季刊速递|International Monetary Review, October 2024

【Special Column on Creating BRICS Common Currency】

1. Challenges in Creating a Common BRICS Currency (by Herbert Poenisch)

2. BRICS Common Currency and Prospects for the BRICS+ & the Global South (by Jaya Josie)

【China's Economy】

1. Chinese Economic Collapse not Happening (by Otton Solis)

2. A Strong Guarantee is Made to Achieve National Rejuvenation (by China Daily)

3. China’s Service Sector Is an Underutilized Driver of Economic Growth (by Sonali Jain-Chandra, Siddharth Kothari, and Natalija Novta)

4. China Looks Inward for Technology, Investment and Know-how (by Herbert Poenisch)

 【Global Economy】

1. Slower Productivity Growth in the World’s Largest Economy Threatens to Reverberate around the Globe (by Gita Bhatt)

2. Laying Foundation for a Fair and Just World Order (by Rana Mohamed)

3. FOCAC a Platform for Fruitful Cooperation (by Hans Seesaghur)

4. India at an Inflection Point - Some Thoughts (by Shaktikanta Das)

【Finance】

1. Sovereign Index Inclusion will be a ‘Game-changer’ for EU Bonds (by Burhan Khadbai)

【IMF News】

1. Managing Director’s Remarks: UN’s Summit of the Future (by Kristalina Georgieva)

2. The IMF Holds the Key to Argentina’s Cage (by Hector Torres)

3. Emerging Markets Hold Both the Reins of Future Growth and the Keys to the Future of Multilateralism (by Aqib Aslam and Petya Koeva Brooks)

 【Digital Technology】

1. The Macroeconomic Impact of CBDC: Why Model Predictions May Be Wrong (by Ulrich Bindseil and Richard Senner)

2. Emerging Technologies in Financial Services - Opportunities and Challenges (by Denis Beau)

3. AI is Driving ESG Integration in Emerging Markets (by Atiyah Curmally)

4. Cross-border Payments - Unlocking New Frontiers (by Agustín Carstens)

【Monetary Policy】

1. The Role of the ECB Monetary Policy in Achieving a Soft Landing in the Euro Area (by Yannis Stournaras)

【Climate Policy and Green Finance】

1. Tackling Inequality through Green Transition? (by Masatsugu Asakawa) 

【Banking Supervision】

1. Ten Years of the Single Supervisory Mechanism: Key Aspects of Modern Banking Supervision (by Margarita Delgado)

2. Liquidity, Supervision, and Regulatory Reform (by Michelle W. Bowman)

【Working Paper】

1. No Safe Haven, Only Diversification and Contagion: Intraday Evidence around the COVID-19 Pandemic (by Zeyun Bei, Juan Lin, and Yinggang Zhou)

   Author   

Herbert Poenisch, member of IMI International Committee, former senior economist, BIS.

   Abstract   

This paper examines the prospect of a common currency for BRICS nations, an agenda item for the upcoming BRICS summit in Kazan, Russia. Although monetary union is improbable due to member diversity, a feasible initiative is a wholesale currency for payment denomination and settlement, intended for financial intermediaries and commercial banks. Historical precedents, including the SDR and ECU, illustrate potential frameworks for managing a BRICS currency, particularly in terms of denomination, settlement, and storage. This analysis addresses practical requirements, the pivotal role of China’s renminbi, and the implications of a BRICS currency on regional liquidity and monetary policy. Challenges persist, notably balancing strong and weak economies within the bloc and China’s cautious approach to renminbi flows. To succeed, a robust institutional structure—potentially akin to an IMF-like framework—would be essential.

   Authors   

Sonali Jain-Chandra, the IMF mission chief for China. 

Siddharth Kothari, senior economists for China in the Asia and Pacific Department.

Natalija Novta, senior economists for China in the Asia and Pacific Department.

   Abstract   

Reforms to rebalance demand toward consumption and further open the service sector can promote sustainable growth and help create jobs.

China’s economic development over the last several decades has been remarkable amid rapid growth. We project growth will remain resilient at around 5 percent in 2024, despite the continued property sector adjustment.

At the same time, China has relied too much on investment as opposed to consumption. Diminishing productivity and an aging population risk restricting growth, which we expect to slow significantly in coming years, to around 3.3 percent in 2029. Addressing these challenges requires a comprehensive and balanced policy approach.

Given these circumstances, the country’s service sector is an underexploited driver of growth—which was also recognized at the Third Plenum. Reallocating resources to services has helped boost productivity over the past two decades. And it can continue doing so in the years ahead if supportive reforms are implemented.

   Author   

Hans Seesaghur, former economic and commercial counselor at the embassy of Mauritius in Beijing and former China chief representative at the Mauritius Economic Development Board Representative Office in Shanghai.

   Abstract   

Through joint efforts under the frameworks of the Forum on China-Africa Cooperation, the China International Import Expo and the China-Africa Economic and Trade Expo, China and Africa have made continuous and solid progress in fields such as industry, agriculture and health, epitomizing the unique resilience and vitality of African countries and their relations with China.

As leaders from China and African countries gathered in Beijing for the FOCAC Summit, the event will chart the course for fruitful cooperation among China and African countries, which will improve the well-being of the people in Africa, home to the world's largest number of developing countries.

