Global Financial Stability Report

Global Financial Stability Report, October 2022: Navigating the High-Inflation Environment

October 11, 2022

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Format: Chicago

International Monetary Fund. Monetary and Capital Markets Department Global Financial Stability Report, October 2022: Navigating the High-Inflation Environment, (USA: International Monetary Fund, 2022) accessed 12/7/2025, https://doi.org/10.5089/9798400219672.082

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Summary

Global financial stability risks have increased amid a series of cascading shocks. Chapter 1 analyzes the policy response of central banks to high inflation, the risks of a disorderly tightening of financial conditions, and debt distress among emerging and frontier markets. Markets have been extremely volatile, and a deterioration in market liquidity appears to have amplified price moves. In Europe, the energy crisis is contributing to a worsening outlook. In China, the property sector remains a key source of vulnerability. Chapter 2 examines how to narrow the climate financing gap in emerging market and developing economies. Climate policies, including carbon pricing, climate disclosures, and transition taxonomies, are crucial for enabling private climate finance. Innovative financial instruments can help to scale up private climate finance, but the public sector—including multilateral development banks—will have to play a key supporting role. Chapter 3 analyzes the contributions of open-end investment funds to fragilities in asset markets. Open-end investment funds play a key role in financial markets, but those offering daily redemptions while holding illiquid assets can amplify the effects of adverse shocks by raising the likelihood of investor runs and asset fire sales. This contributes to volatility in asset markets and potentially threatens financial stability.

Subject: Asset and liability management, Asset prices, Central banks, Climate finance, Emerging and frontier financial markets, Environment, Financial markets, Liquidity, Prices, Securities markets

Keywords: antidilution levies, Asia and Pacific, asset management, asset price fragility, asset prices, asset return volatility, blended finance, bond funds, bond issuance, carbon markets, Caribbean, cash buffers, Central and Eastern Europe, central banks, China property sector, China spillovers, climate ambition gap, climate change adaptation, climate change mitigation, climate data, climate disclosures, climate finance, climate information architecture, corporate bonds, corporate defaults, COVID-19 market turmoil, dash for cash, debt distress, debt issuance, developing economies, developing economy, dollar strength, Emerging and frontier financial markets, emerging markets, emerging markets, ESG funds, ESG score, ESG scores, European energy crisis, financial conditions, financial stability, financing costs, fire sales, first mover advantage, foreign reserves, fossil fuel expansion, fossil fuel investments, fragility, fragmentation, frontier markets, Global, global bank stress test, green bonds, green finance, Growth-at-risk, herding, house prices, IMF Resilience and Sustainability Trust, inflation, leveraged finance, liquidity, liquidity management, liquidity mismatch, macro uncertainty, market liquidity, market stress, market structure, Middle East, monetary policy, monetary policy tightening, monetary policy uncertainty, multilateral development banks, nonbank financial intermediation, open-end investment funds, Paris Agreement Article 6, portfolio flows, redemptions, rising interest rates, runs on funds, Securities markets, selling pressure, sovereign sustainable bonds, spillovers, stagflation, strategic complementarities, structured finance, sustainability-linked bonds, sustainable finance, swing factors, swing pricing, taxonomies, term premia, TPI, transition finance, transition plans, Transmission Protection Instrument, volatility