Why Countries Must Cooperate on Carbon Prices
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The US dollar is at its highest level since 2000, having appreciated by 22 percent against the yen, 13 percent against the Euro and 6 percent against emerging-market currencies since the start of this year.
Such a sharp strengthening of the dollar in a matter of months has sizable macroeconomic implications for almost all countries, the IMF’s Gita Gopinath and chief economist Pierre-Olivier Gourinchas write in a blog.
For many countries fighting to bring down inflation, the weakening of their currencies relative to the dollar has made the fight harder. On average, the estimated pass-through of a 10 percent dollar appreciation into inflation is 1 percent. Such pressures are especially acute in emerging markets.
The appropriate policy response to depreciation pressures requires a focus on the drivers of the exchange rate change and on signs of market disruptions, the authors say. “Specifically, foreign exchange intervention should not substitute for warranted adjustment to macroeconomic policies.”
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Most Urgent Challenges
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Sub-Saharan Africa faces one of the most challenging economic environments in years, marked by a slow recovery from the pandemic, rising food and energy prices, and high levels of public debt.
One of the most urgent issues confronting the region is the need to tackle decade-high levels of inflation while also supporting growth, write the IMF’s Marijn Bolhuis and Peter Kovacs in a blog that draws on the latest regional outlook.
There are big differences between countries, but the median of inflation rates increased to almost 9 percent in August. And even though the rise has been less dramatic than in other parts of the world and the drivers are different, inflation is nearly double pre-pandemic levels risking social and political instability and worsening food insecurity, the authors say.
“Given sub-Saharan Africa’s fragile recovery, combined with the fact that domestic demand pressures have not so far been an important driver of inflation, policymakers must proceed with caution in coming months while closely monitoring inflation.”
📺 Watch Abebe Aemro Selassie, director of the IMF's African Department, present the findings of the regional outlook at a press briefing during the annual meetings.
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In the September issue of F&D, the IMF’s Marjorie Henriquez profiles Harvard’s Stefanie Stantcheva, who uses surveys and experiments to uncover the invisible in traditional economic data.
Since earning her PhD from the Massachusetts Institute of Technology (MIT) in 2014, Stantcheva, 36, has become one of the world’s leading young economists. Among a boatload of awards and honors, she won the 2020 American Economic Association’s Elaine Bennett Research Prize, which recognizes outstanding research by a woman within the first seven years of receiving her PhD. She was the first woman to join the editorial board of the influential Quarterly Journal of Economics.
Stantcheva says she ultimately hopes her research will give economists and policymakers a greater chance to build consensus around social policies that improve people’s lives. More important, she says, she hopes that by understanding how people process information, economists will be able to provide the tools people need to make better decisions.
“Our goal is to find what explanations are useful to improve people’s understanding of core policies that really shape their daily lives,” Stantcheva says.
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The September 2022 edition of F&D Magazine focuses on THE MONEY REVOLUTION: CRYPTO, CBDCs, AND THE FUTURE OF FINANCE. In this edition, F&D delves into Crypto and CBDCs by drawing on cutting-edge research and analysis from economists and other leading experts including AgustĂn Carstens, Eswar Prasad, Ravi Menon, Tobias Adrian and many others.
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