Business and Economics > Investments: Metals

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Mr. Thomas J Sargent, Mr. George Hall, Mr. Martin Ellison, Mr. Andrew Scott, Mr. Harold James, Ms. Era Dabla-Norris, Mark De Broeck, Mr. Nicolas End, Ms. Marina Marinkov, and Vitor Gaspar


World War I created a set of forces that affected the political arrangements and economies of all the countries involved. This period in global economic history between World War I and II offers rich material for studying international monetary and sovereign debt policies. Debt and Entanglements between the Wars focuses on the experiences of the United States, United Kingdom, four countries in the British Commonwealth (Australia, New Zealand, Canada, Newfoundland), France, Italy, Germany, and Japan, offering unique insights into how political and economic interests influenced alliances, defaults, and the unwinding of debts. The narratives presented show how the absence of effective international collaboration and resolution mechanisms inflicted damage on the global economy, with disastrous consequences.

Mr. Johannes Wiegand
In 1871-73, newly unified Germany adopted the gold standard, replacing the silver-based currencies that had been prevalent in most German states until then. The reform sparked a series of steps in other countries that ultimately ended global bimetallism, i.e., a near-universal fixed exchange rate system in which (mostly) France stabilized the exchange value between gold and silver currencies. As a result, silver currencies depreciated sharply, and severe deflation ensued in the gold block. Why did Germany switch to gold and set the train of destructive events in motion? Both a review of the contemporaneous debate and statistical evidence suggest that it acted preemptively: the Australian and Californian gold discoveries of around 1850 had greatly increased the global supply of gold. By the mid-1860s, gold threatened to crowd out silver money in France, which would have severed the link between gold and silver currencies. Without reform, Germany would thus have risked exclusion from the fixed exchange rate system that tied together the major industrial economies. Reform required French accommodation, however. Victory in the Franco-Prussian war of 1870/71 allowed Germany to force accommodation, but only until France settled the war indemnity and regained sovereignty in late 1873. In this situation, switching to gold was superior to adopting bimetallism, as it prevented France from derailing Germany’s reform ex-post.
Mr. Fabio Comelli and Mrs. Esther Perez Ruiz
A strand of research documents Chile’s copper dependence hence significant exposure to terms of trade shocks. Copper prices’ sharp decline and forecast uncertainty since the end of the commodity super-cycle has rekindled the debate on Chile’s adjustment capacity to external shocks. Following Malz (2014), this paper builds a time-varying measure of copper price uncertainty using options contracts. VAR analysis shows that the investment response to an uncertainty shock of average magnitude in the sample is strong and persistent: the cumulative fall in investment from trend at a one-year horizon ranges 2–5.8 percentage points; and it takes between 1½ and 2 years for investment to return to its trend level. Empirical ranges depend on alternative definitions for investment, uncertainty, and options’ maturing time.
International Monetary Fund. Asia and Pacific Dept
This paper explores key issues affecting the Indian economy and implications for fiscal, monetary, financial sector, and other structural policies. This paper evaluates the build-up of corporate and banking sector vulnerabilities in India, linked to the past macroeconomic slowdown and supply-side bottlenecks, particularly in the infrastructure sector; the nature, scope, and the effectiveness of macroprudential policies in India; the potential costs and benefits of gold monetization schemes in India; two recent episodes of financial market volatility—the taper tantrum of the summer of 2013 and the China spillover episode of the summer of 2015; effectiveness of India’s capital controls using an arbitrage based approach; the relationship between Indian; and international market prices of cereals.
International Monetary Fund. Asia and Pacific Dept
This paper discusses Solomon Islands’ Third Review Under the Extended Credit Facility (ECF) Arrangement and Request for Modification of Performance Criteria (PC). Program performance under the ECF arrangement has been broadly satisfactory. Reserve buffers have been rebuilt and are at a comfortable level, well above the average of other small states. All PCs for end-December, the indicative targets (ITs) for March, and the continuous PCs were met with considerable margins, except for the IT on government-funded recurrent spending on health and education, which was narrowly missed. Based on Solomon Islands’ program performance, the IMF staff recommends completion of the third review under the ECF-supported program.