Posted on December 10, 2014 by iMFdirect
By Min Zhu
(Versions in 中文)
For the past decade, house prices have steadily increased in the vast majority of the 30 countries that make up the IMF’s House Price Index for Emerging Markets released today at a conference organized by the IMF and the Indian Institute of Management in Bangalore, India (Figure 1).
The index shows a lull in the aftermath of the global financial crisis, followed by an increase for nine consecutive quarters since 2012. This run-up—four times as fast as that in advanced economies—would be even more pronounced if the larger countries in the group such as China and India receive greater weight in the index.
Filed under: Advanced Economies, Asia, Economic outlook, Economic research, Emerging Markets, Financial Crisis, growth, IMF, International Monetary Fund, Investment | Tagged: China, credit, emerging market, Global House Price Index, house prices, housing market, India, macroprudential policies, Microprudential regulations, Min Zhu, monetary policy, public-private partnerships | Leave a comment »
Posted on December 9, 2014 by iMFdirect
By Ratna Sahay and Preya Sharma
You may hear a sigh of relief from emerging market watchers as we approach the end of the year. Yet, against the backdrop of a prolonged period of low interest rates in advanced economies, huge capital flows, and a slowdown in emerging market growth, 2015 promises to keep us all on our toes. Differences in the timing of exit from unconventional monetary policy in advanced economies will have a global impact. The IMF has been keeping a close eye on developments in emerging markets, providing analysis on issues such as how investors’ differentiate between emerging market countries, the impact of volatile markets, and the factors explaining the slowdown in growth.
In a recent paper, we take a look back at what happened before and during the tapering episode to draw out the key lessons for policymakers. Past experience is clear: decisions by major central banks can have sizable global spillovers. Announcements by the U.S. Federal Reserve, in particular, have been strongly correlated with asset price volatility and capital flows in emerging markets. With expectations of Fed tightening to begin in 2015, we think a better understanding of these events can better inform policymakers’ decisions.
Filed under: Advanced Economies, Economic research, Emerging Markets, Financial Crisis, Government, growth, IMF, International Monetary Fund, Politics | Tagged: capital flows, central banks, emerging market, financial market, liquidity, market volatility, monetary policy, U.S. Fed, unconventional monetary policy | 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 October 10, 2014 by iMFdirect
By Serkan Arslanalp, David Jones, and Sanjay Hazarika
Six years after the start of the global financial crisis, low interest rates and other central bank policies in the United States remain critical to encourage economic risk-taking—increased consumption by households, and greater willingness to invest and hire by businesses. However, this prolonged monetary ease also may have encouraged excessive financial risk-taking. Our analysis in the latest Global Financial Stability Report suggests that although economic benefits are becoming more evident, U.S. officials should remain alert to excessive financial risk-taking, particularly in lower-rated corporate debt markets.
Bullish financial risk-taking bears monitoring
Persistently low global interest rates have prompted investors to search for higher returns in a wide range of markets, such as stocks, and investment-grade and high-yield bonds. This has resulted in escalating asset prices, and enabled issuers to sell assets with a reduced degree of protection for investors (we give you an example below). The combined trends of more expensive assets and a weakening quality of issuance could pose risks to stability.
Filed under: Advanced Economies, Annual Meetings, Economic Crisis, Economic outlook, Economic research, Emerging Markets, Finance, Financial Crisis, Fiscal policy, Globalization, IMF, International Monetary Fund, Investment | Tagged: banking system, corporate debt, emerging market, Global Financial Stability Report, interest rates, U.S. Fed, United States | Leave a comment »
Posted on September 30, 2014 by iMFdirect
By Abdul Abiad, Davide Furceri, and Petia Topalova
Infrastructure is the backbone of well-functioning economies. Unfortunately, that backbone is becoming increasingly brittle in a number of advanced economies. For example, there has been a decline in the overall quality of infrastructure in the United States and Germany (Figure 1; see the FT 2014 and ASCE 2013 for more in infrastructure in the U.S., and Der Speigel 2014 and Kunert and Link 2013 for Germany). In many emerging market and developing economies, the expansion of the backbone has not kept pace with the broader economy, and this is stunting the ability of these economies to grow.
Filed under: Advanced Economies, Economic outlook, Economic research, Emerging Markets, growth, International Monetary Fund, Investment, Public debt, Reform | Tagged: Brazil, emerging market, Germany, India, infrastructure, investment, Macroeconomic policies, public investment, South Africa, taxes, the Philippines, United States, World Economic Outlook | Leave a comment »
Posted on June 26, 2014 by iMFdirect
By Evridiki Tsounta and Kalpana Kochhar
(Versions in Español)
Emerging market economies have been experiencing strong growth, with annual growth for the period 2000-12 averaging 4¾ percent per year—a full percentage point higher than in the previous two decades. In the last two to three years, however, growth in most emerging markets has been cooling off, in some cases quite rapidly.
Is the recent slowdown just a hiccup or a sign of a more chronic condition? To answer this question, we first looked at the factors behind this strong growth performance.
Our new study finds that increases in employment and the accumulation of capital, such as buildings and machinery, continue to be the main drivers of growth in emerging markets. Together they explain 3 percentage points of annual GDP growth in 2000–12, while improvements in the efficiency of the inputs of production—which economists call “total factor productivity”—explain 1 ¾ percentage points (Figure 1).
Filed under: Economic Crisis, Economic outlook, Economic research, Emerging Markets, Employment, growth, International Monetary Fund, Latin America, Middle East | Tagged: balance sheets, commodiity prices, emerging market, employment, investment, structural reforms, trade | Leave a comment »
Posted on June 17, 2014 by iMFdirect
By Julian Chow and Shamir Tanna
(Versions in Español)
Much has been said lately about growing private sector debt in emerging market economies. In our recent analysis, we examined the corporate sector in a number of countries and found their rising levels of debt could make them vulnerable.
Low global interest rates in the aftermath of the global financial crisis and ample amounts of money pouring in from foreign investors have enabled nonfinancial corporations to raise record levels of debt.
Credit was readily available in the aftermath of the crisis, and economic expansion enabled earnings to grow healthily, thus helping to prevent leverage from rising too far and too fast. Recently though, slowing growth prospects are beginning to put pressure on firms’ profitability. Moreover, higher debt loads have led to growing interest expense, despite low interest rates. As a result, the ability of firms to service their debt has weakened (Figure 1).
Filed under: Debt Relief, Economic outlook, Economic research, Emerging Markets, Financial Crisis, growth, IMF, International Monetary Fund | Tagged: banking sector, credit, emerging market, exchange rate, interest rates, macroprudential policies, private sector | Leave a comment »