The World Bank published its Global Economic Prospects
“Global growth is forecast at 2.5% in 2026, down from 2.9% in 2025. This is the lowest rate since the onset of the pandemic — with nearly two-thirds of economies seeing their forecasts downgraded since January.”
Euro area: ECB hikes rates by 25 bps in line with expectations
The economic outlook for the euro area remains subdued: The IMEN “Euro Area Economy Flash June 2026: Higher Energy Prices Interrupt the Recovery” was published.
The Mexican Stock Market in 2026: A Foreigner’s Guide to the Bolsa and Mexbol by the Times of Rio.
Food for thought!
“Understanding Occupational Wage Growth” by Adrian Adermon, Simon Ek, Georg Graetz, and Yaroslav Yakymovych.
“We jointly estimate growth in occupational wage premia as well as time-varying occupation-specific life-cycle profiles for Swedish workers 1996–2013. Our novel identification strategy is based on re-centering of life-cycle profiles around their flat spot. We document a substantial increase in between-occupation wage inequality due to differential growth in premia, and show that changes in worker composition partly counteracted this trend. The association of wage premium growth and employment growth is positive, suggesting that premium growth is predominantly driven by demand-side factors. We also find that wage growth due to occupation-specific skill acquisition was more dispersed in the early years of the sample period. Our results are robust to varying the assumed flat spot over a reasonable range, as well as to allowing for occupation-level changes in returns to cognitive and psycho-social skills. The results suggest that Swedish wage setting institutions have not prevented wages and quantities from adjusting to technological change or consumer demand shifts.”
Highly relevant!
“The Sovereign-Bank Nexus in Emerging Markets and Developing Economies: Trends, Determinants, and Macrofinancial Implications” by Torsten Wezel, Zulma Barrail, and Salim Dehmej.
“As public debt in emerging markets (EMs) and low-income countries (LICs) has surged since the COVID-19 pandemic, so has the exposure of domestic banks to their sovereigns—raising concerns of destabilizing feedback loops if fiscal conditions deteriorate. This paper provides a comprehensive analysis of this sovereign-bank nexus using a new granular dataset covering over 120 EMs and LICs, combined with IMF Financial Soundness Indicators. We document a marked post-pandemic strengthening of the nexus, particularly in Sub-Saharan Africa and the Middle East and Central Asia, and show that public debt levels, deposit rates, and nonperforming loans are its most robust correlates. While we find no broad evidence of financial repression, higher sovereign refinancing needs significantly increase banks’ government debt holdings in countries with substantial state-owned bank presence. Sensitivity analysis illustrates that the consequences of a strong nexus can be severe: even a moderate domestic debt restructuring could render several banking systems undercapitalized, underscoring that high reported capital ratios in strong-nexus countries may provide a false sense of security.”
Highly relevant!
“Not All Energy Shocks Are Created Equal” by Christophe Blot Jérôme Creel, François Geerolf, and Davide Romelli.
“The inflation surge of 2022–2023, and the risk of recurrence following the outbreak of conflict in the Middle East in early 2026, raises fundamental questions about the appropriate monetary policy response to supply-driven inflation. We examine the anatomy of both inflationary episodes, the challenges in distinguishing between supply and demand shocks in real time, the adequacy of the ECB’s response to the 2022–2023 energy crisis, and the lessons that can be drawn for responding to the current inflationary pressures.”