By Atish Rex Ghosh

Fifty years ago, the world changed. On August 15, 1971, US President Richard Nixon slammed shut the “gold window,” suspending dollar convertibility. Although it was not Nixon’s intention, this act effectively marked the end of the Bretton Woods system of fixed exchange rates. But, in truth, with the rise of private cross-border capital flows, a system based on fixed exchange rates for the major currencies was no longer viable and Nixon’s decision—decried at the time as an abrogation of America’s international responsibilities—paved the way for the modern international monetary system.

By Olusegun Akanbi, Kenji Moriyama, Keyra Primus

Already facing huge development needs, the COVID-19 pandemic is exacerbating the challenges facing fragile and conflict states—a group of currently about 40 countries trapped in cycles of low administrative capacity, political instability, conflict, and weak economic performance. Our new IMF staff working paper, which analyzes the experiences of 196 countries between 1979 and 2018, shines a light on how countries can avoid or break out of this trap.

As our chart of the week shows, weaker growth raises the probability of falling into fragility, particularly for countries in the middle-range of government effectiveness (measured by, e.g., the ability to collect taxes and enforce contracts). The top chart measures the change in the probability of entry into/exit from fragility when growth declines by 2 percentage points at various levels of government effectiveness. Weaker growth raises the probability of...

By Atish Rex Ghosh

Fifty years ago, the world changed. On August 15, 1971, US President Richard Nixon slammed shut the “gold window,” suspending dollar convertibility. Although it was not Nixon’s intention, this act effectively marked the end of the Bretton Woods system of fixed exchange rates. But, in truth, with the rise of private cross-border capital flows, a system based on fixed exchange rates for the major currencies was no longer viable and Nixon’s decision—decried at the time as an abrogation of America’s international responsibilities—paved the way for the modern international monetary system.

Alejandro Díaz de León is the Governor of Banco de México. He was appointed by the President of Mexico on December 1, 2017 to serve until December 31, 2021. An economist, he began his career at Banco de México in 1991, where he held various positions, including as Macroeconomic Analysis director, and Economic Studies director. In October 2007, he became the general director of the National Pension Fund of State Workers. From January 2011 to November 2015, he was the head of the Debt Management Office at Mexico’s Ministry of Finance, where he was in charge of the government’s internal and external financing and the oil hedging strategy. He also served as director of Mexico’s Export-Import Bank (BANCOMEXT). Prior to becoming Governor, on January 1, 2017, Mr. Díaz de León became part of Banco de México’s governing board as Deputy Governor, having been nominated by Mexico’s President and confirmed by the Senate.###

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Central banks should better communicate monetary policy’s distributional effects

Central banks across the globe are responding to the economic effects of the COVID-19 pandemic through extensive monetary easing, including interest rate cuts and asset purchases. Such accommodative policies have served to limit the fallout from the pandemic. Whether, at the same time, these policies exacerbate inequality, however, is up for debate. Monetary policy is seen, in part, as responsible for boosting equity markets from pandemic lows, which is, in the first instance, good news mainly for the rich. Yet monetary easing also has the potential to reduce inequality; for instance, because low interest rates can encourage small businesses to take out loans and hire workers.

So, on balance, is easy monetary policy increasing or reducing inequality?

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Streaming video offers emerging markets an avenue for content at home and around the world

She is a beautiful Nigerian attorney. He is a dashing Indian investment banker. Just as their romance spans the international divide, the movie that immortalizes it is equally cross-cultural: filmed and produced in Nigeria, edited in India, and released by Netflix to a global audience.

Beyond a plotline of disapproving parents and saccharine-sweet dance numbers, the merging of Nigeria’s Nollywood and India’s Bollywood with the release of Namaste Wahala (“Hello trouble” in Hindi and Nigerian pidgin) represents how small the world of entertainment has become in a new age of streaming video.

