Global ETF News Older than One Year
Emerging market debt hits record high of $100tn
May 17, 2023--Emerging market debt has hit a record high of over $100tn, a third higher than pre-pandemic levels, as concerns mount about financial leverage in a world of higher interest rates.
Global debt rose by $8.3tn in the first three months of the year to $306.3tn, the highest level since the first quarter of last year and second-highest quarterly reading ever, according to the Institute of International Finance, in its quarterly global debt monitor.
Global debt is now $45tn higher than its pre-pandemic level and is "expected to continue increasing rapidly," said the IIF, owing to ageing populations, rising healthcare costs, higher national spending on defence and substantial climate finance gaps.
Source: westobserver.com
IMF Working Paper-How We Missed the Inflation Surge: An Anatomy of Post-2020 Inflation Forecast Errors
May 12, 2023--Summary:
This paper analyzes the inflation forecast errors over the period 2021Q1-2022Q3 using forecasts of core and headline inflation from the International Monetary Fund World Economic Outlook for a large group of advanced and emerging market economies.
The findings reveal evidence of forecast bias that worsened initially then subsided towards the end of the sample. There is also evidence of forecast oversmoothing indicating rigidity in forecast revision in the face of incoming information. Focusing on core inflation forecast errors in 2021, four factors provide a potential ex post explanation: a stronger-than-anticipated demand recovery; demand-induced pressures on supply chains; the demand shift from services to goods at the onset of the pandemic; and labor market tightness. Ex ante, we find that the size of the COVID-19 fiscal stimulus packages announced by different governments in 2020 correlates positively with core inflation forecast errors in advanced economies. This result hints at potential forecast inefficiency, but we caution that it hinges on the outcomes of a few, albeit large, economies.
Source: imf.org
Europe, And the World, Should Use Green Subsidies Cooperatively
May 11, 2023--A coordinated approach, including toward subsidies, is needed to tackle climate change successfully
Governments across the world are using subsidies to support the green transition.
Green subsidies can be helpful where there are market failures. When carbon emissions are underpriced in relation to their true cost to society or preferable policy solutions (such as carbon pricing) are not in place, subsidies can steer businesses and consumers towards clean technologies that are less polluting while also lowering the costs of those technologies.
But subsidies should be carefully targeted to correct market failures and they should not discriminate between firms, be they foreign or domestic, old or new, large or small. They must be consistent with World Trade Organization rules, too.
Source: IMF.org
Electric vehicle sales leapt 55% in 2022-here's where that growth was strongest
May 11, 2023--Global sales of electric vehicles (EVs) increased by 55% in 2022 from the year before, according to data from the EV Volumes sales database.
China remains the world's largest EV market, with 59% of global sales.
World Economic Forum estimates annual EV sales need to increase 18-fold by 2030 to meet global emissions targets.
Many people around the world will have noticed an increasing number of electric vehicles (EVs) on the roads in the towns and cities where they live. The latest data on global sales of EVs confirms a growing appetite for green motoring.
EV sales rose by 55% in 2022, reaching a total of 10.5 million, according to the EV Volumes sales database. These figures include both battery electric vehicles (BEVs) and plug-in hybrids (PHEVs).
Source: weforum.org
WEF-Economists Divided on Global Economic Recovery, Expect Rebound in Asia-Chief Economists Outlook: May 2023
May 1, 2023---Growth outlook has strengthened in all regions but chief economists divided on likelihood of a global recession in 2023
Experts do not see recent bank failures as signs of systemic vulnerability, although further turbulence may be ahead
Experts concerned about trade-off between managing inflation and maintaining financial stability, with 76% anticipating central banks to struggle to bring down inflation
Industrial policy is increasingly widespread and could further restructure global supply chains
The continuing uncertainty of the global economic outlook is reflected in the striking spread of responses to the latest Chief Economists Outlook, released today. In a survey featured in the report, experts are evenly divided on the prospects for the global economy, with equal shares of 45% saying that a global recession this year is likely or unlikely.
