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This paper examines the growth-inflation nexus in Franc zone currency unions. It aims at estimating the inflation threshold above which additional inflationary pressures adversely affect economic expansion. It uses cointegration methods that are applied to data from 14 African countries from the Franc zone over 1970-2018. Based on country-level data, the results indicate that it is possible to increase the threshold levels used by regional central banks to 5.4-5.6 percent in the Central African Monetary Union and 4.3-4.5 percent in the West African Monetary Union. Homogeneous cointegration panel data analyses confirm the need to increase the threshold in Central African Monetary Union countries but do not in the West African Monetary Union countries.

Cointegration --- Currencies and Exchange Rates --- Currency Union --- Economic Growth --- Fixed Exchange Rate --- Inflation --- Monetary Union --- Trade and Regional Integration

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Using a panel of 80 developing and developed countries for the period 1990-2015, this studyanalyses the relationship between exchange rate volatility and foreign direct investment (FDI)inflows. The results reveal a negative relationship between de facto exchange rate volatility andFDI. Reducing exchange rate volatility by 10 percent over one-year can boost FDI inflows-ceterisparibus-by an estimated 0.48 percentage points of GDP while the same reduction over the pastfive years can boost FDI inflows by 0.27 percentage points over the long-run. The results areapplied to the case of South Africa, which has been experiencing high volatility of the rand inrecent years. Reducing the rand's volatility to that of developing country peers, South Africa could boost FDI inflows by a potential of 0.25 percentage points of GDP.

Capital Flows --- Currencies and Exchange Rates --- Exchange Rates --- Finance and Financial Sector Development --- Foreign Direct Investment --- Macroeconomics and Economic Growth

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The World Bank Treasury's Reserve Advisory and Management Partnership (RAMP) conducted its third survey on reserve management practices in 2021. One hundred and nineteen central banks, from different regions, income groups, and reserve levels, contributed to the survey, which included questions on investment policies, asset allocation, risk management, environmental, social, and governance (ESG) investing, and business continuity. The pandemic underlined the importance of safety and liquidity for reserve portfolios. The authors find that central banks maintained their conservative investment approach, focusing on high-quality fixed-income assets denominated in US dollars and euros. At the same time, against a backdrop of ultra-low interest rates in major economies, we also observe that central banks continued, in their search for yield, to gradually diversify their reserves into more currencies and asset classes within fixed income. Survey results also indicate that central banks' risk management practices show room for improvement, especially in institutions that have expanded into nontraditional asset classes, including those that invest in corporate credit. Meanwhile, reserve managers could further enhance internal risk and reporting practices to strengthen oversight. ESG investing is still rarely adopted by central banks, and fewer than a quarter of respondents have included ESG objectives in their investment policy. Crucially, this is largely explained by the focus of reserve portfolios on high-quality fixed-income assets, among which ESG instruments and strategies are rarely encountered. We learn that, in order to maintain business continuity, central banks implemented home-based work in 2020, but technological drawbacks and cybersecurity concerns tended significantly to obstruct any ambition to attain fully remote reserve management operations. The paper carries the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development and World Bank and its affiliated organizations or those of the Executive Directors of the World Bank or the governments they represent.

Currencies and Exchange Rates --- Finance and Financial Sector Development --- Financial Crisis Management and Restructuring --- Financial Regulation and Supervision

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The global financial crisis and its aftermath have triggered extraordinary policy responses in advanced countries. The impacts of these policy responses-from asset price bubbles to currency depreciations-have often been felt in the developing world. As tapering talk evolves into actual withdrawal of quantitative easing in the United States, and as the Euro Zone launches its own quantitative easing program, there are good reasons to be concerned about the financial stability of emerging economies. India's experience with U.S. tapering offers insights into what to expect. This paper estimates the contribution of external and domestic factors to short-term fluctuations in the value of the Indian rupee between 2004 and 2014, using a rich dynamic model that controls for a large number of exchange rate determinants. The paper finds that a global surprise factor, more than domestic vulnerabilities, was the main driver of the large rupee depreciation in summer 2013. With the surprise factor gone, further normalization of U.S. monetary policy is unlikely to have significant effects on the rupee exchange rate.

Currencies and Exchange Rates --- Debt Markets --- Economic Stabilization --- Economic Theory & Research --- Emerging Markets --- Exchange Rate --- Indian Rupee --- Tapering

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Global growth is expected to be 2.8 percent in 2015, but is expected to pick up to 3.2 percent in 2016-17. Growth in developing countries and some high-income countries is set to disappoint again this year. The prospect of rising borrowing costs will compound the challenges many developing countries are facing as they adapt to an era of low commodity prices. Risks to this outlook remain tilted to the downside. This edition of Global Economic Prospects includes two Special Features that analyze the policy challenges raised by the two transitions in developing countries: the risks associated with the first U.S. central bank interest rate increase since 2006 and the implications of persistently low commodity prices for low-income countries. Global Economic Prospects is a World Bank Group Flagship Report that examines global economic developments and prospects, with a special focus on developing countries, on a semiannual basis (in January and June). The January edition includes in-depth analyses of topical policy challenges faced by developing countries while the June edition contains shorter analytical pieces.

Business. --- Currencies and exchange rates. --- Debt markets. --- Economic History --- Business & Economics --- Economic forecasting --- Economic forecasting. --- Developing countries --- Economic conditions. --- Economics --- Forecasting --- Economic indicators