November 2017: Homeland insecurity

In the 12 months since the US presidential vote, the feeling of popular dissatisfaction with the status quo that brought Donald Trump to the White House has manifested itself in other elections around the world. This month’s Bulletin reflects on the forces that continue to disrupt economics and politics and the risks of them contributing to a rise in economic nationalism. Robert Koopman of the World Trade Organisation draws attention to how artificial intelligence and robotics are disrupting the labour market and impacting the relative demand for skilled v. unskilled workers, while Juan Carlos Martinez Oliva focuses on the importance of globally coordinated compensation schemes to narrow this divide. Claudio Borio of the Bank for International Settlements argues that the role of globalisation and technology in influencing wage-setting weakens central banks’ control over inflation. Weak inflation was a key factor in the European Central Bank’s decision on 26 October to extend its quantitative easing programme. Danae Kyriakopoulou suggests that the Bank of Japan’s yield curve control policy may provide useful lessons as the ECB runs against constraints to achieving its mandate. Kenneth Sullivan and Robin Darbyshire discuss the need for central banks to properly account for their gold and related transactions to strengthen accountability to stakeholders.

Two other major central banks were due to meet as this Bulletin went to press. The US Federal Reserve is not expected to move policy this month, though a rate hike is widely expected for December, writes Darrell Delamaide. The Bank of England meets in early November and is widely expected to raise interest rates. The economic outlook remains clouded by the UK-European Union exit negotiations after yet another inconclusive summit in Brussels at the end of October. More than two-thirds of respondents in this month’s OMFIF Advisers Network poll expressed confidence that a transitional period of some sort will be agreed. In emerging markets, Meghnad Desai promotes fiscal policy as the crucial tool to revive India’s growth, while Steve Hanke draws lessons from Georgia’s efforts in improving the regulatory environment to boost productivity. Mario Blejer and Juan Cancelli present evidence for the impact of modernisation of banking procedures on Argentina’s housing market. Adam Cotter highlights that renminbi internationalisation stands at an inflection point, concluding that the long-term trend will be one of greater adoption on global markets, while Elliot Hentov suggests that internationalisation of the Chinese currency is a matter of political will.

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