## Global Financial Stability Report, October 2022: Navigating the High-Inflation Environment _Global Financial Stability Report, October 2022_ ## Source details **Canonical URL:** [Global Financial Stability Report, October 2022: Navigating the High-Inflation Environment](https://www.imf.org/en/publications/gfsr/issues/2022/10/11/global-financial-stability-report-october-2022) ## Other formats - [Markdown version](/en/publications/gfsr/issues/2022/10/11/global-financial-stability-report-october-2022/index.md) - [Structured JSON version](/en/publications/gfsr/issues/2022/10/11/global-financial-stability-report-october-2022/index.json) - [Bundle manifest](/en/publications/gfsr/issues/2022/10/11/global-financial-stability-report-october-2022/bundle-manifest.json) ## Bibliographic details - Published: October 11, 2022 --- ### Overview: Rising global financial stability risks - Financial stability risks have increased amid the highest inflation in decades and the ongoing spillovers from Russia’s war in Ukraine to European and global energy markets. - Poor market liquidity raises the risk that a sudden, disorderly tightening in financial conditions may interact with preexisting vulnerabilities. - Specific regional and sectoral vulnerabilities noted: - Emerging markets: rising rates, weak fundamentals, and large outflows have pushed up borrowing costs, particularly for frontier economies, with a heightened risk of additional defaults. - China: the property downturn has deepened as sharp declines in home sales have exacerbated pressures on developers, with heightened risks of spillovers to the financial sector. - Europe: the energy crisis is contributing to a worsening outlook. ### Chapter 1 — Financial Stability in the New High-Inflation Environment - Focus: policy response of central banks to high inflation, risks of a disorderly tightening of financial conditions, and debt distress among emerging and frontier markets. - Key findings: - Markets have been extremely volatile. - A deterioration in market liquidity appears to have amplified price moves. - In emerging markets, rising rates, weak fundamentals, and large outflows have pushed up borrowing costs, particularly for frontier economies, with a heightened risk of additional defaults. - In China, the property sector remains a key source of vulnerability. - Implication: heightened probability of interactions between market liquidity strains and preexisting vulnerabilities, potentially producing disorderly tightening in financial conditions. ### Chapter 2 — Scaling Up Private Climate Finance in Emerging Market and Developing Economies - Focus: narrowing the climate financing gap in emerging market and developing economies. - Key findings and arguments: - 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 and broaden the investor base. - The public sector—including multilateral development banks—will have to play a key supporting role to provide risk-absorption capacity. - The IMF can play a catalytic role through policy advice, surveillance, capacity development, and financing from its new Resilience and Sustainability Trust, which could help tackle longer-term structural challenges arising from climate change. ### Chapter 3 — Asset Price Fragility: The Role of Open-End Investment Funds - Focus: contributions of open-end investment funds to fragilities in asset markets. - Key findings: - 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. - Mechanisms of amplification include higher likelihood of investor runs and asset fire sales, contributing to volatility in asset markets and potentially threatening financial stability. - These vulnerabilities could spill over to emerging markets and lead to a tightening of financial conditions. - Policy recommendation: - Policymakers should ensure that liquidity management tools are available, calibrated appropriately, and utilized by funds. ### Key takeaways and policy priorities - Monitor and manage interactions between high inflation, central bank responses, and market liquidity to reduce the risk of a disorderly tightening of financial conditions. - Support emerging and frontier markets facing rising borrowing costs and debt-distress risks through targeted policies and international cooperation. - Address sectoral vulnerabilities, notably in China’s property sector, to limit spillovers to the financial system. - Scale up private climate finance via policy frameworks (carbon pricing, climate