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The Haves and Have-nots Of the Digital Age

1 day ago

By Gita Bhatt
Accelerated by the pandemic, the digital future is coming at us faster than ever before, and maybe faster than we can imagine. In this issue of Finance & Development magazine, we explore the possible consequences—the good, the bad, and the gray.
For millions, technology has been a lifeline, changing the way we work, learn, shop, and entertain ourselves. In a year like no other, it has spurred game-changing digital shifts. Governments moved quickly, using mobile solutions to provide cash assistance; financial technology has helped the survival, and in some cases, growth of small- and medium-sized businesses; and the first national digital currency, in The Bahamas, provides a glimpse of the future of money.
Despite the promise of digital transformation, it can also drive

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The Great Divergence: A Fork in the Road for the Global Economy

6 days ago

By Kristalina Georgieva
عربي, Español, 日本語, Русский 
As G20 finance ministers and central bank governors meet virtually this week, the world continues to climb back from the worst recession in peacetime since the Great Depression.
The IMF recently projected global GDP growth at 5.5 per cent this year and 4.2 per cent in 2022. But it is going to be a long and uncertain ascent. Most of the world is facing a slow rollout of vaccines even as new virus mutations are spreading—and the prospects for recovery are diverging dangerously across countries and regions.
Indeed, the global economy is at a fork in the road. The question is: will policymakers take action to prevent this Great Divergence?

There is a major risk that most developing countries will languish for years to come.

As our note to

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Divergent Recoveries in Asia: History is not Destiny

7 days ago

By Davide Furceri, Jonathan D. Ostry, and Anthony C.K. Tan
 中文,  日本語
Asian economies are performing better than expected. In the IMF’s latest World Economic Outlook Update, we upgraded our growth estimate for 2020 by 0.7 percentage point from our previous forecast in October, to a contraction of 1.5 percent—in regional terms, a better outcome than other parts of the world. This is largely driven by stronger-than-expected performance among advanced economies in the region, as well as some large emerging market economies such as China, India, Malaysia, and Thailand.

The expectation is for strong growth in Asia-Pacific in 2021 and 2022; but the aggregate figures mask an enormous range of output losses.

Growth outturns in the fourth quarter and higher-frequency economic indicators for

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Structural Factors and Central Bank Credibility Limit Inflation Risks

11 days ago

By Gita Gopinath
After ending last year with unexpectedly strong vaccine success and hope that the pandemic and economic distress it caused would recede, we woke up to the reality of new virus variants and the unpredictable, winding road that it can lead the world down.
Something similar has happened with the discourse on inflation. At the end of last year, after a historic collapse of the global economy estimated at -3.5 percent, inflation was below target in 84 percent of countries. This was expected to allow for continued low interest rates and government spending to support growth, especially in advanced economies. The U.S. plan for an additional $1.9 trillion of fiscal spending has challenged this view, with even traditionally dovish economists raising concerns about an overheated

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Public and Private Money Can Coexist in the Digital Age

12 days ago

By Tobias Adrian and Tommaso Mancini-Griffoli
We value innovation and diversity—including in money. In the same day, we might pay by swiping a card, waving a phone, or clicking a mouse. Or we might hand over notes and coins, though in many countries increasingly less often.
Today’s world is characterized by a dual monetary system, involving privately-issued money—by banks of all types, telecom companies, or specialized payment providers—built upon a foundation of publicly-issued money—by central banks. While not perfect, this system offers significant advantages, including: innovation and product diversity, mostly provided by the private sector, and stability and efficiency, ensured by the public sector.
These objectives—innovation and diversity on the one hand, and stability and

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Why Climate Change Vulnerability Is Bad for Sovereign Credit Ratings

13 days ago

By Serhan Cevik and João Tovar Jalles
عربي, 中文, Español, Русский 
Climate change has made the world a riskier place.
The destruction wrought by heatwaves, droughts, hurricanes, and coastal flooding doesn’t stop with the toll on human lives and livelihoods—it can also have deep consequences for a country’s finances.
Recent IMF staff research has found that a country’s vulnerability or resilience to climate change can have a direct effect on its creditworthiness, its costs of borrowing, and, ultimately, the likelihood it might default on its sovereign debt.

