Read more about the article Commodity Price Cycles

Commodity Price Cycles

Commodity prices go through extended periods during which prices are well above or below their long-term price trend. The upswing phase in super cycles results from a lag between unexpected, persistent, and upward trends in commodity demand, matched with a typically slow-moving supply. Eventually, as adequate supply becomes available and demand growth slows, the cycle enters a downswing phase. The latest super-cycle of commodity prices, starting in the mid-90s, reaching a peak by the time of the global financial crisis, and getting to the bottom by 2015, can be seen as associated to the developments of globalization that we have already dealt with in this series. More recently, some analysts have spoken that we might be on the verge of a new cycle, super-cycle or not.

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Read more about the article Inflación y calentamiento global: ¿Por qué los bancos centrales deben ser parte de la lucha contra el cambio climático?

Inflación y calentamiento global: ¿Por qué los bancos centrales deben ser parte de la lucha contra el cambio climático?

El director ejecutivo de la Junta Ejecutiva del Banco Mundial, Otaviano Canuto, marcó las tres premisas por las que los bancos centrales de los distintos países deberían involucrarse en la lucha contra el cambio climático. Los riesgos para la estabilidad financiera, el impacto en el crecimiento y la inflación y la “potencia de fuego” de los bancos centrales para mitigar este fenómeno son las razones por las que involucrarse en este tema.

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Read more about the article Financial Globalization

Financial Globalization

Financial integration of countries and financial globalization led to an extraordinary rise of foreign assets and liabilities as a share of GDP, followed by stability of total flows since the global financial crisis of 2008-2009. The apparent stability has been marked by an underlying metamorphosis of cross-border finance, with de-banking and rising foreign direct investment and non-banking financial flows. Blind spots and potential instability remain.

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Read more about the article What can Brazil expect from joining the OECD?

What can Brazil expect from joining the OECD?

Brazil can expect significant benefits from joining the Organization for Economic Cooperation and Development (OECD). The organization has shown to effectively promote better policies and institutions among its members countries, with significant positive effects. Considering the evidence that institutions are behind a large share of long-term increases in welfare standards, the benefits of membership go well beyond the modest costs involved in participating in the organization. Among the studied benefits are increases in trade – which are larger than those due to other international organizations such as the World Trade Organization (WTO) or the International Monetary Fund (IMF) –, increases in foreign direct investment, improvements in education, and better results in governance. Risks are small compared to potential benefits. We estimate the benefits by benchmarking against an estimate of the benefits of acceding to an institution with similar goals and policies – the European Union (EU) – and find them to be very large.

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Read more about the article A mãe de todas as recuperações nos Estados Unidos, por Otaviano Canuto

A mãe de todas as recuperações nos Estados Unidos, por Otaviano Canuto

Há quem já esteja esperando que o nível dos juros de 10 anos se mova a 2% ao ano. Isso não será suficiente para deter o entusiasmo de Biden com a verdadeira reorientação radical na política econômica e social a que já se propôs a começar em seus 100 primeiros dias.

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Read more about the article Central Banks and Climate Change

Central Banks and Climate Change

There are three major reasons for central banks to engage on climate change issues. The first is the set of – physical and transition - risks to financial stability potentially brought about by natural disasters and trends derived from climate change. Second, the potential impact of climate change shocks and trends on economic growth and inflation and, therefore, on their monetary policy decisions. Finally, the possibility of using their balance sheets and their macroprudential toolkit to favor climate mitigation.

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Read more about the article Por que seria bom o Brasil entrar na OCDE

Por que seria bom o Brasil entrar na OCDE

Frequentemente a importância da entrada na OCDE é vista como a obtenção de um “selo”, reduzindo prêmios de risco, atraindo investimentos externos e outros. Tal selo é apenas uma cereja no bolo, com os verdadeiros ganhos sendo auferidos a partir das instituições e políticas que tornam o país um membro pleno.

