ESG and Of Interest News
IMF Working Paper-The Crypto Cycle and US Monetary Policy
August 4, 2023--Summary:
We examine fluctuations in crypto markets and their relationships to global equity markets and US monetary policy. We identify a single price component-which we label the "crypto factor"-that explains 80% of variation in crypto prices, and show that its increasing correlation with equity markets coincided with the entry of institutional investors into crypto markets.
We also document that, as for equities, US Fed tightening reduces the crypto factor through the risk-taking channel-in contrast to claims that crypto assets provide a hedge against market risk. Finally, we show that a stylized heterogeneous-agent model with time-varying aggregate risk aversion can explain our empirical findings, and highlights possible spillovers from crypto to equity markets if the participation of institutional investors ever became large.
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Source: imf.org
IMF Working Paper-Constructing a Positive Shock: Growth Through the Lens of Option Pricing
July 28, 2023--Summary:
Low-income economies face negative shocks whose frequency and disproportionate impact overcome growth trajectories, producing a negative drift. COVID-19 was the latest such episode. To escape this negative drift, and build a durable recovery, there is a need for a counter-balancing force: to construct a positive shock. Growth is realized through decisions that fall under two categories, routine and non-linear.
While routine decisions modify existing economic behavior along the same path, non-inear decisions describe riskier options that involve transformation. Option pricing theory can be useful to describe the latter, and construct the positive shock required to escape the negative drift.
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Source: imf.org
The Political Economy of GovTech
July 21, 2023--Summary:
The digitalization of public services, known as GovTech, can disrupt traditional mechanisms to promote economic development (for example, financial inclusion, education, and health care), improve the delivery of public services, and expedite development objectives.
For GovTech to be successful in enhancing the public sector's efficiency, transparency, and inclusiveness, its design and implementation require that private interests be aligned with the overarching goal of a "citizen-oriented" digitalization.
Because the interests of the state and private providers are often antagonistic, the social dividends from GovTech remain contingent on implementing the appropriate market structure through adequate property rights and regulatory oversight.
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Source: imf.org
Livable Planet Possible with More Efficient Use of Natural Resources, Report Says
June 27, 2023--More efficiency could help tackle climate change, economic productivity, food security, health
Global challenges such as climate change, economic productivity, food and water security, and health could be overcome if countries use their natural resources more efficiently, and this is possible without sacrificing the environment or human prosperity, a new report says.
Combining innovative science, data sources, and biophysical and economic models, the Nature's Frontiers: Achieving Sustainability, Efficiency, and Prosperity with Natural Capital report offers a novel way to address the fundamental challenge of sustainability. It identifies how and where countries can use natural resources more efficiently so they can prosper without damaging the planet-or going beyond their natural efficiency frontiers.
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Source: worldbank.org
Thriving: Making Cities Green, Resilient, and Inclusive in a Changing Climate
June 23, 2023--Globally, 70 percent of greenhouse gas emissions emanate from cities. At the same time, cities are being hit increasingly by climate change related shocks and stresses, ranging from more frequent extreme weather events to inflows of climate migrants.
This report analyzes how these shocks and stresses are interacting with other urban stresses to determine the greenness, resilience, and inclusiveness of urban and national development. It provides policymakers with a compass for designing tailored policies that can help cities and countries take effective action to mitigate and adapt to climate change.
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Source: worldbank.org
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