Read more about the article Why a Weaker Dollar Might Be Good for Emerging Markets?

Why a Weaker Dollar Might Be Good for Emerging Markets?

There is currently a convergence of views that, gradually or not, US current account deficits and insufficient domestic savings tend to slide down the relative value of the dollar. Four “channels of dollar transmission” explain why there is a negative correlation between the dollar's strength and economic growth of emerging market economies. A dollar depreciation against a wide basket of currencies in 2021 would likely be welcome by emerging economies.

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Read more about the article Quantitative easing in emerging market economies

Quantitative easing in emerging market economies

The pandemic global financial shock has sparked the inclusion of QE as a policy tool also available for central banks of EME. Nonetheless: - QE targets are on the yield structures of interest rates. If there are fragilities leading to high basic, short-term interest rates, QE will not get much in terms of results. - QE should not raise concerns about “fiscal dominance”, because otherwise it will be self-defeating. Capital outflow pressures may exacerbate. - A prolonged stay of central banks as buyers in local currency bond markets may distort market dynamics. A permanent role of the central bank as a market maker, especially in primary markets, will impair the development of the domestic financial market. Consideration should also be given to the effect of asset purchase programs on possible overvaluation of assets, as well as on collateral availability in the banking system and its impact on the policy rate transmission

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Read more about the article Pour Otaviano Canuto, le coronavirus a plongé les pays en développement “en pleine tempête” (inc. English version)

Pour Otaviano Canuto, le coronavirus a plongé les pays en développement “en pleine tempête” (inc. English version)

Le Covid-19 a précipité l’économie mondiale dans un Grand Confinement, pour reprendre l’expression du FMI. En peu de temps, les pays ont été touchés les uns après les autres par la pandémie, chacun d’entre eux étant confronté à un triple choc : épidémiologique, économique et financier. Les explications de Otaviano Canuto, Senior Fellow au Policy Center for the New South, ex-vice-président de Banque mondiale et ex-directeur exécutif au FMI. Covid-19 has submitted the global economy to a Great Lockdown, as the IMF called it. In a short time, country after country has suffered outbreaks of the new coronavirus, with each facing a three-fold shock: epidemiologic, economic, and financial. In addition to dealing with their own local coronavirus outbreaks, emerging market and developing countries have faced additional shocks from abroad. It may be said that a perfect storm has fallen on them.

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Read more about the article Channels of transmission of coronavirus to developing economies from abroad
Photo by Edwin Hooper on Unsplash

Channels of transmission of coronavirus to developing economies from abroad

In a previous article, we highlighted how developing economies have faced simultaneous shocks from their external environment, as pandemic and recession curves have unfolded abroad. In addition to financial shocks, there have been declines in remittances, tourism receipts, and commodity prices . The combination of these shocks with the hardships related to flattening domestic infection curves has configured what we have called a ‘perfect storm’ for developing countries, brought by COVID-19. Recent World Bank and United Nations World Tourism Organization reports have given us a view of how serious these shocks have been. We assess here the falls in remittances, tourism receipts, and commodity prices, particularly in oil markets (with accompanying video at bottom).

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Read more about the article Coronavirus brought a perfect storm to developing countries

Coronavirus brought a perfect storm to developing countries

Coronavirus brought a perfect storm to developing countries - Flattening coronavirus curves of infection and recession will be harder in developing countries - Developing countries have faced foreign capital outflows - A boosted IMF may provide liquidity buffers for developing countries, but debt relief will be necessary to help vulnerable countries manage the coronavirus crisis

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Read more about the article More than one coronavirus curve to manage: infection, recession and external finance

More than one coronavirus curve to manage: infection, recession and external finance

The global reach of COVID-19 is now clear. In a short time, country after country has suffered outbreaks of the new coronavirus, with each facing a three-fold shock: epidemiologic, economic, and financial. In addition to dealing with their own local coronavirus outbreaks, emerging market and developing countries have faced additional shocks from abroad.