Streaming giants like Netflix, Disney+, and Amazon are growing new audiences and overlapping markets in ways never seen before. In doing so, they’ve opened burgeoning film and television industries in some of the most vibrant emerging markets to new...

Last Updated: July 28, 2021

The Special Series notes are produced by IMF experts to help members address the economic effects of COVID-19. The views expressed in these notes are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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By IMFBlog

A book is a must, as you head off to visit family and friends, or take time off during the summer to unwind. A good book can bring in new thinking and perspective from the past. And it can inspire and motivate us to act.

Below you’ll find some additions to your summer reading list, and possibly some food for thought, based on a selection of recent book reviews by our editors at Finance & Development (F&D).

Has Asia Lost It? Dynamic Past, Turbulent Future

Vasuki Shastry World Scientific Publishing Singapore, 2021, 332 pp., $68

Asia is the continent of the future and always will be: this is Vasuki Shastry’s grim prediction of Asia’s prospects, a contrast to conventional wisdom, which projects—linearly—the continent’s outstanding economic performance of recent decades into the future and sees it regaining by 2050 the parity in incomes it enjoyed with Europe around the 1500s. In Has Asia Lost It? Dynamic Past, Turbulent Future, Shastry attributes a large part of Asia’s success to the regional security offered by the United States and the spread of globalization, which provided an export-led economic model that helped many countries lift average incomes and millions out of poverty. But in coming years he sees the tussle for supremacy between the United States and China eroding regional security and threats to globalization arising from nationalistic...

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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Programs that offer passports in return for investment have financial integrity risks that must be managed

As countries closed their borders to slow the spread of COVID-19, a second passport became an ever-more-desirable commodity, for those who could afford it. While not a new phenomenon—several countries have adopted “golden passport” programs over the years—the onset of the pandemic generated renewed interest. Price tags for a second citizenship—sometimes in only 30 days—range from $100,000 to $2.5 million. Antigua and Barbuda, Cyprus, Grenada, Jordan, Malta, St Kitts and Nevis, and Vanuatu are among the many countries that have offered such deals.

There are few figures about the trade in passports given the overall opacity of these programs. Nevertheless, firms that offer such services reported increasing demand for second passports in the midst of the pandemic. Requests from high-net-worth individuals in advanced economies...

Between one quarter and one half. That’s how much carbon dioxide (CO2) and other greenhouse gases must fall over the next decade to keep alive the goal of restricting global warming to below 2°C. The fastest and most practical way to achieve this is by creating an international carbon price floor arrangement.

The International Monetary Fund is preparing a Strategy to strengthen its engagement with fragile and conflict-affected states (FCS). Building on the Fund’s long-standing experience in FCS, the Strategy will further articulate the IMF’s role in helping countries to exit from fragility. It will also identify and propose specific measures to enhance the impact of the Fund’s engagement over the next three years. The Strategy is expected to strengthen the IMF’s ability to support FCS in correcting balance of payments, promoting macroeconomic stability, and building institutions to deliver good policies for sustainable and inclusive economic growth. The Strategy also seeks to complement efforts by other actors and organizations supporting FCS, focusing on the IMF’s comparative advantage. The FCS Strategy will be submitted for consideration and approval to the IMF’s Executive Board in December 2021.

Learn more about the IMF’s FCS Strategy: Download the Concept...

Author/Editor:

Fabien Gonguet ; Claude P Wendling ; Ozlem Aydin Sakrak ; Bryn Battersby

Publication Date:

August 11, 2021

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

Public financial management (PFM) consists of all the government’s institutional arrangements in place to facilitate the implementation of fiscal policies. In response to the growing urgency to fight climate change, “green PFM” aims at adapting existing PFM practices to support climate-sensitive policies. With the cross-cutting nature of climate change and wider environmental concerns, green PFM can be a key enabler of an integrated government strategy to combat climate change. This note outlines a framework for green PFM, emphasizing the need for an approach combining various entry points within, across, and beyond the budget cycle. This includes components such as fiscal transparency and external...