The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. To date, a total of SDR 660.7 billion (equivalent to about US$943 billion) have been allocated. This includes the largest-ever allocation of about SDR 456 billion approved on August 2, 2021 (effective on August 23, 2021). This most recent allocation was to address the long-term global need for reserves, and help countries cope with the impact of the COVID-19 pandemic. The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.

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By Romain Duval, Davide Furceri, and Marina M. Tavares

Some central banks are currently debating whether to tighten monetary policy to fight inflationary pressures, after having eased decisively in response to the COVID-19 shock. In making such decisions, central bankers have to consider how much businesses and consumers will respond. The structure of the financial system and the future expectations of consumers and businesses are key drivers of how effective monetary policy actions will be. Yet there’s another, overlooked, driver: corporate market power.

New IMF staff research has found ever larger and more powerful companies are making monetary policy a less potent tool for managing the economy in advanced economies, all else equal.

Market power has risen in many advanced economies and emerging market countries in recent years, as seen in price markups—the ratio of a good or service’s price to its marginal cost of production, concentration, or...

?By Vybhavi Balasundharam and Leni Hunter

With virtually no international travel since March 2020, national airlines in the Pacific face mounting financial difficulties. For Pacific Island countries this shock is particularly severe given the weak financial condition of national carriers prior to the pandemic, the reliance of these countries on airline connectivity to support tourism, and limited fiscal space to provide ongoing or future financial support to these airlines.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. To date, a total of SDR 660.7 billion (equivalent to about US$943 billion) have been allocated. This includes the largest-ever allocation of about SDR 456 billion approved on August 2, 2021 (effective on August 23, 2021). This most recent allocation was to address the long-term global need for reserves, and help countries cope with the impact of the COVID-19 pandemic. The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.

?By Vybhavi Balasundharam and Leni Hunter

With virtually no international travel since March 2020, national airlines in the Pacific face mounting financial difficulties. For Pacific Island countries this shock is particularly severe given the weak financial condition of national carriers prior to the pandemic, the reliance of these countries on airline connectivity to support tourism, and limited fiscal space to provide ongoing or future financial support to these airlines.

The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. To date, a total of SDR 660.7 billion (equivalent to about US$943 billion) have been allocated. This includes the largest-ever allocation of about SDR 456 billion approved on August 2, 2021 (effective on August 23, 2021). This most recent allocation was to address the long-term global need for reserves, and help countries cope with the impact of the COVID-19 pandemic. The value of the SDR is based on a basket of five currencies—the U.S. dollar, the euro, the Chinese renminbi, the Japanese yen, and the British pound sterling.

You can add location information to your Tweets, such as your city or precise location, from the web and via third-party applications. You always have the option to delete your Tweet location history. Learn more

Dominant currency pricing

The central assumption underlying the traditional view on exchange rates is that firms set their prices in their home currencies. As a result, domestically-produced goods and services become cheaper for trading partners when the domestic currency weakens, leading to more demand from them and, thus, more exports. Similarly, when a country’s currency depreciates, imports become more expensive in home currency terms, inducing consumers to import less in favor of domestically-produced goods. Thus, if prices are set in the exporter’s currency, a weaker currency can help the domestic economy recover from a negative shock.

However, there is growing evidence that most of global trade is invoiced in a few currencies, most notably the US dollar—a feature dubbed Dominant Currency Pricing or Dominant Currency Paradigm. In fact, the share of US dollar trade invoicing across countries far exceeds their share of trade with the US. This is especially...

The Special Drawing Right (SDR) is an interest-bearing international reserve asset created by the IMF in 1969 to supplement other reserve assets of member countries. The SDR is based on a basket of international currencies comprising the U.S. dollar, Japanese yen, euro, pound sterling and Chinese Renminbi. It is not a currency, nor a claim on the IMF, but is potentially a claim on freely usable currencies of IMF members. The value of the SDR is set daily by the IMF on the basis of fixed currency amounts of the currencies included in the SDR basket and the daily market exchange rates between the currencies included in the SDR basket. SDRs are only allocated to IMF members that elect to participate in the SDR Department. Currently all members of the IMF are members of the SDR Department. SDRs can be held and used by member countries, the IMF, and certain designated official entities called "prescribed holders" (see below)—but it cannot be held, for example, by private entities or...

?By Vybhavi Balasundharam and Leni Hunter

With virtually no international travel since March 2020, national airlines in the Pacific face mounting financial difficulties. For Pacific Island countries this shock is particularly severe given the weak financial condition of national carriers prior to the pandemic, the reliance of these countries on airline connectivity to support tourism, and limited fiscal space to provide ongoing or future financial support to these airlines.

By Ding Ding and Rui Mano

(Español)

The economic linkages between China and Latin America have grown dramatically over the last 20 years. On the trade front, China has become a key partner for the region, increasingly importing commodities and exporting manufactured goods. On the investment front, China has emerged as a source of capital for Latin America, with Chinese investment expanding rapidly from natural resources to other industries.  

The drivers of China’s economic growth are shifting, however, from investment-led to consumption-led growth, from low-tech to higher-tech industries, and from manufacturing to services.

How will this ‘rebalancing’ affect the region? We explore the impact on trade and investment.

Mixed impact on trade

Overall, we expect China’s rebalancing to be positive for the region, but the impact will be different for commodity versus non-commodity exporters.

Less dependent on state-led...

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All metrics are not equal when it comes to assessing the pandemic’s unequal effect

The severe impact of the COVID-19 pandemic is clearly seen in the numbers: more than 3.1 million deaths and rising, 120 million people pushed into extreme poverty, and a massive global recession. As suffering and poverty have risen, some data show an increase in another extreme: the wealth of billionaires.

With both extreme poverty and billionaire wealth on the rise, the pandemic’s effect on inequality may appear obvious. The reality is not as simple as you may think.

Inequality is a notoriously challenging concept on which to make definitive statements. Inequality of what? Of household income or of GDP per capita? Or even of mortality rates themselves, across different groups? Inequality among whom: should it be viewed at the level of individuals? Households? Countries? Even once a distribution is precisely specified—so that we are clear...

Growth prospects for advanced economies this year have improved by 0.5 percentage point, but this is offset exactly by a downward revision for emerging market and developing economies driven by a significant downgrade for emerging Asia. For 2022, we project global growth of 4.9 percent, up from our previous forecast of 4.4 percent. But again, underlying this is a sizeable upgrade for advanced economies, and a more modest one for emerging market and developing economies.

We estimate the pandemic has reduced per capita incomes in advanced economies by 2.8 percent a year, relative to pre-pandemic trends over 2020-2022, compared with an annual per capita loss of 6.3 percent a year for emerging market and developing economies (excluding China).

These revisions reflect to an important extent differences in pandemic developments as the delta variant takes over. Close to 40 percent of the population in advanced economies has been fully vaccinated, compared with 11...