   Author   

Burhan Khadbai, Head of Content, Sovereign Debt Institute, OMFIF.

   Abstract   

Government bond status would create structural demand for bloc’s capital markets borrowing. While the European Union was dealt a blow earlier this year when both Intercontinental Exchange (ICE) and MSCI declined to add the EU to its government bond indices, there is hope that the EU will still achieve sovereign index inclusion sooner rather than later - perhaps as early as 2025. Such a move would have the single biggest impact to the EU’s bonds, making it attractive to global investors and increasing its demand, performance and liquidity.

   Authors   

Aqib Aslam, division chief in the IMF’s Research Department.

Petya Koeva Brooks, deputy director in the IMF’s Research Department.

   Abstract   

This article discusses the growing role of emerging markets in global economic growth and multilateralism. Emerging markets, historically classified separately from advanced economies, have evolved significantly, achieving economic resilience and policy sophistication. Now accounting for a substantial share of global growth, they are key players in the global economy, navigating diverse challenges such as geopolitical tensions, capital volatility, and climate transition demands. As advanced economies turn inward, emerging markets have a vested interest in sustaining a multilateral system essential for trade, innovation, and poverty reduction. Their influence is increasingly recognized in groups like the G20, where emerging markets have shaped agendas around inclusivity, technology, and resilience. The article argues for international organizations like the IMF to adapt by tailoring policy support and governance to reflect the systemic importance of emerging markets in today's global landscape.

   Author   

Atiyah Curmally, Principal Environmental Scientist, International Finance Corporation.

   Abstract   

Artificial intelligence can help institutional investors and asset managers align their emerging market investment strategies with the United Nations’ sustainable development goals. AI can leapfrog gaps in environmental, social and governance data disclosures and reshape business models to drive economic growth and societal progress. As investment opportunities and disclosures increase, so do the demands of asset managers and industry for solutions that efficiently structure information to measure, track and validate climate and other ESG risks. For regulators and investors such applications speed up the approach to scoring companies, developing engagement strategies and peer-to-peer benchmarking. This in turn leads to faster and more efficient reviews, quicker project approvals and better resource management.

   Author   

Yannis Stournaras, Governor of the Bank of Greece.

   Abstract   

In the past few years, the Governing Council of the ECB has followed a meeting-by-meeting, data dependent approach to monetary policy. This speech begins with an overview of the recent economic developments that have set the stage for entering the "dialing back" phase of our monetary policy. It then explores the rationale behind our latest policy decisions, and concludes with a discussion on the challenges facing the Eurosystem’s monetary policy, which includes the ECB and the national central banks of the euro area.

   Author   

Masatsugu Asakawa, president of the Asian Development Bank.

   Abstract   

The Asia and Pacific region stands at a critical juncture, positioned both as a significant contributor to global greenhouse gas emissions and a potential leader in transformative climate action. The Asian Development Bank, alongside its member countries, is steering the region toward a sustainable future through support for a just transition. Our (the ADB’s) vision is to reorient economic and social frameworks to foster low-carbon, climate-resilient growth that enhances prosperity and inclusion.

We must encourage optimism and all sectors of society should make a concerted effort to embrace the principles of justice and inclusivity that will be needed to build a low-carbon, climate-resilient future. This journey faces challenges but is also filled with opportunities for transformative change that can forge a healthier, more equitable and prosperous world. The path we chart now will determine the climate legacy we leave for future generations.

   Author   

Margarita Delgado, Bank of Spain.

   Abstract   

The celebration of the tenth anniversary of the Single Supervisory Mechanism (SSM) marks a significant milestone, providing an opportunity to reflect on the progress made in the banking sector over the past decade and to anticipate future developments in financial supervision. This anniversary serves as a moment to assess the impact of the supervisory model introduced ten years ago, evaluate the current state of the banking sector, and identify lessons to further enhance and strengthen the financial system. The address is structured into three key parts: an analysis of the sector's present status under SSM supervision, a retrospective look at the achievements of the past decade, and a forward-looking perspective on the challenges that lie ahead in supervision.

   Authors   

Zeyun Bei, Wang Yanan Institute for Studies in Economics, Xiamen University and Department of Economics and Finance, City University of Hong Kong

Juan Lin, Corresponding author. Department of Finance at School of Economics and Wang Yanan Institute for Studies in Economics, Xiamen University

Yinggang Zhou, Center for Macroeconomic Research and Department of Finance at School of Economics, Wang Yanan Institute for Studies in Economics

   Abstract   

Using the 2020 financial turmoil during the COVID-19 pandemic as a laboratory, we exam- ine contagion, safe-haven, and diversification effects across stocks, gold, and oil. We de- velop a unified approach to quantify these effects using multivariate downside-to-upside and downside-to-downside CoVaR measures. Although gold lost its safe-haven glitter in the early pandemic, a diversification benefit still existed in the form of reduced downside risk and up- side potential. However, strong contagion among the three assets occurred after the worldwide pandemic was declared on March 11, 2020. Further analysis shows that pandemic-related fear diminished diversification benefits of gold investment and exacerbated contagion spillovers.