Chief economists expect both growth and inflation dynamics to vary widely across regions, while on the economic policy front, 72% predict proactive industrial policy to become an increasingly widespread phenomenon over the next three years. Although a majority do not see recent financial-sector disruption as a sign of systemic vulnerability, further bank failures and turbulence are considered likely this year.
Source: WEF (World Economic Forum)
IMF Working Paper-Eye of the Storm: The Impact of Climate Shocks on Inflation and Growth
April 28, 2023--Summary:
What is the impact of climate change on inflation and growth dynamics? This is not a simple question to answer as climate shocks tend to be ubiquitous, but with opposing effects simultaneously on demand and supply. The extent of which climate-related shocks affect inflation and economic growth also depends on long-run scarring in the economy and the country's fiscal and institutional capacity to support recovery.
In this paper, we use the local projection method to empirically investigate how climate shocks, as measured by climate-induced natural disasters, influence inflation and economic growth in a large panel of countries over the period 1970-2020. The results shows that both inflation and real GDP growth respond significantly but also differently in terms of direction and magnitude to different types of disasters caused by climate change. We split the full sample of countries into income groups-advanced economies and developing countries-and find a striking contrast in the impact of climate shocks on inflation and growth according to income level, state of the economy, and fiscal space when the shock hits.
Source: IMF.org
Commodity Prices to Register Sharpest Drop Since the Pandemic
April 27, 2023--But food prices remain near record highs, compounding food insecurity
Global commodity prices are expected to decline this year at the fastest clip since the onset of the COVID-19 pandemic, clouding the growth prospects of almost two-thirds of developing economies that depend on commodity exports, according to the World Bank's latest Commodity Markets Outlook report.
The drop in prices, however, is expected to bring little relief to the nearly 350 million people across the world who face food insecurity. Although food prices are expected to fall by 8% in 2023, they will be at the second-highest level since 1975. Moreover, as of February this year, annual food price inflation is at 20% globally, the highest level over the past two decades.
Source: worldbank.org
WMO annual report highlights continuous advance of climate change
April 25, 2023--From mountain peaks to ocean depths, climate change continued its advance in 2022, according to the annual report from the World Meteorological Organization (WMO). Droughts, floods and heatwaves affected communities on every continent and cost many billions of dollars.
Antarctic sea ice fell to its lowest extent on record and the melting of some European glaciers was, literally, off the charts.
The State of the Global Climate 2022 shows the planetary scale changes on land, in the ocean and in the atmosphere caused by record levels of heat-trapping greenhouse gases.
For global temperature, the years 2015-2022 were the eight warmest on record despite the cooling impact of a La Niña event for the past three years. Melting of glaciers and sea level rise-which again reached record levels in 2022-will continue to up to thousands of years.
Source: World Meteorological Organization (WMO)
FinTech, investor sophistication and financial portfolio choices
April 21, 2023--Summary Focus
Financial technology (fintech) enables data to be more efficiently used to solve problems related to asymmetric information. In finance, artificial intelligence can be used to increase financial inclusion and reduce the costs of financial services. However, fintech can also lead to discrimination among investor groups, particularly if they have different levels of access to, or use of, the new technology.
For instance, fintech can allow sophisticated market players to acquire better data and formulate profitable trading strategies, while less sophisticated ones may lose out. So are advances in financial technology democratising finance and levelling the playing field?
Contribution
We use a portfolio theory model to analyse the relationship between financial technology advancements, investors' sophistication levels and financial portfolios' composition and returns. The model assumes that investors have different capacities to process information, as measured by their level of financial literacy, and choose which assets to learn about and invest in.
Source: BIS
BIS-The changing nexus between commodity prices and the dollar: causes and implications
April 13, 2023--Key takeaways
Commodity prices and the US dollar have moved in tandem recently, in contrast to their usual statistical pattern of moving in opposite directions.
The causes of the change in the relationship are partly temporary, such as the unusual combination of recent shocks, and partly structural, such as the United States' emergence as a net energy exporter.
The change in the nexus compounds the stagflationary effects of higher commodity prices for commodity importers, while its implications for commodity exporters are more ambiguous.
A lasting change in the nexus could create more difficult challenges for macro-financial stability frameworks, particularly in commodity-importing economies.
Source: BIS.org
