Transformative Changes in World Energy Production and Trade

Transformative Changes in World Energy Production and Trade

Major changes in oil production have transformed the US from a major importer to a major producer and sometime exporter of oil. The market power of OPEC and its non-member collaborators has been weakened (Libya and Nigeria have been exempted from current quotas). In addition to new sources of oil production, we are now hearing […]

Matchmaking Finance and Infrastructure

Matchmaking Finance and Infrastructure

The world economy – and emerging market and developing economies in particular – display a gap between infrastructure needs and its finance (Canuto, 2014). On the one hand, infrastructure investment has fallen far short of what would be necessary to support potential growth. On the other hand, abundant financial resources in world markets have been facing […]

Turkey: Lower Reserves and Higher Rates, but Market Turmoil Is Unlikely

Turkey: Lower Reserves and Higher Rates, but Market Turmoil Is Unlikely

Key takeaway – Despite declining reserves and increased interest rates, Turkey is unlikely to suffer a market-crash over the next 12 months. What happened? Since the July 2016 coup attempt, the reserves of the Central Bank of Turkey’s (CBRT) declined. Gross international reserves declined by 14 percent (by USD 14.5 bn, from USD 104.7bn to […]

European Union Recovery – Surprise Economic Story of 2017

European Union Recovery – Surprise Economic Story of 2017

  Against all odds, and contrarily to a generalized gloomy scenario of the past years about the destiny of the European Union, the Euro area has surprisingly recorded a stronger than expected economic growth in the first semester of 2017 and a rather optimistic and reinvigorated political turnaround in favour of the EU. During this […]

The IMF’s Flexible Credit Line

The IMF’s Flexible Credit Line

The policy conditions attached to the disbursement of an IMF loan have long been the subject of controversy. In the wake of the global financial crisis, the IMF introduced a new lending program—the Flexible Credit Line—that allowed its members to apply for a loan before a crisis took place. If approved, the member can elect […]

Are Advanced Economies Ready for Recovery, Really? Or Global Reflation As China Begins Tightening

Are Advanced Economies Ready for Recovery, Really? Or Global Reflation As China Begins Tightening

Until recently, the conventional wisdom was that China’s contribution to global reflation would be increasingly accompanied by those of the US and Europe. Yet, the realities may look grimmer than anticipated. Usually, the term ‘reflation’ is used to describe the first phase of economic recovery after a period of contraction. More recently, ‘global reflation’ has […]

Politics and Budgets

Politics and Budgets

  photo: GotCredit Every year, parliaments in democratic countries discuss budget proposals for the following year to set the course for economic policy going forward. But the reality is that politics and budgets are deeply interwoven. This was recognized by Joseph Schumpeter who noted “the spirit of a people, its cultural level, its social structure, the […]

H2-2017: Where to invest?

H2-2017: Where to invest?

Key takeaway – The investment environment remains challenging. In their portfolios, investors should: i) privilege a multi-year horizon; ii) focus on capital preservation by adopting a defensive risk profile; and iii) accept lower expected returns in exchange for lower volatility. Wealth preservation requires conservative investment strategies, with a greater exposure to alternatives. The recommended strategic […]

Does Brazil’s Sector Structure Explain Its Productivity Anemia?

Does Brazil’s Sector Structure Explain Its Productivity Anemia?

Brazil’s labor and total-factor productivity (TFP) have featured anemic increases in the last decades (Canuto, 2016). As we illustrate here, contrary to common view, sector structures of the Brazilian GDP and employment cannot be singled out as major determinants of productivity performance. Horizontal, cross-sector factors hampering productivity increases seem to carry more weight. Brazil’s productivity […]

Negative Rates – Part 2: A Policy Too Far?

Negative Rates – Part 2: A Policy Too Far?

Negative Reality Debt can only be reduced by strong growth, inflation, currency devaluation (where the borrowing is from foreigners) or default. All the strategies other than growth involve some level of transfer of value from savers either by reduction in the nominal value returned or decreased purchasing power. Growth and inflation are low. Devaluation is […]

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