Financial risks created by climate change are felt more acutely by developing economies…

The economic consequences of climate change have been known for years, but research on how climate change affects sovereign risk has been

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Chart of the WeekWhen it Comes to Services vs. Manufacturing, Words Matter

14 days ago

By Reda Cherif and Fuad Hasanov
Efforts to revive national manufacturing sectors get a lot of airtime. After all, the sector propelled many East and South East Asian economies—the so-called “East Asia Miracle”—and was a gateway to the middle class for millions of workers. However, for all the obsession with manufacturing, economists for their part seem to be more preoccupied with services.
To confirm this, we combed through thousands of IMF reports on countries’ economies from 1978 to 2019. Using 113 distinct terms related to growth theory and policy—ranging from “infrastructure” to “liberalization”—we computed the relative weights of each term across countries and years. As shown in our chart of the week, “services” is used more than any other term.
In fact, across all countries and

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Chart of the WeekHow e-Government Services Can Pay Dividends

19 days ago

By Ali Al-Sadiq
The ability to renew your passport or driver’s license, pay a tax bill, or access government data with the click of a button or swipe of a screen, anytime and anywhere, has grown more important during the COVID-19 pandemic to prevent the spread of the virus. Beyond the obvious efficiency and transparency gains that digital government services provide, “e-government” can actually make an economy more attractive to foreign investors.
Recent IMF staff research has linked―for the first time―the accessibility of government information and services online to the volume of foreign direct investment a country receives. For many countries, this positive impact is likely to be stronger as the pandemic pushes governments to provide even more services and information online.
A review

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Latin America and Caribbean’s Winding Road to Recovery

22 days ago

By Alejandro Werner, Anna Ivanova, and Takuji Komatsuzaki
Español, Português
Latin America and Caribbean economies managed to bounce back from COVID-19’s initial economic devastation earlier in 2020. But the pandemic’s resurgence towards the end of the year threatens to thwart an uneven recovery and add to the steep social and human costs.
After the sharp contraction in the second quarter of last year, the brisk recovery in the third quarter exceeded expectations in some larger economies, like Brazil, Peru and Argentina. Manufacturing recovered faster than services. Net exports have recovered to pre-crisis levels while consumption and investment are lagging.
Early indicators, like industrial production and retail sales, pointed to a continuing comeback in the last quarter of 2020, boosted

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Cooperation Critical to Reducing Divergent Paths to Recovery in Middle East and Central Asia

27 days ago

By Jihad Azour
 عربي, Français, Русский 
The road to recovery for the Middle East and Central Asia region will hinge on containment measures, access to and distribution of vaccines, the scope of policies to support growth, and measures to mitigate economic scarring from the pandemic. The virus’s second wave, which began in September, hurt many countries in the region, where infection and death rates far surpassed those seen during the first wave . Most countries resumed selective restrictions to help lessen their negative humanitarian and economic impact, while some have started vaccination campaigns.

Access to the COVID-19 vaccine will play a critical role in the recovery ahead.

Uneven access to vaccines
Meanwhile, region-wide disparities on vaccine plans require active policies to

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COVID’s Long Shadow: Social Repercussions of Pandemics

27 days ago

By Philip Barrett, Sophia Chen, and Nan Li
عربي, 中文, Español, Français, 日本語, Português, Русский 
In 1832, the great cholera pandemic hit Paris. In just a few months, the disease killed 20,000 of the city’s 650,000 population. Most fatalities occurred in the heart of the city, where many poor workers lived in squalid conditions, drawn to Paris by the Industrial Revolution. The spread of the disease heightened class tensions, as the rich blamed the poor for spreading the disease and the poor thought they were being poisoned. Animosity and anger were soon directed at the unpopular King. The funeral of General Lamarque—pandemic victim and defender of popular causes—spurred large anti-government demonstration on the barricaded streets: scenes immortalized in Victor Hugo’s novel Les Misérables.

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Chart of the WeekThe Pre-Pandemic Debt Landscape—and Why It Matters

29 days ago

By Xuehui Han, Paulo Medas, and Susan Yang
Many countries entered the pandemic with elevated debt levels. Our new update of the IMF’s Global Debt Database shows that global debt—public plus private—reached $197 trillion in 2019, up by $9 trillion from the previous year. This substantial debt created challenges for countries that faced a debt surge in 2020, as economic activity collapsed and governments acted swiftly to provide support during the pandemic.

Higher debt can potentially reduce the ability of governments to react to the COVID-19 crisis.

