In January, the World Bank issued its latest Global Growth Report, which contained a section titled, “Who Catches a Cold When Emerging Markets Sneeze?”It contained the following graph, which shows the slower pace of post-recession global growth:
The report argues the following five factors caused the drop:
The report argues developed country GDP drops .4% for every 1% drop in BRIC growth. Assuming this to be accurate, we now have a fairly good idea regarding the causation of slower growth across the OECD’s bigger countries.
The ECBs’ rate announcement was this week’s biggest news.In addition to lowering several rates, the bank announced:
(4) The monthly purchases under the asset purchase programme will be expanded to €80 billion starting in April.
(5) Investment grade euro-denominated bonds issued by non-bank corporations established in the euro area will be included in the list of assets that are eligible for regular purchases.
Not only are they increasing purchases by 20 billion euros, they’re expanding these purchases to corporate debt.In effect, large EU companies can now issue paper directly to the ECB. EU corporations are more dependent on financial institutions than the bond market, making this a very important development. Draghi offered the following commentary regarding the program:
Third, we decided to include investment-grade euro-denominated bonds issued by non-bank corporations established in the euro area in the list of assets that are eligible for regular purchases under a new corporate sector purchase programme. This will further strengthen the pass-through of our asset purchases to the financing conditions of the real economy. Purchases under the new programme will start towards the end of the second quarter of this year.
