Economic Research and Data

International Markets :: Economic Trends

2007

  • The Dollar’s Depreciation and Inflation. Factors underlying the dollar’s depreciation may be changing in a manner that could put upward pressure on U.S. prices, should they continue. Nevertheless, dollar depreciations do not cause inflation. Inflation is a purely home-grown, monetary phenomenon. (08.07.07)
  • Sovereign Wealth Funds. The growing clout of sovereign wealth funds has left a lot of anxious people wondering if state-controlled investment funds will act like privately owned investment funds. With the exception of Norway’s, sovereign wealth funds’ operations are notoriously opaque, which has given rise to many questions. (07.02.07)
  • Is Foreign Exchange Intervention a Good Idea? Intervention does not affect fundamental determinants of exchange rates, but it may affect rates temporarily if it conveys useful information. Evidences indicates that even this limited effect of intervention is more of a hit-or-miss event than a sure bet. (06.06.07)
  • Do Workers Benefit from Globalization? The International Monetary Fund (IMF) recently looked at the evidence bearing on this controversial subject and concluded that globalization has generally given workers in advanced developed countries a bigger piece, but a small share, of a growing economic pie. (05.03.07)
  • Deficits and the Dollar. Contrary to what many people seem to believe, a simple, straightforward relationship does not exist between a nation’s current-account balance and movements in its trade-weighted exchange rate. A current-account deficit need not produce a currency depreciation, and an exchange-rate appreciation need not cause a current-account deficit. (03.30.07)
  • Asian Reserves. Since the early 1990s, developing Asian countries have increased their holdings of foreign-exchange reserves. Traditionally, developing countries have held foreign-exchange reserves to manage—or fix—their key exchange rates in a manner that might promote their international trade. Trade considerations alone, however, have not motivated the recent build up.(03.30.07)
  • Will the Euro Supplant the Dollar?The euro certainly has potential, but it still has a long way to go before it surpasses the dollar’s predominance as an international currency. (02.28.07)
  • China's Economy. China’s economy expanded 10.7 percent in 2006, its fastest rate of growth in eleven years, due to strong exports and investment spending. Economists anticipate slower growth this year, around 9-1/2 percent, but a year ago, economists issued the same prediction for 2006. (02.02.07)
  • Japanese Monetary Policy. The Bank of Japan left its operating target, the uncollateralized overnight call rate, unchanged at 0.25 percent in January. Observers expect that the bank’s next move will be upward. The timing of any move remains uncertain and depends on the outlook for economic activity and prices. (01.03.07)
  • The Yen Carry Trade.International investors borrow yen at extremely low Japanese interest rates and invest (carry) the funds in higher yielding, foreign-currency assets for a profit.Because carry-trade investors typically remain exposed to foreign-exchange risk, many observers fear that if the Bank of Japan raises interest rates, the carry trade might unwind rapidly with repercussions in global currency markets. (01.03.07)
  • Current Account Sustainability.Current account deficits are likely to persist for the foreseeable future, and their financial burden will set the general tone for the dollar. (1.3.07)

2006

  • The Currency Composition of International Reserves. While the dollar remains the world's key international reserve currency, global imbalances are creating a strong incentive for countries to diversify. Developing countries seem to be shifting their holdings to euros. (12/06)
  • Latin America's Economic Prospects. Falling inflation rates and rising growth prospects in Latin America make the current economic outlook the brightest in decades. However, fiscal spending has increased and high levels of public debt still remain. (12/06)
  • International Growth and Inflation. The global expansion continues, bringing strong output growth but also inflationary pressures. (11/06)
  • Labor Force Changes in the Euro Area. The euro area's aging labor force could have a major impact on the future output growth of the union. (11/06)
  • The Income Component of the Current Account. Thanks to 20 years of current account deficits, the income component of the current account posted its third straight deficit. (10/06)
  • Nonfuel Commodity Prices. Metal prices have skyrocketed during the current global expansion, as supply growth has failed to keep pace with strong demand from developing countries. (10/06)
  • China and the Inflation Threat. China's output continued to grow at a blistering pace in the second quarter of 2006, yet for the time being, inflation seems to be under control. (8/06)
  • Global Market Developments. Despite a strong global outlook, equity and commodity prices have fallen substantially in the past two months. (07/06)