Our data show that the global average debt-to-GDP ratio (weighted by each country’s GDP in US dollars) rose to 226 percent in 2019, 1.5 percentage points higher than in 2018. Most of the increase came from higher public debt in emerging

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Government Support Is Vital as Countries Race to Vaccinate

January 28, 2021

By Vitor Gaspar, Raphael Lam, Paolo Mauro, and Mehdi Raissi
عربي, Español, Français, 日本語, Português, Русский 
The COVID-19 pandemic is accelerating in many countries and uncertainty is unusually high. Decisive government actions are necessary to ensure swift and extensive vaccine rollouts, protect the most vulnerable households and otherwise viable firms, and foster a durable and inclusive recovery.

Most countries will need to do more with less, considering the increasingly tight budget constraints.

Many countries have continued to support people and firms amid the resurgence of infections and renewed restrictions, while calibrating their responses to the evolving economic situation. The January 2021 Fiscal Monitor Update provides an overview of such efforts and outlines what more

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Financial Perils in Check for Now, Eyes Turn to Risk of Market Correction

January 27, 2021

By Tobias Adrian and Fabio Natalucci
عربي, 中文, Español, Français, 日本語, Português, Русский 
“The vaccines are here!”—the cry heard and welcomed the world over—has boosted hopes of a global economic recovery in 2021. Yet until vaccines are widely available, the market rally and the economic recovery rest on continued monetary and fiscal policy support.

While there is for now no alternative to continued monetary policy support, there are legitimate concerns around excessive risk-taking and market exuberance.

Financial stability risks have been in check so far, but we cannot take this for granted.
Prices for stocks, corporate bonds, and other risk assets have risen higher on the news of vaccine rollouts. Financial markets have shrugged off rising COVID-19 cases, betting that continued policy

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A Race Between Vaccines and the Virus as Recoveries Diverge

January 26, 2021

By Gita Gopinath
عربي, 中文, Español, Français, 日本語,  Português, Русский 
In just three months since we released our last forecast in October, recorded COVID-19 deaths have doubled to over 2 million, as new waves have lifted infections past previous peaks in many countries. In these same three months, multiple vaccines have seen unexpectedly strong success and some countries have started ambitious vaccination drives. Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens. There remains tremendous uncertainty and prospects vary greatly across countries.

There remains tremendous uncertainty and prospects vary greatly across countries.

In our latest World Economic

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What the Continued Global Uncertainty Means for You

January 19, 2021

By Hites Ahir, Nicholas Bloom, and Davide Furceri
عربي, Español, 中文, Français, 日本語, Português, Русский 
Global uncertainty reached unprecedented levels at the beginning of the COVID-19 outbreak and remains elevated. The World Uncertainty Index—a quarterly measure of global economic and policy uncertainty covering 143 countries—shows that although uncertainty has come down by about 60 percent from the peak observed at the onset of the COVID-19 pandemic in the first quarter of 2020, it remains about 50 percent above its historical average during the 1996–2010 period.

Uncertainty in systemic economies matters for uncertainty around the world.

What drives global uncertainty?
Economic growth in key systemic economies, like those of the United States and European Union, is a key driver of

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Legally Speaking, is Digital Money Really Money?

January 14, 2021

By Catalina Margulis and Arthur Rossi
Countries are moving fast toward creating digital currencies. Or, so we hear from various surveys showing an increasing number of central banks making substantial progress towards having an official digital currency.
But, in fact, close to 80 percent of the world’s central banks are either not allowed to issue a digital currency under their existing laws, or the legal framework is not clear.
To help countries make this assessment, we reviewed the central bank laws of 174 IMF members in a new IMF staff paper, and found out that only about 40 are legally allowed to issue digital currencies.
Not just a legal technicality
Any money issuance is a form of debt for the central bank, so it must have a solid basis to avoid legal, financial and reputational

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Data PointsDenmark’s Ambitious Green Vision

January 11, 2021

By Nicoletta Batini and Miguel Segoviano
Denmark aspires to become one of the most climate-friendly countries in the world. In June, its Parliament overwhelmingly passed a new climate law that aims to reduce greenhouse gas emissions by 70 percent below 1990 levels by 2030, with net zero emissions targeted for 2050.
This is an even more ambitious goal than the EU’s target to cut emissions by 55 percent over the same time period.

