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The Global Financial Cycle and Emerging Market Economies | Capital Ebbs and Flows
The Federal Reserve’s latest increase in its policy rate is a signal of its desire to reestablish its credibility after U.S. inflation rose to 8.6% in May, and a precursor of more hikes. Similar increases have been implemented by the Bank of England and the Swiss National Bank, and the European Cen
The IMF’s Proposed Policies on the Management of Capital Flows | Capital Ebbs and Flows
The IMF’s views on the advantages and drawbacks of capital flows have substantially evolved over time. The Fund reversed its opposition to capital controls in the wake of the global financial crisis of 2007-09, when it adopted the “Institutional View on the Liberalization and Management of Capital F
When Safe Assets Are No Longer Safe | Capital Ebbs and Flows
The U.S. has long benefitted from its ability to issue “safe assets” to the rest of the world. These usually take the form of U.S. Treasury bonds, although there was a period before the 2008-09 global financial crisis when mortgage-backed securities with Triple A ratings were also used for this purp
The Increasing Debtor Status of the U.S. | Capital Ebbs and Flows
The Net International Investment Position (NIIP) of a country reflects the difference between foreign assets owned by domestic residents and domestic liabilities held by foreign residents. The difference, positive or negative, determines a country’s status as an international creditor or debtor. The
The Rising Dollar | Capital Ebbs and Flows
The foreign currency value of the dollar has been rising. Thenominal broad dollar index of the Federal Reserveshows the dollar has incresed by by about 9% since its low point a year ago whileother indexes register larger gains. What does this mean for the U.S. and other economies?The appreciation re
China and the Debt Crisis | Capital Ebbs and Flows
Sri Lanka is not the first developing economy todefault on its foreign debt, and certainly won’t be the last.The Economisthas identified 53 countriesas most vulnerable to a combination of “heavy debt burdens, slowing global growth and tightening financial conditions.” The response of China to what w
The Restructuring of Sovereign Debt | Capital Ebbs and Flows
The economic repercussions of Russia’s invasion of Ukraine will be devastating for many countries that have yet to recover from the pandemic. Higher prices for commodities, particularly energy and food, will increase inflation rates and widen trade deficits for those nations that import those items.
The Struggle for Hegemony | Capital Ebbs and Flows
Therestrictions by the Biden administrationon the sale of semiconductor chips and the equipment to manufacture them represent a new stage in the division between China and the U.S. The belief that increased trade would lead to a convergence of Chinese and U.S. interests faded years ago. The history
Making Friends in the New Global Order | Capital Ebbs and Flows
U.S. Treasury Secretary Janet Yellen gave atalk at the Atlantic Council last Aprilon the future role of cooperation in the global economy. In October Chrystia Freeland, Deputy Prime Minister of Canada and its Minister of Finance, gave anaddress at the Brookings Institutionthat presented a similar pe
Has the Third Era of Globalization Ended? | Capital Ebbs and Flows
Behind the headlinesforecasting a global economic recessionthere is another narrative about theend of globalization. This reflects political tensions over trade, the impact of the pandemic on global supply chains and the shutdown of economic ties with Russia. But dating the beginning and end of the