Argentina currency crisis highlights policy vacuum

2018 ◽  
Keyword(s):  
Exchange Rate ◽  
Gdp Growth ◽  
External Shocks ◽  
Foreign Investors ◽  
Content Type ◽  
Electoral Success ◽  
Real Gdp ◽  
Weak Exchange ◽  
Capital Outflows ◽  
Financial Environment

Significance In recent days a severe currency run drove a 12.2% depreciation of the peso and an estimated fall of nearly 5 billion dollars in international reserves (8% of that stock). The Bank has raised rates by 600 bp in only a few days, but this has not stopped the run. The crisis highlights Argentina’s vulnerability to external shocks, but has also been driven by domestic errors, such as the BCRA’s loss of reputation and the implementation of a tax on Lebacs (BCRA notes), an asset that had attracted many foreign investors. Impacts The weak exchange rate will boost inflation, while capital outflows will drive real GDP growth estimates down. A less benign global financial environment will limit the government’s gradualist strategy. The government’s ability to overcome the crisis will condition its chances of electoral success in 2019.

Russia's central bank will anticipate sanction risks

2021 ◽  
Keyword(s):  
Exchange Rate ◽  
Credit Rating ◽  
Bond Market ◽  
Secondary Market ◽  
Foreseeable Future ◽  
Foreign Reserves ◽  
Foreign Investors ◽  
Content Type ◽  
Economic Fundamentals ◽  
Sovereign Credit Rating

Significance Because the risk of sanctions was priced into Russian bond prices and the ruble exchange rate, the market reaction to the measures announced on April 15 was muted. US investors can still buy and hold OFZs and Eurobonds on the secondary market, but the prospect of further restrictions are possible. Impacts Sanctions risks will weigh down Russia's sovereign credit rating for the foreseeable future. Diminished liquidity in the bond market will make it difficult to price new Russian corporate debt, particularly for new issuers. Strong economic fundamentals and high foreign reserves will encourage foreign investors to return once uncertainty subsides.

Development Growth Models for Singapore and Malaysia: A Geweke Causality Analysis

2015 ◽  
Vol 8 (2) ◽  
pp. 165-186 ◽  
Author(s):  
Tan Khee Giap ◽  
Nguyen Le Phuong Anh ◽  
Ye Ye Denise
Keyword(s):  
Economic Growth ◽  
Linear Dependence ◽  
Growth Models ◽  
Growth Dynamics ◽  
Gdp Growth ◽  
Multiple Time ◽  
Causality Analysis ◽  
Content Type ◽  
Real Gdp ◽  
Long Run

Purpose Nearly five decades after undergoing a structural transformation and navigating several external shocks, both Singapore and Malaysia are now grappling with some crucial policy challenges that necessitate a course-correction in order to sustain their growth momentum, going forward. In light of the renewed interest in understanding the growth constraints faced by the two countries, this paper aims to empirically explore the drivers of economic growth in both Singapore and Malaysia, using data from 1975 to 2012. Design/methodology/approach The paper employs a novel empirical approach-the Geweke causality analysis-to investigate the causal drivers of economic growth in Singapore and Malaysia. Intuitively, the Geweke causality analysis helps us understand and measure the linear dependence and feedback between multiple time series variables. To that effect, we perform both a bi-variate as well as a multi-variate causality analysis. Findings The empirical results established using Geweke causality analysis suggest that Malaysia's new development trajectory should lie in rebalancing the economy toward greater domestic demand and building a robust services sector. The results also suggest that Singapore, on the other hand, should embrace a growth model that goes beyond relying heavily on foreign direct investment (FDI) as a source of economic growth as the linear dependence between FDI and real GDP growth appears to be weaker compared to the linear dependence between the remaining variables and the real GDP growth. Originality/value While the traditional growth accounting framework provides useful insights at the aggregate level, there is a growing literature that discusses the importance of sectoral analysis to understand structural transformations in the economies which become important to sustain productivity growth in the long-run. This is immensely relevant in the case of Malaysia and Singapore, as well, especially with the changing policy focus in these countries to overcome structural growth issues. In light of this growing discussion on the importance of understanding the growth dynamics at the sectoral level, this paper presents new empirical evidence on the growth drivers in Singapore and Malaysia with a sectoral focus.