Amount by which Denmark plans to reduce greenhouse gas emissions by 2030 relative to 1990 levels

A new IMF staff paper takes a closer look at Denmark’s green strategy and proposes a few adjustments to help the country realize its ambitious goals. In line with earlier IMF recommendations, the paper proposes a comprehensive strategy with enhanced carbon

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The Jobs of Tomorrow

January 7, 2021

By Saadia Zahidi
This article first appeared in Finance & Development magazine.
The World Economic Forum’s Future of Jobs Report 2020 comes at a crucial juncture for the world of work. The report, now in its third edition, maps the jobs and skills of the future, tracking the pace of change based on surveys of business leaders and human resource strategists from around the world.

Some jobs will disappear and others will emerge as the world faces a dual disruption.

This year, we aim to shed light on the effect of pandemic-related disruptions placed in the broader context of longer-term technology trends. Here are the five things you need to know from our findings.

The workforce is automating faster than expected, displacing 85 million jobs in the next five years. Automation, in

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Top 10 Blogs of 2020

January 4, 2021

By IMFBlog
Welcome to 2021. Before we step too far into the new year, the editors at IMFBlog invite you to reflect on what the world went through in 2020. As much as we would like to turn the page on 2020, navigating a course forward through still uncertain times entails using all we’ve learned up to now.
Our list of your top reads from the past year tracks the COVID-19 pandemic—from the early days of uncertainty and fear through to the tepid and uneven reopening of economies. Naturally, our coverage focused on the profound implications for the global economy and financial stability. But it touched on other dimensions of the crisis as well.
As policy makers debated how best to respond, our economists put forward their recommendations on the types of policies needed to meet the crisis head

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Global Policy Responses to Capital Flow Volatility

December 23, 2020

By Annamaria De Crescenzio, Annamaria Kokenyne, Dennis Reinhart, and Julia Schmidt
The COVID-19 health and economic crisis has once again focused attention on the fickleness of capital flows and the need to have an adequate policy toolkit to manage the risks that stem from these flows, while maximizing their benefits.
A virtual workshop organized by the Bank of England, Banque de France, International Monetary Fund and the Organization for Economic Co-operation and Development (OECD) highlighted risks emerging from the changing landscape of global capital flows and the need for greater international efforts to address these including by broadening the regulatory perimeter.

The nexus between the global financial cycle and extreme capital flow episodes, as well as currency crises, is here

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Reclaiming Our World Post-2020

December 22, 2020

By Atish Rex Ghosh
As 2020 draws to a close, many of us cannot wait for this annus horribilis to end. And for good reason: this year has seen more than a million and a half COVID-19 deaths; an economic collapse far greater than that of the 2008 financial crisis; a boiling-over of resentment against decades of racial and social injustice; record numbers of wildfires decimating millions of acres of pristine forests; and locust plagues of Biblical proportions.
Yet, 2020 also gives us reason for hope. The development, within a few short months, of at least three COVID-19 vaccines that promise a high degree of efficacy is nothing short of miraculous: a great triumph of medical science, technology, and yes, globalization.

As the COVID-19 pandemic unfolded, the IMF went into overdrive.


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Top 10 Charts of the Week for 2020

December 21, 2020

2020 will soon be over, and with it an incredibly trying year. The editors at IMFBlog wish you good health and peace over the holidays ahead, and into the new year.
In case you missed some of the compelling facts and figures in our Charts of the Week series this year, we have pulled together your top reads.
Here are the top ten charts of the week for 2020, based on your readership.
1. Global Uncertainty Related to Coronavirus at Record High

2. Unemployment in Today’s Recession Compared to the Global Financial Crisis

3. How the Rich Get Richer

4. Tourism Trauma and COVID-19

5. Low Internet Access Driving Inequality

6. The Crisis is Not Over, Keep Spending (Wisely)

7. Aging Economies May Benefit Less from Fiscal Stimulus
8. Data Disruption: The Impact of COVID-19 on Inflation

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What is Really New in Fintech

December 17, 2020

By Arnoud Boot, Peter Hoffmann, Luc Laeven, Lev Ratnovski
The financial industry is undergoing rapid technological change. Traditional banks face competition from online start-ups with no physical branches. Social media and other digital platforms are expanding into payments and credit. The increase in demand for digital services triggered by COVID-19 is turbo-charging this transformation. The confluence we are witnessing is driving fintech innovation and raises important questions. What are the transformative aspects of recent financial innovation that can uproot finance as we know it? Which new policy challenges will the transformation of finance bring?