disclosures, transition taxonomies), innovative instruments, and public-sector interventions, with multilateral development banks and IMF mechanisms playing supporting roles. - Strengthen liquidity management frameworks for open-end investment funds to mitigate run and fire-sale risks and contain potential cross-border spillovers. *Global Financial Stability Report, October 2022: Navigating the High-Inflation Environment* --- ## Content in this bundle - **Chapter 1 Data** - [Chapter 1 Data (Markdown version)](/-/media/files/publications/gfsr/2022/october/data/ch1data.xlsx.md){rel="alternate" type="text/markdown"} - [Chapter 1 Data (XLSX)](/-/media/files/publications/gfsr/2022/october/data/ch1data.xlsx){rel="external" type="application/vnd.openxmlformats-officedocument.spreadsheetml.sheet"} - **Chapter 3 Data** - [Chapter 3 Data (Markdown version)](/-/media/files/publications/gfsr/2022/october/data/ch3data.xlsx.md){rel="alternate" type="text/markdown"} - [Chapter 3 Data (XLSX)](/-/media/files/publications/gfsr/2022/october/data/ch3data.xlsx){rel="external" type="application/vnd.openxmlformats-officedocument.spreadsheetml.sheet"} - **Chapter 1** - [Chapter 1 (Markdown version)](/-/media/files/publications/gfsr/2022/october/english/ch1.pdf.md){rel="alternate" type="text/markdown"} - [Chapter 1 (PDF)](/-/media/files/publications/gfsr/2022/october/english/ch1.pdf){rel="external" type="application/pdf"} - **Chapter 2 Online Annex** - [Chapter 2 Online Annex (Markdown version)](/-/media/files/publications/gfsr/2022/october/english/ch2onlineannex.pdf.md){rel="alternate" type="text/markdown"} - [Chapter 2 Online Annex (PDF)](/-/media/files/publications/gfsr/2022/october/english/ch2onlineannex.pdf){rel="external" type="application/pdf"} - **Chapter 3** - [Chapter 3 (Markdown version)](/-/media/files/publications/gfsr/2022/october/english/ch3.pdf.md){rel="alternate" type="text/markdown"} - [Chapter 3 (PDF)](/-/media/files/publications/gfsr/2022/october/english/ch3.pdf){rel="external" type="application/pdf"} - **Chapter 3 Online Annex** - [Chapter 3 Online Annex (Markdown version)](/-/media/files/publications/gfsr/2022/october/english/ch3onlineannex.pdf.md){rel="alternate" type="text/markdown"} - [Chapter 3 Online Annex (PDF)](/-/media/files/publications/gfsr/2022/october/english/ch3onlineannex.pdf){rel="external" type="application/pdf"} - **Executive Summary** - [Executive Summary (Markdown version)](/-/media/files/publications/gfsr/2022/october/english/execsum.pdf.md){rel="alternate" type="text/markdown"} - [Executive Summary (PDF)](/-/media/files/publications/gfsr/2022/october/english/execsum.pdf){rel="external" type="application/pdf"} - **Foreword** - [Foreword (Markdown version)](/-/media/files/publications/gfsr/2022/october/english/foreword.pdf.md){rel="alternate" type="text/markdown"} - [Foreword (PDF)](/-/media/files/publications/gfsr/2022/october/english/foreword.pdf){rel="external" type="application/pdf"} - **Global Financial Stability Report — Key Highlights** - [Global Financial Stability Report — Key Highlights (Markdown version)](/-/media/files/publications/gfsr/2022/october/english/infographic.pdf.md){rel="alternate" type="text/markdown"} - [Global Financial Stability Report — Key Highlights (PDF)](/-/media/files/publications/gfsr/2022/october/english/infographic.pdf){rel="external" type="application/pdf"} - **Full Report** - [Full Report (Markdown version)](/-/media/files/publications/gfsr/2022/october/english/text.pdf.md){rel="alternate" type="text/markdown"} - [Full Report (PDF)](/-/media/files/publications/gfsr/2022/october/english/text.pdf){rel="external" type="application/pdf"} --- ## References - [Podcast](https://www.imf.org/en/News/Podcasts/All-Podcasts/2022/10/11/GFSR-OCT-2022) - [Blog by Tobias Adrian](https://www.imf.org/en/Blogs/Articles/2022/10/11/interest-rate-increases-volatile-markets-signal-rising-financial-stability-risks) - [Watch the Video](https://www.imf.org/en/Videos/view?vid=6313422125112) - [Read The Blog](https://origin-blogs.imf.org/en/blogs/articles/2022/10/07/how-to-scale-up-private-climate-finance-in-emerging-economies) - [watch the video](https://www.imf.org/en/Videos/view?vid=6313256443112) - [Read The Blog](https://www.imf.org/en/Blogs/Articles/2022/10/04/how-illiquid-open-end-funds-can-amplify-shocks-and-destabilize-asset-prices) _Source: https://www.imf.org/en/publications/gfsr/issues/2022/10/11/global-financial-stability-report-october-2022_