Greek economy could slip into recession again

2017 ◽  
Keyword(s):  
Private Investment ◽  
The United States ◽  
Gdp Growth ◽  
Investment Climate ◽  
Content Type ◽  
Goods And Services ◽  
Real Gdp ◽  
Greek Economy ◽  
Target Set ◽  
The Government

Subject Greece’s stagnating economy. Significance The economy failed to turn a corner in 2016, registering zero real GDP growth. The ambitious 2.7% GDP growth target, set for 2017 by the government and Greece’s lenders, now looks hard to achieve. However, the economy’s stabilisation, albeit at a level much lower than before the crisis, is evident. Impacts A swift end to the bailout review might lift uncertainty and improve the investment climate, allowing both domestic and private investment. Inclusion into the ECB’s quantitative easing programme would help inject additional liquidity into the economy, stimulating credit growth. Over the medium term, rising protectionism in the United States and Europe might restrict trade, reducing Greek goods and services exports.

Iran will struggle to create a ‘resistance economy’

2017 ◽  
Keyword(s):  
Central Asia ◽  
Fiscal Year ◽  
Gdp Growth ◽  
Crowding Out ◽  
Medium Term ◽  
Content Type ◽  
Investor Confidence ◽  
Real Gdp ◽  
Defence Spending ◽  
Supreme Leader

Subject The Iranian budget. Significance Speeches marking the Iranian New Year (Nowruz) on March 21 highlighted disagreements between Supreme Leader Ali Khamenei and President Hassan Rouhani. While both promoted a ‘resistance economy’, each meant something different. The recently published budget for the 2017-18 fiscal year highlights divisions and linkages between the two philosophies. Impacts Real GDP growth in 2017 will not be much above 3.0% and will rise to 4.5% in the medium term. Rising tensions with Washington will further boost defence spending, crowding out development. Additional US congressional sanctions, or even threat of sanctions, are likely to depress investor confidence. New transport links to Central Asia may significantly increase trade.

Corruption may undermine Kenyan government credibility

2018 ◽  
Keyword(s):  
Civil Society ◽  
Political System ◽  
Zero Tolerance ◽  
The Political ◽  
Public Confidence ◽  
Gdp Growth ◽  
Medium Term ◽  
Foreign Investors ◽  
Content Type ◽  
Government Institutions

Significance Kenya has been rocked by a string of corruption scandals in government institutions over recent weeks. The episode has served as a powerful reminder to both ordinary Kenyans and foreign investors that public-sector corruption remains pervasive -- and that President Uhuru Kenyatta’s government has failed to make significant inroads on the issue despite its rhetorical claims of ‘zero tolerance’. Impacts The lack of progress in anti-corruption efforts will raise concern among donor countries. Along with other barriers, evidence of corruption will limit FDI and constrain GDP growth in the medium term. Failure to tackle graft will erode public confidence in the political system, leading to further civil society protests.

Doubts about graft could mar Bulgaria’s euro bid

2020 ◽  
Keyword(s):  
Exchange Rate ◽  
Sovereign Debt ◽  
Convergence Criteria ◽  
Content Type ◽  
Euro Adoption ◽  
Exchange Rate Mechanism ◽  
Investment Grade ◽  
Positive Outlook ◽  
Financial Environment ◽  
Rate Mechanism

Subject Bulgaria’s moves towards euro adoption. Significance Bulgaria wants to participate in the EU’s Exchange Rate Mechanism (ERM II), which fixes non-euro currencies against the euro within a fluctuation band. Problem-free participation for at least two years is one of the convergence criteria for eventually entering the euro-area. Bulgaria’s motivation is mostly political: to align the country, geographically and economically on the EU’s periphery, with core EU institutions and gain a place at the negotiating table as the post-Brexit EU faces major changes. Impacts All three major ratings agencies class Bulgarian sovereign debt as investment grade (albeit the second-lowest grade) with positive outlook. There are doubts whether Bulgaria can qualify to join the euro within the minimum two years. There is opposition to euro adoption from some shadowy groups preferring a less-regulated, more loosely supervised financial environment. Circles seeking to weaken EU influence and bring Bulgaria closer to Russia will step up efforts to thwart the process.