Fintech’s potential to reach out to over a billion unbanked people around the world, and the changes in the financial system structure

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Glaciers of Global Finance: The Currency Composition of Central Banks’ Reserve Holdings

December 16, 2020

By Alina Iancu, Neil Meads, Martin Mühleisen, Yiqun Wu
 Español, 中文, Français, 日本語, Русский 
The currencies that are being held by central banks as foreign exchange reserves have remained largely steady over decades. Changes in the composition of these holdings can, at best, be described as glacial in pace. But geopolitical shifts and technological revolutions are reshaping the global economy and the international use of currencies. These forces, and the fallout from the COVID-19 pandemic, could further accelerate the transformations in the reserve holdings of central banks.

Financial links seem to be a key driver of reserve currency holdings.

The status quo
There are currently around 180 national currencies, but only a few are widely used for international transactions, such as

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What to do When Low-for-Long Interest Rates are Lower and for Longer

December 14, 2020

By Tobias Adrian
Central banks have played a pivotal role in easing financial conditions in response to the COVID-19 shock, and helped avert a catastrophic downturn. However, their work is far from done. Yet more monetary stimulus will be needed to support economic recovery, and central banks are implementing innovative new strategies to provide it.

Policymakers must weigh the pros of more stimulus today against the cons of higher financial stability risks in the future.

While the new approaches are both necessary and welcome, it is critical that policymakers weigh the pros of providing more stimulus today against the potential cons of higher financial stability risks down the road. In a new paper, I present a model for quantifying the tradeoff between support today and vulnerability

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Chart of the WeekWhen Inequality is High, Pandemics Can Fuel Social Unrest

December 11, 2020

By Tahsin Saadi Sedik and Rui Xu
In the months and years following previous pandemics, the countries most affected saw a rise in social unrest. Based on this historical trend, the COVID-19 pandemic could pose a threat to the social fabric in many countries, but these trends do not pre-determine an outcome.

Pandemics can set off a vicious cycle of economic despair, inequality, and social unrest.

We take a closer look into this issue in a new IMF staff working paper by analyzing the effect of past major pandemics in 133 countries over 2001–18: SARS in 2003, H1N1 in 2009, MERS in 2012, Ebola in 2014, and Zika in 2016. As shown in our chart of the week, social unrest increased consistently following each of these outbreaks. The International Country Risk Guide’s civil disorder score,

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Navigating Capital Flows—An Integrated Approach

December 9, 2020

By Tobias Adrian, Gita Gopinath, Ceyla Pazarbasioglu
عربي, 中文, Español, Français, 日本語, Português, Русский 
In a continuous effort to help countries manage volatile cross-border capital flows, the IMF has taken a major step toward a new analytical macroeconomic framework that can guide appropriate policy responses. The work reflects evolving thinking on macroeconomic policy and will feed into the upcoming review of the IMF’s Institutional View on the Liberalization and Management of Capital Flows, which currently guides the Fund’s advice and assessments of members’ policies.

Our analysis suggests that there is no “one-size-fits-all” response to capital flow volatility, nor is it a case of “anything goes” or that all policies are equally effective.

International capital flows provide

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A Greener Future Begins with a Shift to Coal Alternatives

December 8, 2020

By Christian Bogmans and Claire Mengyi Li
中文, Español, Français, 日本語, Português, Русский 
As the world economy emerges from the COVID-19 crisis, the consumption of coal is expected to recover from its sharp decline during the pandemic.
Demand for coal remains strong and helps to fuel economic development in emerging markets. Yet many countries, seeking a more sustainable future, have been taking steps to reduce their dependence on fossil fuels, especially coal. Obstacles to their efforts have proven difficult to overcome, not least because people who work in the coal industry depend on it for their livelihoods—but the right policy levers can help.

Tough questions will need to be asked and answered when considering the policy alternatives supporting a shift away from coal.


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Cyber Risk is the New Threat to Financial Stability

December 7, 2020

By Jennifer Elliott and Nigel Jenkinson
عربي, 中文, Español, Français, Português, Русский 
Many of us take for granted the ability to withdraw money from our bank account, wire it to family in another country, and pay bills online.Amid the global pandemic, we’ve seen how much digital connection matters to our everyday life. But what if a cyberattack takes the bank down and a remittance doesn’t go through?

As we become more reliant on digital banking and payments, the number of cyberattacks has tripled over the last decade, and financial services is the most targeted industry.

As we become increasingly reliant on digital financial services, the number of cyberattacks has tripled over the last decade, and financial services continue to be the most targeted industry. Cybersecurity has clearly

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