Today the IMF published some of its new research from the Global Financial Stability Report on two hot topics: emerging economies and the insurance sector in advanced economies. Here’s a quick take on the latest analysis.
The work on emerging economies shows that changes in their asset prices explain over a third of the rise and fall in global equity prices and exchange rates. The IMF analysis finds that rising financial ties, more than emerging economies’ growing share of global GDP and trade, is the key factor behind their increasing financial impact on other countries. For example, while economic news from China does affect global equity returns, spillovers from Chinese asset price shocks remain limited relative to those of financially more integrated emerging market economies including Brazil, Mexico, and South Africa.
The analysis of life insurers in major advanced economies shows they have contributed more risk to the financial system as a whole since the global financial crisis.
Insurers are large institutional investors holding over $24 trillion in global assets and longer-term liabilities, and they have become more exposed to swings in asset prices in recent years. Low interest rates are another important source of risk for insurers. And the lower the level of interest rates, the more vulnerable insurers become to further interest rate changes.
The IMF will release more analysis of the global financial system on April 13. You can check out the press conference live here.