Russian economic gloom belied by benign debt outlook

2016 ◽  
Keyword(s):  
Credit Rating ◽  
External Shocks ◽  
Public And Private ◽  
Monetary Policies ◽  
Content Type ◽  
Domestic Debt ◽  
Capital Outflows ◽  
Fiscal Austerity ◽  
Investment Grade ◽  
Sovereign Credit Rating

Subject Russia's foreign and domestic debt position. Significance Standard & Poor's (S&P) raised its outlook for Russia's sovereign credit rating from 'negative' to 'stable' on September 16. At BB+, the agency's rating for Russia remains a notch below investment grade, as does Moody's, but S&P notes that the economy has demonstrated resilience in its response to external shocks and that plans for fiscal austerity are encouraging. The scale of Russian external debt, both public and private, is modest thanks to years of eschewing borrowing. Impacts Providing fiscal and monetary policies remain prudent, net private capital outflows are likely to be limited. Corporate ruble bonds, already enjoying some popularity among foreign investors, are likely to remain attractive. When financial sanctions are eventually lifted, some Russian companies able to repay debt will pull in foreign direct investment.

Debt dollarisation poses dilemmas in Argentina

2016 ◽  
Keyword(s):  
Exchange Rate ◽  
Fiscal Policy ◽  
Interest Rates ◽  
Policy Support ◽  
Economic Downturn ◽  
External Shocks ◽  
Content Type ◽  
The Exchange Rate ◽  
Monetary And Fiscal Policy

Subject Monetary, fiscal and debt concerns. Significance After falling to nearly 16 pesos/dollar in early March, the exchange rate stabilised, mainly due to rising domestic interest rates, which climbed to a peak of 38.0%. Monetary tightening and the deepening of the economic downturn helped to bring down inflation, which is expected to reach a monthly rate of 1.5% in the last quarter. Lower interest rates and decreasing inflation are needed to drive an economic rebound, key to the government's prospects in October 2017 mid-term elections. Impacts Dollarisation of financial liabilities will leave the economy more vulnerable to negative external shocks. The economy may show further decline in third-quarter figures. Moderating inflation and monetary and fiscal policy support are expected to help turn growth positive in 2017.

Establishing finance-growth linkage for India: a financial conditions index (FCI) approach

2019 ◽  
Vol 14 (5) ◽  
pp. 1032-1059 ◽  
Author(s):  
A.K. Giri ◽  
Deven Bansod
Keyword(s):  
Economic Growth ◽  
Global Financial Crisis ◽  
Gdp Growth ◽  
Data Sets ◽  
Content Type ◽  
Real Gdp ◽  
Financial Conditions ◽  
Multiple Markets ◽  
Long Run ◽  
The Global Financial Crisis

Purpose The global financial crisis of 2008 emphasized the need for monetary policy authorities to have a more comprehensive view of the conditions prevailing in the economy before deciding their policy stance. The purpose of this paper is to outline the construction of a financial conditions index (FCI) and investigate the possible co-integrating relationship between the economic growth and FCI. Design/methodology/approach The study employs the PCA methodology, with appropriate augmentations to handle the unbalanced panel data-sets and constructs a FCI for India. It tests the growth-predicting power of FCI by applying the auto regressive distributed lags approach to co-integration and verifies if the FCI is co-integrated with real GDP growth. It also discusses construction of a financial development index (FDI) which tracks the financial markets through M3, market capitalization and credit amount to residents. Findings The constructed FCI has a quarterly frequency and is available starting 1998q2. The long-run coefficient of FCI while predicting the real GDP growth is significant at 10 percent. The results confirm that a more-broader index FCI outperforms a narrower index FDI in growth prediction. Research limitations/implications By showing that FCI is a better growth predictor than FDI, the study establishes the importance of including the foreign exchange markets, bond markets and stock markets while summarizing the conditions in the economy. The authors hope that the FCI would be helpful to the monetary authorities in their policy decisions. Originality/value The paper adds to the few existing studies studies dealing with FCI for Indian economy and constructs a more comprehensive index which tracks multiple markets simultaneously. It also fills the gap in literature by evaluating the correlating relationship between FCI and economic growth.

No clear endgame for Kyrgyz war with gold miner

2021 ◽  
Keyword(s):  
Rule Of Law ◽  
Revenue Sharing ◽  
Gdp Growth ◽  
Foreign Investors ◽  
Content Type ◽  
The Government

Significance Although tensions around revenue-sharing from the mine have recurred over many years, the government's move to deprive Canada's Centerra Gold of control of KGC (which it owns) and the mine is unprecedented. The government denies it intends to nationalise Kumtor, but its actions have already damaged Kyrgyzstan's reputation as an investment destination. Impacts Rule of law as perceived by foreign investors may be the chief victim. The IMF's March forecast of 3.8% GDP growth is partly premised on higher gold output, which is now looking unlikely. The fiscal position is manageable but leaves no space for additional spending needs.

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