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Tag Archives: exchange rates

Should Emerging Economies Embrace Quantitative Easing during the Pandemic?

Gianluca Benigno, Jonathan Hartley, Alicia Garcia Herrero, Alessandro Rebucci, and Elina Ribakova Emerging economies are fighting COVID-19 and the economic sudden stop imposed by lockdown policies. Even before COVID-19 took root in emerging economies, however, investors had already started to flee these markets–to a much greater extent than they had at the onset of the 2008 global financial crisis (IMF, 2020; World Bank, 2020). Such sudden stops in capital flows can cause significant...

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Courage under Fire: Policy Responses in Emerging Market and Developing Economies to the COVID-19 Pandemic

Martin Mühleisen, Vladimir Klyuev, Sarah Sanya The coronavirus crisis is a crisis like no other, and for emerging market and developing economies (EMDE), it has triggered a policy response like no other, both in scope and magnitude. Despite their diversity, and in some cases, strained resources, this large group of countries—consisting of emerging markets and low-income countries—have bolstered the provision of health services and extended unprecedented support to households, firms, and...

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Modeling the Global Effects of the COVID-19 Sudden Stop in Capital Flows

Ozge Akinci, Gianluca Benigno, and Albert Queralto The COVID-19 outbreak has triggered unusually fast outflows of dollar funding from emerging market economies (EMEs). These outflows are known as “sudden stop” episodes, and they are typically followed by economic contractions. In this post, we assess the macroeconomic effects of the COVID-induced sudden stop of capital flows to EMEs, using our open-economy DSGE model. Unlike existing frameworks, such as the Federal Reserve...

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Taming the Currency Hype

By Gustavo Adler, Luis Cubeddu, and Gita Gopinath Escalating trade tensions are taking a toll on the global economy and are partly responsible for the recent downward revisions to our growth forecasts for 2019-20. Facing sluggish growth and below-target inflation, many advanced and emerging market economies have appropriately eased monetary policy, yet this has prompted concerns over so-called beggar-thy-neighbor policies and fears of a currency war. In this blog post, we discuss the...

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Economic Forces, Not Tariffs, Drive Changes in Trade Balances

By Johannes Eugster, Florence Jaumotte, Margaux MacDonald, and Roberto Piazza عربي, 中文, Español, 日本語, Português New IMF research finds that macroeconomic factors, not tariffs, explain most of the changes in trade balances between two countries. Bilateral trade balances (the difference in the value of exports and imports between two countries) have come under scrutiny recently. Some policymakers are concerned that their large and rising size are the result of uneven measures that distort...

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The Perplexing Co-Movement of the Dollar and Oil Prices

Thomas Klitgaard, Paolo Pesenti, and Linda Wang Oil prices and the exchange rate of the U.S. dollar against the euro have often moved together over the past decade or so, but it is not at all clear why they should. The standard interpretation of oil price movements as a response to global oil supply and demand shifts makes it unlikely that the correlation stems from the dollar’s effect on oil prices. In addition, the notorious difficulty in predicting currency moves makes it hard to...

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When History Rhymes

By Christine Lagarde November 5, 2018 عربي,  中文 Español, Português, Русский The graves of soldiers who died in World War I, near Verdun, France: on the 100th anniversary of the end of the Great War, leaders should listen closely to the echoes of history (photo: Mathieu Pattier/SIPA/Newscom) Mark Twain once said that “History never repeats itself, but it does often rhyme.” As heads of state gather in Paris this week to mark 100 years since the end of World War I, they should listen...

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Global Growth Plateaus as Economic Risks Materialize

By Maurice Obstfeld October 9, 2018 عربي, 中文, Español, Français, Baˈhasa indoneˈsia, 日本語, Русский Uncertainty over trade policy is becoming a drag on economic activity (photo: Imagine China/Newscom) The latest World Economic Outlook report projects that global growth will remain steady over 2018–19 at last year’s rate of 3.7 percent. This growth exceeds that achieved in any of the years between 2012 and 2016. It occurs as many economies have reached or are nearing full employment and...

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Central Bank Credibility Pays Off in Times of Stress

By Rudolfs Bems, Francesca Caselli, Francesco Grigoli, Bertrand Gruss, and Weicheng Lian October 3, 2018 عربي, 中文, Español, Français, Português Shopping center in Warsaw, Poland: emerging market economies have been able to bring down inflation to a low level (photo: Caro/Bastian/Newscom) Since the mid-2000s, inflation in emerging market economies has been remarkably low and stable, in sharp contrast to the 1990s. But rising interest rates in advanced economies like the United States...

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Top 5 Blogs on Finance

By IMFBlog September 11, 2018 A guard stands outside former US investment bank Lehman brothers (photo: Frances M. Roberts/Newscom) The tenth anniversary of the collapse of US investment bank Lehman Brothers and the global crisis that followed is a sober reminder of what has changed, and what has not, in the world of economics and finance.  To mark this turning point in the story of the global financial system, we have selected a few blogs that highlight some of our most recent...

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