(AGENPARL) – ven 02 dicembre 2022 The latest IMF analysis of global economics, finance, development and policy issues shaping the world. []
[IMF Weekend Read]
Dear Colleague,
In today’s edition, we spotlight the importance of the policy mix in responding to persistently high inflation, the poverty threat to a million people in the Caucasus and Central Asia, the scramble for energy, sub-Saharan Africa’s crypto clampdown, sovereign finance and transparency, Aruba’s tourism arrivals, and much more.
Global Policy
Why Countries Must Cooperate on Carbon Prices
(IMF PHOTO/LENA MUCHA)
In early 1980s, the United States pursued an expansionary fiscal policy despite persistently high inflation. The Federal Reserve under then-chairman Paul Volcker raised interest rates sharply to rein in inflation, causing investment to collapse and the dollar to appreciate. Manufacturers clamored for trade protection.
A smaller fiscal deficit cools aggregate demand and inflation, so the central bank doesn’t need to raise rates as much. Reducing deficits also addresses debt vulnerabilities at a time of tight global financial conditions.
“While many central banks are tightening policy in response to the large and persistent rise in global inflation, the policy mix matters. Fiscal restraint will reduce the cost of bringing inflation back to target…compared with the alternative of leaving monetary policy alone to act.”
Central Asia
(IMF PHOTO/YAM G-JUN)
Although food prices are now below pre-war levels, they are still significantly higher than the 2021 average. High food prices are especially concerning for low-income families who have low savings and spend a higher share of their income on food—as much as 60 to 70 percent in Azerbaijan, the Kyrgyz Republic, and Tajikistan.
By 2023, high food price inflation is expected to increase poverty rates by an average of 0.7 percentage points across most countries in the region. In poorer countries, the impact will be significantly higher. A sharp decline in remittances could increase the poverty rate even more—by up to 1.4 percentage points in Tajikistan.
“Governments must act now to prevent the war in Ukraine and the broadening sanctions on Russia from increasing poverty levels and reversing their hard-won achievements of the last two decades,” the authors say.
(BJÖRN ÖBERG)
To investigate this question, we present groundbreaking research and analysis from economists and other leading authorities in the world of energy economics.
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Nick Owen
Editor
IMF Weekend Read
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