Walking on the Wild Side – Monetary Policy and Prudential Regulation
Global financial integration and the linkages between the financial and the real sides of economies are sources of huge policy challenges. This is now beyond doubt, after what we saw in the run-up to and the unfolding of the 2008 global financial crisis. As a consequence, the established wisdom regarding monetary policies and prudential regulation has been subject to a deep critical review, including a demise of the belief that they should be maintained as fully independent functions.
Lost in Transition
Not long ago, many economists were anticipating a switchover in the global economy's main engines, with autonomous sources of growth in developing economies compensating for the drag of struggling advanced economies. But, in the last few months, enthusiasm about these economies’ prospects has given way to bleak forecasts.
Elephants and Macro-Financial Linkages
Emerging Markets (EMs) are more likely to suffer shocks, such as commodity-price and terms-of-trade shocks, as well as surges and sudden stops in capital flows.. Furthermore, structural and institutional features typical of most EMs tend to amplify and propagate shocks. Even when asset price-led cycles are not generated within EMs, they tend to be affected the most due to capital flows.
Dealing with the Challenges of Macro Financial Linkages in Emerging Markets
The 2008 financial crisis has emphasized the importance of macro financial linkages. In the financial sector, attention is now focusing on macro prudential regulations that are geared toward the stability of the financial system as a whole. In the macro arena, the recognition that price stability was not sufficient to guarantee macroeconomic stability and that financial imbalances developed despite low inflation and small output gaps has highlighted the need for additional tools (macro prudential policies) to complement monetary policy in countercyclical management. Emerging markets (EMs) face different conditions and have key structural features that can have a bearing on the relevance and efficacy of policy measures. Drawing on Canuto, Otaviano, and Swati R. Ghosh, eds. 2013. Dealing with the Challenges of Macro Financial Linkages in Emerging Markets. Washington, DC: World Bank), this note discusses the challenges of dealing with macro financial linkages and explores the policy toolkit available for dealing with systemic risks, particularly in the context of EMs.
Dealing with the Challenges of Macro Financial Linkages in Emerging Markets
The 2008 financial crisis highlighted the challenges associated with global financial integration, emphasized the importance of macro financial linkages and challenged pre-crisis financial stability regimes.
Instanbul, Turkey
QE Tapering as a Wake-up Call for Emerging Markets
While unconventional monetary policies have been appropriately anti-cyclical in ACs implementing them, they have had inappropriately pro-cyclical consequences on EMs -- boosting credit and demand when most economies among the latter were already heated up, and threatening to accentuate a slowdown where it started to happen.
South-South Trade through Value-Added Glasses
Using gross figures of exports and imports to approach the contribution of trade to economic growth and a country’s resource allocation may be misleading. Products often cross borders more…
Resource-Backed Investment Finance in Least Developed Countries
The global financial crisis and shrinking aid flows have led to decreased availability of long-term debt finance for Least Developed Countries (LDCs), particularly for infrastructure. On the other hand,…