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Read more about the article Lost in Transition – Developing Countries in the Global Economy

Lost in Transition – Developing Countries in the Global Economy

The growth and productivity performance of emerging market and developing economies (EMDEs) in the last 10 years failed to repeat the achievements of the previous decade. Besides frustrating expectations that they might become the new growth pole in the global economy, their convergence to per capita incomes of advanced economies has suffered a setback. Nonetheless, the path of policies and reforms to be pursued in that direction remains the same.

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Read more about the article The Essential presents: Argentina, A Story of Divergence

The Essential presents: Argentina, A Story of Divergence

A panel discussion in Washington DC on the present and future of Argentina's politics and economy. Guest panelists include Otaviano Canuto (Center for Macroeconomics and Development, Policy Center for the New South, and Brookings), Rafael Mathus Ruíz (DC correspondent for Argentina's La Nación newspaper) and Arturo Porzecanski (economist and professor at American University). Hosted by journalist Adrian Bono.

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Read more about the article Argentina’s half-baked adjustment has not worked

Argentina’s half-baked adjustment has not worked

Argentina’s peso tumbled and stocks plunged after last Sunday’s primary elections. The perception of a likely victory of President Macri’s opponents – Alberto Fernandez, and running mate, Christina Fernandez de Kirchner - has sparked a new shift in investor preferences away from peso assets, pressures on the exchange rate, and hikes on sovereign spreads. Unless fears of a return to policies prevailing before Macri are assuaged, the market rout tends to deepen.

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Read more about the article China’s Rebalancing Act is Slowly Addressing Sliding Growth Figures
SAO PAULO, SP, BRASIL, 22-11-2016: Entrevista com Otaviano Canuto, diretor do Banco Mundial (Foto: Fabio Braga/Folhapress, MERCADO)***EXCLUSIVO***.

China’s Rebalancing Act is Slowly Addressing Sliding Growth Figures

  Capital Finance International (Spring, 2019) China’s economic growth has been sliding since 2011, while its economic structure has gradually rebalanced toward lower dependence on investments and current-account surpluses. Steadiness…

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Read more about the article New Challenges Faced by the Bretton Woods Institutions

New Challenges Faced by the Bretton Woods Institutions

In their 75 years of existence, the twin institutions born at the Bretton Woods Conference have undergone adaptation and transformation in response to the evolution of the world economy and the challenges it has posed to them. They will have to mutate and adapt to operate in a context of institutional fragmentation and possible arm-breaks between shareholders/members to continue fulfilling their missions.

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Read more about the article China’s Growth Rebalance with Downslide

China’s Growth Rebalance with Downslide

China’s economic growth has been in a downslide trend since 2011, while its economic structure has gradually rebalanced toward lower dependence on investments and current-account surpluses. Steadiness in that trajectory has been accompanied by rising levels of domestic private debt, as well as slow progress in rebalancing private and public sector roles. As the ongoing trade war with the US continues to unfold, it remains unclear at which growth pace China’s rebalancing will tend to settle.

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Read more about the article Is It Finally Getting Easier to Do Business in Brazil?
In the photo, consumer movement in Mercadao in Sao Paulo on 6 September 2018. The IPCA (National Broad Consumer Price Index) fell 0.09% in August, the IBGE said on on 6 September 2018. It was the lowest rate for the month since 1998, when the indicator showed a fall of 0.51%. Despite the deflation in August, the index advanced by 2.85%, above the 1.62% registered in the same period in 2017. For the 12-month period, the IPCA is up 4.19%. The food sector presents the second consecutive month of deflation. Of the items consumed by the family, the sharpest decline in August came from onions, with a drop of 22.9%, followed by English potatoes, down 11.89%. (Photo by Cris Faga/NurPhoto)

Is It Finally Getting Easier to Do Business in Brazil?

Recent reforms have helped improve Brazil's business environment. Further changes could do away with the "Brazil cost" once and for all.

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