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Dear Colleague,
In today's edition, we highlight:
- Kristalina Georgieva on climate change and global outlook
- The macroeconomics of AI
- Financial crime
- Green returns
- Interest rate anxiety
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CLIMATE CHANGE
(Credit: IMF)
Climate risks are macro critical, hitting economies, communities and households, and they can cause financial instability, Kristalina Georgieva told a session at the UN Climate Change, or COP28.
Global commitments for this decade add up to a cut in emissions of carbon and other greenhouse gases of just 11 percent, well below the cuts of between 25 percent and 50 percent needed to limit global warming to 1.5 degrees Celsius by 2050, IMF research shows.
“We believe that with a strong package of measures—including a carbon price, elimination of harmful subsidies, and policy support to accelerate decarbonization—we can still have the impact we need by 2030,” Georgieva told a forum of business leaders at the conference in Dubai.
Also read the managing director’s conversation with World Bank president Ajay Banga about climate cooperation, remarks on carbon pricing, and a joint article for the Financial Times (paywall) on carbon markets with European Commission president Ursula von der Leyen and WTO director-general Ngozi Okonjo-Iweala.
See more IMF blogs, events, videos and other content from COP28 covering the Paris Agreement, climate finance, green growth, and much more at our dedicated website and YouTube channel.
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MANAGING DIRECTOR INTERVIEW
Global economic outlook
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The outlook for the global economy has improved in recent months, Kristalina Georgieva told Council of Foreign Relations president Michael Forman in a wide-ranging discussion on Wednesday. But slower medium-term economic growth, a divergence between stronger- and weaker-performing economies, and fragmentation that hinders international cooperation remain concerns, Georgieva said. |
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FINANCE & DEVELOPMENT MAGAZINE
(Credit: Jun Cen)
AI can develop in very different directions—affecting productivity growth, income inequality, industrial concentration, and much more. The future that emerges will be a consequence of many things, including technological and policy decisions made today, write Stanford’s Erik Brynjolfsson and Gabriel Unger in F&D.
The December issue of F&D focuses on Artificial Intelligence: What AI means for economics. Read articles by Gita Gopinath, Daron Acemoglu, Simon Johnson, Ian Bremmer, Mustafa Suleyman, Daniel Björkegren, Joshua Blumenstock, Anton Korinek, Hélène Landemore, Nandan Nilekani, Tanuj Bhojwani, Andrew Berg, Chris Papageorgiou, Maryam Vaziri, Robert Horn, Jeremy Wagstaff, Kerry Dooley Young, Eswar Prasad, Anil Ari, Lev Ratnovski, Christopher Evans, Marika Santoro, Martin Stuermer, Gita Bhatt, and many more.
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There’s no question that Artificial Intelligence will increase productivity—but at what cost? Daniel Susskind has written two thought-provoking books on how AI is changing the nature of work and what tomorrow’s labor market will look like. In this podcast, Susskind speaks with journalist Rhoda Metcalfe about how encouraging technologies that complement rather than substitute human work would place fewer livelihoods at risk. |
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FINANCIAL CRIME
(Credit: Nikada/iStock by Getty Images)
The fight against financial crime isn’t lost, but the world needs to do more to limit the economic impact of crime, Rhoda Weeks-Brown, the head of the IMF’s Legal Department writes in a blog.
The international community has made significant progress toward strengthening safeguards against money laundering and terrorist financing, but the overall efforts are still broadly insufficient, Weeks-Brown and co-authors Carolina Claver and Chady El Khoury write.
“Money laundering is a necessary component of the organized crime that too frequently spans borders, skirts taxes, funds terrorism and corrupts officials—and it comes with hefty macroeconomic costs,” they say.
“Bad actors are also embracing new technologies on top of their traditional techniques, all of which makes economic growth less inclusive and sustainable, fueling inequality and informality.”
The IMF recently reviewed its strategy on anti-money laundering and combatting the financing of terrorism. The goal is to better help our 190 member economies address these critical financial integrity issues. Read more.
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Ensuring a lower-carbon future is not only necessary but also good for the economy, according to the latest climate scenarios from the Network for Greening the Financial System, a group of 127 central banks and financial supervisors working to manage climate risks and boost green investment. As the Chart of the Week shows, making an orderly transition to net zero by 2050 could result in global gross domestic product being 7 percent higher than under current policies.
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Weekly Roundup
FRAGMENTATION
Gita Gopinath, the IMF’s first deputy managing director, spoke to the Financial Times’s Martin Sandbu about Europe’s place in a geopolitically fragmented world. The interview built on Gopinath’s remarks in Berlin last week and recent research by staff from the IMF’s European Department.
FINTECH
Technological advances and competitive pressures have fueled rapid adoption of artificial intelligence in the financial sector and this is set to accelerate with the recent emergence of generative AI. In a Fintech Note, IMF economists provide early insights into GenAI’s inherent risks and potential impact on the financial sector.
FINTECH
Policymakers must develop policy responses to address risks posed by digital assets, IMF staff advise in a new Fintech Note. For instance, a foreign-currency denominated "stablecoin" can amplify currency substitution and capital outflows in response to negative shocks. The first line of defense is to maintain high-quality macroeconomic policy frameworks, guard against macro-financial vulnerabilities, and so minimize the preconditions for foreign currency substitution.
MONETARY POLICY
An IMF staff paper finds that monetary policy affects people’s wellbeing. It looks at the reactions of people living in Germany to the monetary policy decisions of the European Central Bank between 2002 and 2018. Self-reported wellbeing falls when monetary policy is tightened, and increases when monetary loosening is announced, the paper finds. These observations have implications for central bank communications.
FINANCIAL STABILITY
Financial crises are to economists what earthquakes are to geologists. But how can we measure these seismic economic shocks and their impact on financial and economic stability? In a recent paper, IMF staff construct a real-time continuous narrative measure of financial stress for 110 countries from 1967 to the present.
HOUSING
The price-to-income ratio is a widely used indicator of housing affordability but does not consider important factors such as the cost of financing. An IMF staff paper constructs a new measure of housing affordability that takes these factors into account and looks at the housing market in 40 countries from 1970 to 2021. Among the findings is that affordability improved in all countries during periods of lower interest rates and favorable economic conditions.
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DECEMBER 11 | 10:30 AM ET
Gita Gopinath, the IMF's first deputy managing director, will speak on conflict, fragmentation, divergence and the world economy at the International Economics Association's World Congress in Colombia. Watch on IMF Live.
DECEMBER 13 | 11:30 AM ET
Somlia’s finance minister Bihi Egeh, the director of the IMF’s Middle East and Central Asia department Jihad Azour, and the World Bank’s vice president of Eastern and Southern Africa Victoria Kwakwa will discuss Somalia’s path to debt relief and what it means for the country, its people, and the role of the international community.
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Thank you again very much for your interest in the Weekend Read! Be sure to let us know what issues and trends we should have on our radar. |
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