Posted on November 11, 2014 by iMFdirect
By Bertrand Gruss and Fabiano Rodrigues Bastos
(version in Español and Português)
China is still a distant and exotic country in the mind of many people in Latin America. Yet, with the Asian giant rapidly expanding its ties with the region (the share of exports going to China is now ten times larger than in 2000), their economic fates seem to be increasingly connected. And in fact, a sharper slowdown in China now represents one of the key risks Latin Americans should be worried about—and prepare for. So, what is at stake? How much do shocks to China matter for economies in Latin America?
In an earlier study presented in our April 2014 Regional Economic Outlook, we analyzed growth spillovers in a large model of the global economy, focusing on the link through commodity prices. Here, we complement that analysis by using a simple yet novel approach that exploits the reaction of financial markets to the release of economic data. We find that growth surprises in China have a significant effect on market views about Latin American economies.
Filed under: Advanced Economies, Asia, Economic outlook, Economic research, Emerging Markets, Español, Globalization, growth, IMF, International Monetary Fund, Investment, Latin America, Politics | Tagged: Brazil, Chile, China, Colombia, commodiity prices, exchange rate, Finance & Development magazine, financial market, fiscal policy, Latin America, Mexico, Peru, Poland, Regional Economic Outlook: Western Hemisphere, spillovers, Turkey | Leave a comment »
Posted on November 7, 2014 by iMFdirect
By Evan Papageorgiou
When the U.S. Federal Reserve first mentioned in 2013 the prospect of a cutback in its bond buying program, markets had a “taper tantrum.” Many emerging markets saw large increases in volatility, even though outflows from their domestic markets were small and short-lived. Now the Fed has ended its bond buying and is looking ahead to rate hikes, and portfolio flows continue to arrive at the shores of emerging market economies. So everything’s fine, right? Not quite.
In our latest Global Financial Stability Report, we show that the large concentration of advanced economy capital invested in emerging markets acts as a conduit of shocks from the former to the latter.
Filed under: Advanced Economies, Economic outlook, Economic research, Emerging Markets, Fiscal policy, International Monetary Fund, Investment | Tagged: bonds, Brazil, Chile, Colombia, emerging market, euro area, Germany, Global Financial Stability Report, government bond, Hong Kong, Hungary, Indonesia, interest rates, investment, Ireland, Israel, Japan, Malaysia, Mexico, Netherlands, Philippines, Poland, Russia, South Africa, Thailand, Turkey, U.S. Federal Reserve, United Kingdom, United States | Leave a comment »
Posted on November 5, 2014 by iMFdirect
By Deniz Igan
(version in Español)
There was a time in the not-so-distant past when science fiction could make us look forward to a better world. We had uplifting visions of the future in shows like Star Trek and Back to the Future. Today, the menu of options only offers a dystopian world ruined by poverty and violence (think The Hunger Games, Divergent, or Elysium).
It sure is easy to get pessimistic these days. Six years after the financial crisis, the recovery in the United States has been fragile and weaker than anything we have seen in the post-WWII period. Growth figures, in large part, have been serial disappointments, disrupted by government shutdowns, debt ceiling showdowns, or meteorologically-triggered slowdowns.
Filed under: Advanced Economies, Economic Crisis, Economic outlook, Economic research, Employment, Financial Crisis, Fiscal, Fiscal policy, Government, growth, Politics, Reform | Tagged: Article IV, deficit, education, global financial crisis, immigration, infrastructure, labor force, recovery, tax reform, United States | Leave a comment »
Posted on October 29, 2014 by iMFdirect
By Bertrand Gruss
(version in Español and Português)
It looks as if labor markets in Latin America have not been following the economic news—literally! Economic activity has slowed markedly in the last three years, with some South American countries slipping into outright recession more recently. Yet, labor markets still appear remarkably strong, with unemployment rates, in particular, hovering at record-low levels in most countries (Figure 1). So, what is going on? Has the region discovered how to defy the law of gravity?
Filed under: Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, growth, IMF, International Monetary Fund, Latin America, Reform, unemployment | Tagged: Argentina, Brazil, Chile, Colombia, Costa Rica, Ecuador, education, infrastructure, labor market, Latin America, Mexico, Peru, Regional Economic Outlook: Western Hemisphere, South America, unemployment rate, Uruguay | Leave a comment »
Posted on October 28, 2014 by iMFdirect
By Antoinette M. Sayeh
Tremendous efforts are under way to upgrade sub-Saharan Africa’s infrastructure. But the needs on the ground are still immense as evidenced by the frequent electricity blackouts, poor roads, and insufficient access to clean water in many countries.
Infrastructure is one of the key challenges facing policymakers in the region—I experienced it first hand when I was finance minister of Liberia before coming to the IMF. The benefits are fairly clear: with improved infrastructure, new growth opportunities in the manufacturing and services sector can be generated, barriers to intraregional trade can be reduced, and economies will be better positioned to transition from low to higher productivity activities. Without improved infrastructure, I fear the increase in productivity and greater economic diversification necessary to sustain Africa’s current growth momentum will not materialize.
In this spirit, in the latest Regional Economic Outlook: Sub-Saharan Africa economists from the IMF’s African Department looked at progress so far in addressing the infrastructure deficit and discussed policies needed going forward.
Filed under: Economic outlook, Economic research, Financial Crisis, Globalization, growth, IMF, International Monetary Fund, Low-income countries, Reform | Tagged: Africa, China, domestic tax revenues, infrastructure, investors, manufacturing, public debt, Regional Economic Outlook: Sub-Saharan Africa, Sub-Saharan Africa, telecommunication | Leave a comment »
Posted on October 23, 2014 by iMFdirect
By Prakash Loungani
(version in 中文)
Raising the minimum wage is a polarizing issue. One side worries that raising it will lower employment. The other side downplays the impact on employment and plays up the positive impact on the living standards of the poor. Both sides are able to cling to their beliefs as the evidence, much of which comes from high-income (“advanced”) economies, is mixed.
The majority of the global labor force, however, is in the emerging markets. Moreover, for a number of these countries, instituting a minimum wage or raising it is squarely on the policy agenda. But little is known about the impacts of minimum wages on employment and living standards in emerging markets.
Filed under: Advanced Economies, Asia, Economic outlook, Economic research, Emerging Markets, Employment, Fiscal policy, Global Governance, growth, IMF, Inequality, International Monetary Fund, unemployment | Tagged: China, employment, income, labor force, labor market, manufacturing, minimum wage | Leave a comment »
Posted on October 22, 2014 by iMFdirect
By Rabah Arezki
Natural gas is creating a new reality for economies around the world. Three major developments of the past few years have thrust natural gas into the spotlight: the shale gas revolution in the United States, the reduction in nuclear power supply following the Fukushima disaster in Japan, and geopolitical tensions between Russia and Ukraine.
Over the last decade, the discovery of massive quantities of unconventional gas resources around the world has transformed global energy markets, and reshaped the geography of global energy trade (see map). Consumption of natural gas now accounts for nearly 25 percent of global primary energy consumption. Meanwhile, the share of oil has declined from 50 percent in 1970 to about 30 percent today.
Filed under: Advanced Economies, Asia, Economic outlook, Economic research, Europe, Globalization, growth, IMF, International Monetary Fund, Investment, Politics | Tagged: energy prices, Fukushima disaster, gas supply, Japan, natural gas, Russia, shale gas, Ukraine, United States, World Economic Outlook | Leave a comment »