Ousmene Mandeng conference images

Economics Commentary offers analyses and opinions on international monetary affairs and emerging markets capital markets developments. The content is primarily concerned with changes in the international monetary system and its impact on economic policies and international capital markets and draws extensively on participations in key international economic policy fora. Economics Commentary aims to support the public debate and markets' understanding of major international monetary and emerging capital markets developments.


Central bank issued digital currencies and financial inclusion

Tenth Annual Conference—Central Reserve Bank of Peru and Reinventing Bretton Woods Committee

Sacred Valley, Peru, 24 July 2018

[...] In my remarks I will focus on the session title to respond to the question: Should central banks issue digital currencies or CBDCs? My answer is an unambiguous yes. Physical cash is simply no longer the best technology to make available means of payment widely. The gains from greater monetary control, transparency in payments and scope for financial inclusion should in my view by far outweigh possible disadvantages of CBDCs. However, those gains remain highly contested. I shall focus on the seldom evoked but important special role CBDCs can play to advance financial inclusion. [...]

Trade war, fintech and the new exorbitant privilege

20 July 2018

The U.S.-China merchandise trade war exposes China’s persistent fundamental disadvantage in international exchange. It uses the dollar to conduct most of its trade. While China may retaliate, it remains highly dependent on the U.S. for using the dollar. In a world where the U.S. is a willing leader to support international exchange it may not matter. In a “U.S. first” world it matters a great deal. China’s aim for renminbi internationalisation has thus become far more urgent. New financial technologies may be the new “exorbitant privilege.” [...]

Is the dollar still international enough?

Conference—World Finance Forum

Beijing, 30 June 2018

[...] I would like to explore the nexus between uncertainty and the direction of the international monetary system to address the question: Is the dollar still international enough to serve the international economy? As you know, the dollar remains by far the dominant international currency and a great number of countries, including China, maintain monetary policy frameworks that rely on the dollar as anchor currency. New financial technologies may now allow to overcome the entrenched advantages of the dollar. Decentralisation may be the new approach to integration. [...]

Swiss sovereign money referendum and the architecture of money

11 June 2018

The referendum on the Swiss sovereign money initiative (Vollgeldinitiative) of 10 June served as an important reminder that the modalities of the production of money are not set in stone. Its failure should not be seen as confirmation that central banking and money do not require some fundamental rethink. The initiative’s objective to suspend fractional reserve banking and provide central bank money to everyone was not its most radical proposition. It was the legalisation of cryptocurrencies and envisaged money competition. The referendum offered a true change in the architecture of money with likely important broader impulses for the international monetary system. [...]

ECB looks very 19th century

4 June 2018

The European Central Bank (ECB) may long have decided to switch its main instrument from interest rate setting to direct lending. Its persistent low and unchanged interest rates and maintenance of net asset purchases brings the ECB close to the origins of central banking. While the ECB was seen as a successor to the Bundesbank, it may now look increasingly closer to its ancestor the German Imperial Bank (Reichsbank). [...]

Beggar-thy-neighbour and inter-RFA coordination

Second joint RFA research seminar

Cartagena, 17 May 2018

The importance of coordination among regional financing arrangements (RFAs) to strengthen the global financial safety net (GFSN) has been well established. The number of institutions offering adjustment lending requires some coordination to mitigate duplication and strengthen effectiveness. However, too little attention is given to the outcome of adjustment such that adjustment of one country does not unduly impair prospects of other countries or regions. This fundamental principle of avoiding a beggar-thy-neighbour approach represents one of the most important rationales for seeking close coordination of RFAs. Yet, it remains elusive. [...]

Emerging markets vulnerability to exchange rate shocks—A curative approach

3 May 2018

The U.S. Federal Reserve announced on 2 May that it will keep its policy rate at its current level. The Fed reiterated that it sees economic conditions warranting "further gradual increases in the federal funds rate." Emerging markets currencies have notoriously been vulnerable to U.S. interest rate rises and in particular a stronger dollar. The prospect of a sustained rate increase therefore causes some disquiet or worse. Yet, it is important to be reminded that emerging markets exchange rate vulnerability seems largely "self-inflicted." A curative approach is needed. [...]

The geography of money

OMFIF May Bulletin, 1 May 2018

The quest for international currencies is not new. The 18th-century Maria Theresa thaler was one of the first international currencies and may be considered something of a model for bitcoin. The denationalised properties of the cryptocurrency have highlighted the advantages of such currencies. [...]