The inflation story differs across major economies
June 30, 2022--The return of inflation has touched off an unusual public debate among policymakers around the world, but there are important differences in inflation across economies that call for radically different policy responses. Inflation may be caused by a reduction in an economy's ability to supply goods and services, an increase in the demand for goods and services, or both. Reductions in supply appear to be widespread, but increases in demand are limited mainly to the United States and the United Kingdom.
Policies to increase supply are often hard to implement, but releasing oil and grain from official reserves can be a useful temporary measure. Tighter monetary and fiscal policies are needed to restrain demand, notably in the United States and the United Kingdom. So far, Japan has been the exception to the global pattern, with declines in demand and inflation. Continued easy monetary and fiscal policies are needed there.
Source: piie.com
World Economic Forum-What next for travel and tourism? Here's what the experts say
June 30, 2022-- In 2020 alone, the travel and tourism sector lost $4.5 trillion and 62 million jobs globally.
But as the world recovers from the impacts of the COVID-19 pandemic, travel and tourism can bounce back as an inclusive, sustainable, and resilient sector.
Two experts highlight some of the key transformations in the sector going forward during the World Economic Forum's Our World in Transformation series.
The Travel & Tourism sector was one of the hardest hit by the COVID-19 pandemic, leaving not only companies but also tourism-driven economies severely affected by shutdowns, travel restrictions and the disappearance of international travel.
In 2020 alone, the sector lost $4.5 trillion and 62 million jobs, impacting the living standards and well-being of communities across the globe. Moreover, the halt in international travel gave both leisure and business travellers the chance to consider the impact of their choices on the climate and environment.
Source:wef.org
COVID-19 Drives Global Surge in use of Digital Payments
June 29, 2022--Three quarters of adults now have a bank or mobile money account; gender gap in account ownership narrows
The COVID-19 pandemic has spurred financial inclusion-driving a large increase in digital payments amid the global expansion of formal financial services.
This expansion created new economic opportunities, narrowing the gender gap in account ownership, and building resilience at the household level to better manage financial shocks, according to the Global Findex 2021 database.
As of 2021, 76% of adults globally now have an account at a bank, other financial institution, or with a mobile money provider, up from 68% in 2017 and 51% in 2011. Importantly, growth in account ownership was evenly distributed across many more countries. While in previous Findex surveys over the last decade much of the growth was concentrated in India and China, this year's survey found that the percentage of account ownership increased by double digits in 34 countries since 2017.
Source: worldbank.org
Rise of ETFs 'destabilising' emerging markets
June 27, 2022--Passive money most likely to be withdrawn during times of global stress, analysis finds
The explosive growth of index-tracking exchange traded funds has destabilised emerging economies, increasing their vulnerability to global shocks, according to economists at the Italian central bank.
Their analysis found that investment funds were far more likely than other sources of private sector funding, such as banks, insurance companies and pension funds, to withdraw funding from developing countries during global shocks.
Source: FT.com
BIS Annual Economic Report-No respite
BIS Annual Economic Report-No respite
June 26, 2022--Introduction
There is no respite for the global economy. Two years ago, it was shaken by the onset of the pandemic, as an overwhelming health crisis turned into an overwhelming economic crisis. While the after-tremors of the pandemic still reverberate, two new shocks hit home in the year under review: the unexpected resurgence of inflation and the tragic war in Ukraine.
Last year's Annual Economic Report (AER) raised the prospect of a bumpy pandexit; bumps have turned out to be a one-two punch.
These tumultuous events are bound to have far-reaching consequences. Are we perhaps witnessing a regime change, from a low- to a high-inflation regime? Is the global economy flirting with stagflation? And are we seeing signs of an end to the post-World War II globalisation era? Meanwhile, the crypto universe is in turmoil, reminding us that there are important developments in the monetary system that we cannot neglect.
