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Fed Monetary Policy, Inverted Yield Curve and Outlook for US and Global Economy

Satyandra Nayak , Otaviano Canuto | Posted : August 27, 2019


Since the Fed’s July meeting, when the Fed Funds Rate had a 0.25% cut, fears about the impact of the US-China trade war on the global economy have escalated. The US yield curve inversion received much attention as a harbinger of a slowdown in the global and US economic outlooks. We approach here whether lights on next monetary policy events can be obtained from reading the minutes of the Fed’s meeting – and of the July meeting of the ECB governing council – released this week.

Les instruments de Bretton Woods en mode de retrait contraint

Mohammed Germouni | Posted : August 26, 2019


La création d’instruments financiers à la Conférence de Bretton Woods, à la fin de la Seconde  Guerre mondiale, était une nouveauté pour l’époque et avait sonné la fin du chacun pour soi « monétaire », en jetant les bases d’un système de changes fixes mais ajustables reconnaissant, cependant, et dès le départ, la primauté du dollar de la nouvelle grande puissance.

Brazil must hold to structural reforms while undergoing slow economic recovery

Otaviano Canuto | Posted : August 08, 2019


Brazil's economic recovery after the deep 2015-16 recession has been the slowest on record, with GDP per capita last year remaining more than 9% below its pre-crisis peak (Chart 1, right side). The IMF's annual report on the country's economy, released two weeks ago, estimated current GDP to be nearly 4% below its potential level, which suggests insufficiency of aggregate demand (Chart 1, left side). On the other hand, as the slow recovery reflects structural factors, it is necessary to avoid the use of measures to reinforce such demand that might run against the confrontation of such problems.

Planning for tomorrow's workforce: is Africa ready?

Tayeb Ghazi | Posted : April 10, 2019

Africa is experiencing a demographic boom, so as its population is expected to double by 2050 to reach 2.8 billion. The growth in Africa’s working-age population will be inevitable. The youth population will also grow to make of Africa the continent of youth ‘par excellence’, so as it will hold the largest number of young people in the globe.

Africa's industrialization and global commodity markets: the need for a paradigm shift

Yves Jégourel | Posted : December 04, 2018

Are the relationships between global commodity markets and the developing economies that export them being properly analyzed? After more than half a century of economic research on this issue, the answer, paradoxically, remains uncertain. While the well-known "natural resource curse" tells us that the exploitation of a nation's geological endowment often leads to the implementation of inappropriate economic policies, corruption and rent-seeking strategies, or even to conflicts and civil wars, "Dutch disease" suggests that the economic development of extractive sectors can lead to a deterioration in national price competitiveness and, as a result, to macroeconomic vulnerability. The so-called Prebisch-Singer hypothesis, formulated in 1950, shows, for its part, that the terms of trade for commodity exporting countries deteriorate over time. While these different approaches have been the subject of the most serious empirical tests, the implicit assumption on which they are based still surprises, namely that of being able to apprehend raw materials as a homogeneous whole. They are anything but the latter. 

The Parrot and Commodity Prices

Otaviano Canuto | Posted : October 10, 2018

Teach a parrot the terms ‘supply and demand’ and you’ve got an economist.” That parrot can explain to us what is happening with commodity prices (Chart 1, left side). That is, while agricultural and industrial metal prices - particularly copper - plummeted on average by over 10% since June, energy prices - especially oil - have risen nearly 20% since the beginning of the year. Brent's barrel price is now triple what it was in early 2016. Check the latest World Bank Commodities Price Data (The Pink Sheet) here.

Quand les grands se fâchent, le monde panique !

Tayeb Ghazi | Posted : August 13, 2018

Depuis la fin de l’année 2017, le président Donald Trump mène plusieurs batailles commerciales, contre différents partenaires, sous prétextes de sauver des emplois industriels américains et de réduire le déficit commercial des États-Unis. S’il est difficile de se prononcer sur les effets des combats commerciaux amorcés par le président Trump, l’importance des opposants et des échanges pour l’économie mondiale en fait une source de risque pour la croissance, les emplois et les prix à l’échelle planétaire.

Argentina, Turkey and the May Storm in Emerging Markets

Otaviano Canuto | Posted : June 06, 2018

The spike in US bond yields since mid-April in tandem with the strengthening of the dollar sparked a retrenchment of capital flows to emerging markets (EM), accompanied by a sell-off of assets in some cases. Argentina and Turkey suffered from strong and potentially disruptive exchange rate depreciation pressures in May, with financial markets calming down only after bold domestic policy moves (interest rate hikes in both countries and, in the case of Argentina, a decision to seek a new loan from the International Monetary Fund - IMF). 

China, Oil, and the Commodity Derivatives Market

Yves Jégourel | Posted : April 16, 2018

The launch of an oil futures contract on the Shanghai International Energy Exchange (INE) cannot be merely seen as a “technical” or secondary event, as it foreshadows what global commodities markets will become in a few years. The Shanghai Futures Exchange (SHFE) and the Dalian Commodity Exchange (DCE) have, indeed, seen their trading volumes increase significantly over the past decade thanks to steel and iron ore, which could suggest that the move is, in fact, not that unprecedented. In terms of the volume of traded contracts, these two exchanges compete with the two giants of the sector: the Chicago Mercantile Exchange (CME), and the Intercontinental Exchange (ICE). While this statistic is not fully representative of their actual respective activities – based on an open-interest analysis, i.e. the number of contracts that have been bought or sold and not yet subject to resales or buy-backs offering strikingly different conclusions – it still fully reflects their economic significance, at least at the local level. Notwithstanding, the point isn’t this.

La Chine, le pétrole et les marchés dérivés de matières premières

Yves Jégourel | Posted : April 10, 2018

Le lancement d’un contrat à terme pétrolier sur le Shanghai International Energy Exchange (INE) ne saurait être vu comme un évènement « technique » ou secondaire tant il préfigure ce que seront dans quelques années les marchés mondiaux de matières premières. Le Shanghai Futures Exchange (SHFE) et le Dalian Commodity Exchange (DCE) ont certes vu leurs volumes de trading augmenter considérablement sur la dernière décennie grâce à l’acier et au minerai de fer, ce qui pourrait laisser à penser que l’initiative n’est, en définitive, pas inédite. En nombre de contrats traités, ces deux bourses concurrencent, en effet, le Chicago Mercantile Exchange (CME) et l’Intercontinental Exchange (ICE), les deux géants du secteur. Même si cette statistique n’est, il est vrai, pas pleinement représentative de la réalité de leurs activités respectives — une analyse en termes d’open interest, i.e. le nombre de contrats ayant été achetés ou vendus et n’ayant pas encore fait l’objet d’une revente ou d’un rachat offrant des conclusions singulièrement différentes —, elle témoigne pleinement de leur importance économique, sur le plan domestique du moins. L’essentiel n’est cependant pas là.