Tobias Adrian is the International Monetary Funds’s Financial Counsellor and the Director of its Monetary and Capital Markets Department. As the Annual Meetings of the International Monetary Fund are about to get underway, I had the good fortune of moderating an important panel his team presented at the Nasdaq. They discussed two chapters of two key reports focusing on Emerging Market Risks and Resilence, one from the World Economic Outlook report and the other from the Global Financial Stability report, both to be released next week.
Speakers in the video include Tobias himself along with Joyce Chang, Global Head of Research J.P.Morgan; Pierre-Olivier Gourinchas, Chief Economist and Director Research Department IMF; Andrea Presbitero, Deputy Division Chief Research Department IMF; Carmen Reinhart, Professor of the International Financial System Harvard Kennedy School; Jason Wu, Assistant Director Global Markets Analysis Monetary and Capital Markets Department IMF, and me as the lucky moderator.
They zeroed in on the two chapters the IMF released today ahead of the official release next week. One, The World Economic Outlook Chapter 2, tied “Emerging market resilience: Good luck or good policies?” which shows that improvements in policy frameworks have supported macroeconomic stability in emerging markets, and
And two, Global Financial Stability Report Chapter 3, titled “Global Shocks, Local Markets: The Changing Landscape of Emerging Market Sovereign Debt,” that explores how emerging market and developing economies with increased local currency sovereign bond issuance and domestic absorption have shown greater resilience to global shocks.
You can their listen to their conversation by going here to IMF Videos https://www.imf.org/en/Videos/index
And as a mental appetizer you can hear why Adrian sees EMs making great strides as they develop domestic bond markets that stabilize markets and insulate them from shocks coming from the rest of the world.
Focus on local currency bond markets in Emerging Economies 00:00:36:18
So, let me focus on, the, the chapter of the Global Financial Stability Report that was released today, which is really focusing on the role of local currency bond markets in emerging markets.
A domestic bond market is an insulator 00:01:04:07
And so what we document is number one, that many major emerging markets really have, made tremendous progress in terms of developing those, domestic bond markets. And, that this in turn is a source of stability for the markets, for the markets and for the country as a whole. So having strong domestic markets means that the countries are more insulated from shocks coming from the rest of the world. And, that makes them, that much more resilient. So it’s no longer luck it’s also very, purposeful, stability.
More market development and infrastructure 00:01:56:11
I thought it the biggest change is from emerging markets to really, be very purposeful in terms of building market infrastructures, primary dealer systems, but also of buyer side. Right? So in many countries now you see that pension funds and insurance companies have developed. So they are savers that are domestically investing in domestic markets.
All this improves the ability to deal with shocks 00:02:23:06
And the more of that countries <improve> in terms of absorbing any, any types of shocks. So it’s, it’s really the intertwining this of markets and institutional development that is at the, at the core of our findings.
Market turbulence motivated EMs to develop stronger frameworks 00:03:17:22
I think the, the big motivation is, is turbulence. We saw in the past, right, in the 1980s and 1990s, we saw a lot of emerging markets crises, whereas in already in the global financial crisis, but then even more strongly in the global pandemic and in the shocks since 2020, we have seen a lot of resilience of the emerging markets.
Crisis also was a real motivator 00:03:43:01
And, we think that it is the crisis that motivated the emerging markets, the major emerging markets, to really develop stronger frameworks and stronger policy frameworks, but stronger institutional frameworks for capital markets as well
Improving but there is always room for more…00:04:04:16
So, you can always do better. It’s a little bit like working out. Let’s, you know, you can always you can always lift more weights and run faster. And, you know, it’s like that with institutional frameworks, with policy frameworks, the, you know, these are highly complex challenges. And, you know, countries can always improve in terms of having, stronger accountability, having stronger autonomy, stronger independence.
Lots of agents and market mechanics to improve 00:04:33:02
And then on the domestic capital market side, you know, developing, developing, you know, repo markets, developing the plumbing of markets, central clearing, primary dealer systems, interconnectivity with the rest of the world. So, you know, the list is very long in terms of things, and dimensions along which you can further improve.
Bank independence encourages the best long run decision-making 00:05:06:17
So, you know, as a central bank and as a government, you may be tempted to trade off short-term gain, against, longer term, troubles. And so that’s why over many decades, if not hundreds of years, this, this autonomy, and accountability and independence of central banks has really evolved.
The benefits of central bank independence are well demonstrated 00:05:43:17
And, we have documented again and again that countries that have such, independence, autonomy and accountability fared better in terms of resisting, bad, policy tradeoffs. So ultimately, life is easier when you move forward and resilient institutions.
Tobias Adrian
Tobias Adrian is the Financial Counsellor and Director of the Monetary and Capital Markets Department of the International Monetary Fund (IMF). In this capacity, he leads the IMF’s work on financial sector surveillance, monetary and macroprudential policies, digital money, financial regulation, bank resolution, and capital markets. He also oversees capacity building activities in IMF member countries with regard to the supervision and regulation of financial systems, bank resolution, central banking, monetary and exchange rate regimes, tokenized money and finance, and debt management.
Prior to joining the IMF, Mr. Adrian was a Senior Vice President of the Federal Reserve Bank of New York and the Associate Director of the Research and Statistics Group. At the Federal Reserve, he contributed to monetary policy, to financial stability policies, and to crisis management.
Mr. Adrian has published extensively in economics and finance journals. His research spans macro-finance, monetary policy, and financial stability, with a focus on aggregate consequences of capital market developments. He has taught at Princeton University, New York University, and Seoul National University, and served on the editorial boards of the International Journal of Central Banking and the Annual Review of Financial Economics.
Mr. Adrian holds a Ph.D. from the Massachusetts Institute of Technology in Economics, an MSc from the London School of Economics in Econometrics and Mathematical Economics, a Diplom from Goethe University Frankfurt and a Maîtrise from Dauphine University Paris. He received his Abitur in Literature and Mathematics from Humboldtschule Bad Homburg.