On the macro front, policy is facing daunting challenges. In some ways, they are not new; but in others, they are unique. As Mark Twain quipped, "History does not repeat itself, but it often rhymes." The world economy experienced stagflation in the 1970s, following a shift away from a low-inflation regime. The new element is that, against the backdrop of historically low interest rates, debt levels- private and public- have never been as high. This is far from inconsequential. Moreover, the monetary and financial system is in the throes of the digital revolution. This, too, albeit in a different way, is far from immaterial.
Source: BIS.org
WTO rolls out Trade Connectivity Heatmap to highlight bilateral trade between economies
June 23, 2022--The WTO is launching today (23 June) the Trade Connectivity Heatmap, a new visualisation tool designed to give a broad overview of the trade relationships between different economies across different product categories, with the possibility of honing in on data for bilateral product-by-product relationships.
Available via the WTO Stats Dashboard, the Heatmap utilises bilateral trade flow data from more than 180 economies aggregated into around 70 product groups. When a user selects an economy from the drop-down menu, a heatmap is generated. Each square tile represents a share of imports or exports sourced from, or destined for, the selected economy.
Source: World Trade Organization (WTO)
The BIS presents a vision for the future monetary system
June 21, 2022--A monetary system based on central bank public goods, using a digital version of sovereign currency as its foundation, could foster innovation while safeguarding stability and security.
As part of a two-tiered monetary system, central bank digital currencies and fast payments systems could enhance efficiency and financial inclusion, while buttressing data privacy.
Recent turmoil in the crypto universe is a reminder of cryptocurrencies' financial vulnerabilities, but their deeper structural inadequacies have been apparent for some time, the report warns.
The Bank for International Settlements (BIS) today set out a blueprint for a future digital monetary system. In a special chapter of its Annual Economic Report 2022, the BIS said a system grounded in a digital representation of central bank money could combine innovation with essential attributes such as safety, stability, accountability, openness and efficiency. Such a system would be capable of adapting continuously to serve the public interest. This vision is built on the foundation of trust in central banks, with a digital version of sovereign currencies at its core.
Source: bis.org
The Role of Non-bank Financial Institutions in the Intermediation of Capital Flows to Emerging Markets
May 16, 2022--Abstract
This paper compares the behaviour of banks with that of non-bank financial institutions (NBFIs) in the intermediation of portfolio flows to emerging market economies (EMEs). Our analysis shows that investment funds, a key component of NBFIs, tend to reduce their exposure to EMEs more than banks during periods of financial turmoil, such as the Covid-19 pandemic. Moreover, passive funds and exchange-traded funds (ETFs) are more responsive to global shocks than active funds.
Global funds show a lower elasticity to financial volatility than regional funds, while the behaviours of institutional and retail funds are quite similar. Regarding the currency composition of portfolio investments in EMEs, investment funds cut their assets denominated in USD in response to global shocks more than those in other currencies. Finally, the portfolio inflows to EMEs with a higher share of portfolio liabilities held by investment funds rather than by banks and other financial intermediaries tend to be more sensitive to the global financial cycle.
Source: papers.ssrn.com
Too Many ESG Funds Mislead Investors
June 20, 2022--Regulatory reckoning with ESG funds does not go far enough.
Regulators are cracking down on ESG funds that pretend to want to save the planet without actually investing in green stocks- an all-too-common practice known as greenwashing.
The European Union has recently adopted a corporate sustainability reporting directive that includes guidelines for funds targeting the ESG market. Similarly, the Securities and Exchange Commission (SEC) is proposing rules requiring ESG funds to disclose information about their strategies.
However, even without greenwashing, investors are too often misled by ESG fund promoters. A typical ESG fund advertisement reads like this: "Investors in the fund will reduce global warming, without giving up returns."
Source: knowledge.insead.edu
ETFs and Asset Management
June 19, 2022--Traditional asset management groups are racing to expand their offerings in alternative investments as they seek to boost profitability and head off competition from private equity giants.
Direct indexing products are rising in popularity and even some of the bigger firms are warming up to crypto, despite its volatility. Meanwhile, China's population provides a huge potential market for western asset managers
Source: ft.com