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Analysis

Coping with global flows

THE OMFIF MONTHLY BULLETIN - Press Release

2 September 2017 - London

Bulletin September Cover (1)

This month's Bulletin focuses on global flows – of capital, goods and people – looking at how they have developed in the post-crisis environment and analysing the political and economic challenges. Central bankers and policy-makers must be ready to address these issues, particularly in the light of the rise in anti-globalisation sentiment over the last two years.

Early discussions have started about who will be at the helm of the European Central Bank once President Mario Draghi's term ends in 2019. Jens Weidmann, head of the German Bundesbank, is the most likely successor, according to this month's OMFIF Advisers Network poll.

Arnór Sighvatsson, deputy governor of the Central Bank of Iceland, discusses Iceland's experience with capital flows management and presents the benefits of the special reserve requirement as a means for achieving a beneficial composition of flows. Danae Kyriakopoulou reflects on the changed nature of financial globalisation in the post-crisis period, with a greater role for foreign direct investment compared with cross-border lending. Ben Robinson discusses the factors affecting the changed relationship between trade and GDP, forecasting a prolonged period of disappointing trade growth.

In the European Union, Brexit and the future of trade dominate the debate. Plutarchos Sakellaris discusses the origins of modern anti-establishment attitudes in Europe, while Szilárd Benk and Péter Gábriel of Magyar Nemzeti Bank examine the impact of intra-EU migration.

On emerging markets, Atish Ghosh, Jonathan Ostry and Mahvash Qureshi present insights from an International Monetary Fund study on proactive macroeconomic management to avoid crises in the face of capital flows volatility. Such volatility played an important role in the Asian financial crisis of 1997-98. Many of these problems continue to trouble Asia.

Gao Haihong examines the challenges for China's capital controls and exchange rate policies as it seeks to internationalise the renminbi. Bhavin Patel writes about improving financial infrastructure to facilitate the renminbi's use in cross-border payments, and Kat Usita discusses Chinese investment in Africa.

Other highlights of the September 2017 edition:

  • September 2017 commemorates 25 years since 'Black Wednesday', the day Britain exited Europe's exchange rate mechanism. David Marsh presents the lessons from the episode, spelled out in the OMFIF Press book Six Days in September: Black Wednesday, Brexit and the making of Europe, to be launched on 15 September in London.
  • Gary Smith discusses the implications for monetary policy of the changed relationship between inflation and unemployment.
  • Hervé Le Bihan and Imène Rahmouni-Rousseau of the Banque de France present insights from unconventional methods of measuring inflation expectations, concluding that the risk of a long period of 'lowflation' remains.
  • Darrell Delamaide summarises the discussions of this year's Jackson Hole symposium.
  • Steve Hanke writes about the need to avoid greenwashing, and presents a new methodology to measure the sustainability and greenness of production processes.
  • Gabriel Stein warns it is easy to overstate the negative scenarios for globalisation in his review of Stephen King's Grave New World.
  • In his review of Richard Bookstaber's The End of Theory, George Hoguet writes how the 2008 financial crisis exposed the difficulty of modelling global financial markets.
  • Robert Bischof in his review of Paul Lever's Berlin Rules discusses the rise of Germany – Europe's 'reluctant hegemon' – on the world stage.

The Bulletin is available to OMFIF members, and to non-members on a subscription basis. To subscribe please contact membership@omfif.org.