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Read more about the article Global current account imbalances

Global current account imbalances

After peaking in 2007 at around 6% of world GDP, global current-account imbalances declined to 3% of world GDP in the last few years. But they have never left entirely the spotlight, albeit acquiring a different configuration from that which marked the trajectory prior to the global financial crisis (GFC). This is not because they threaten global financial stability, but mainly because they reveal asymmetries in adjustment and post-GFC recovery between surplus and deficit economies, and because of the risk of sparking waves of trade protectionism. They also reveal the sub-par performance of the global economy in terms of foregone product and employment, i.e. a post-crisis global economic recovery below its potential.

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Read more about the article Bloated Central Bank Balance Sheets

Bloated Central Bank Balance Sheets

There are good reasons to believe that there will be no return to the pre-QE configuration of balance sheets. First, the increasing global financial integration in the last few decades has imposed increasing challenges in terms of making liquidity management effective as cross-border volumes of capital flows have expanded significantly. Second, changes to financial regulation have induced private agents to alter their behavior and strategies. Finally, a new task has come under the purview of central banks: monitoring relationships between various benchmark curves—i.e., operating as quasi-market makers. As a spill-over from abroad, central bank balance sheets in some emerging market economies also bloated. The era of bloated central bank balance sheets seems to be a component of the “new normal”, even if they undergo some diet in the future.

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Read more about the article Secular Stagnation and the Big Balance Sheet Economy

Secular Stagnation and the Big Balance Sheet Economy

Private balance sheets have risen relative to GDP in advanced economies in the last decades, in tandem with a trend of decline in long-term real interest rates. Asset-driven macroeconomic cycles, along with a structural trend of rising influence of finance on income growth and distribution, have become part of the landscape. Underlying secular trends of stagnation may also be suggested, making the macroeconomic dynamics dependent on the balance sheet economy getting bigger and bigger.

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Read more about the article The Pandemic Will Leave Scars on the Job Market

The Pandemic Will Leave Scars on the Job Market

The pandemic is leaving a trail of unemployment, particularly affecting minorities, low-skilled workers and, in emerging markets and developing economies, women, who predominantly occupy jobs in contact-intensive services. Many of the practices adopted during the pandemic are likely to persist. The role of public policies will be central in the post-COVID-19 world, both in strengthening social protection - including through unemployment insurance and income transfer programs - and in the requalification of workers.

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Read more about the article Por que a pandemia deixará cicatrizes no mercado de trabalho?

Por que a pandemia deixará cicatrizes no mercado de trabalho?

O aumento na desigualdade da renda nos países avançados a partir dos anos 90 teve no progresso tecnológico uma de suas principais causas. Sua aceleração com a pandemia tende, portanto, a intensificar os desafios. De certo modo, cabe dizer que a pandemia está acelerando a história, mais que a mudando. O papel das políticas públicas será central nesse mundo pós-covid, tanto no reforço da proteção social —inclusive mediante seguros-desemprego e programas de transferências de renda— quanto na requalificação de trabalhadores. Em lugar de negar o avanço tecnológico, cabe mais ter o poder público ajudando na adaptação e na minimização do ônus das cicatrizes.

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Read more about the article A Possible Tug-of-war Between the Fed and the Markets

A Possible Tug-of-war Between the Fed and the Markets

There appears to be a double divergence between the market and the Fed. The inflation projections embedded in bond prices remain above those presented by the Fed. In addition, there appears to be a discrepancy between the mode of action announced by the Fed and what the markets predict as the Fed’s ‘reaction function’. The 10-year rise in market yields this year has been more pronounced than in previous times of instability, such as the 2013 taper tantrum and the sell-off of government bonds. The Fed's current complacency in relation to long yields can always be superseded by a revision of such a position for the sake of stabilization, if volatility increases in the long part of the yield curve.

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Read more about the article Global inequality

Global inequality

The global trend towards increasing globalization since the 1990s seems to have had two different distributional consequences: income inequality between countries has declined, while economic inequality within countries has increased. However, technological progress has made the biggest contribution to rising income inequality over the past two decades. Domestic policies – fiscal policies, social protection - are the locus where inequality is to be tackled.

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