‘Leaning against the wind’: exchange rate intervention in emerging markets works

Christian Daude, Eduardo Levy Yeyati 01 September 2014

a

A

The economic debate has typically downplayed the exchange rate-smoothing nature of central bank foreign exchange intervention, attributing it to precautionary or prudential motives, or to the goal of keeping the exchange rate undervalued for mercantilist reasons.

a

A

Topics:  Exchange rates Monetary policy

Tags:  Central Banks, exchange rates, exchange rate smoothing, emerging markets, Leaning against the wind

New-breed global investors and emerging-market financial stability

Gaston Gelos, Hiroko Oura 23 August 2014

a

A

The investor base matters since different investors behave differently. During the emerging-market sell-off episodes in 2013 and early 2014:

  • Retail-oriented mutual funds withdrew aggressively, but investors from different regions also tended to behave differently;
  • Institutional investors such as pension funds and insurance companies with long-term strategies broadly maintained their emerging-market investments.

Figure 1 shows the facts.

Figure 1. Bond flows to emerging-market economies 

a

A

Topics:  Financial markets International finance

Tags:  Pension Funds, financial stability, capital flows, investment, emerging markets, financial deepening, herding, original sin, mutual funds, institutional investors

Central banks in developing countries should consider targeting nominal GDP

Pranjul Bhandari, Jeffrey Frankel 21 August 2014

a

A

Central banks still seek transparent and credible communication. But signalling intentions, through forward guidance or some degree of commitment to an intermediate target, poses a difficult tradeoff. The advantages of transparency and credibility versus the disadvantages of waking up one day to find that unexpected developments have turned past statements into unwanted constraints on current monetary policy.

a

A

Topics:  Monetary policy

Tags:  inflation targeting, emerging markets, NGDP targeting

The transmission of Federal Reserve tapering news to emerging financial markets

Joshua Aizenman, Mahir Binici, Michael M Hutchison 04 April 2014

a

A

The quantitative easing (QE) policies of the US Federal Reserve in the years following the crisis of 2008–2009 included monthly securities purchases of long-term Treasury bonds and mortgage-backed securities totalling $85 billion in 2013. The cumulative outcome of these policies has been an unprecedented increase of the monetary base, mitigating the deflationary pressure of the crisis.

a

A

Topics:  Exchange rates International finance Monetary policy

Tags:  exchange rates, Federal Reserve, asset prices, emerging markets, stock markets, Credit Default Swaps, tapering

Managing the exchange rate: It's not how much, but how

Atish R Ghosh, Jonathan D Ostry, Mahvash Saeed Qureshi 02 April 2014

a

A

The choice of exchange rate regime is a perennial issue faced by emerging markets. Conventional wisdom, especially after the emerging markets crises of the late 1990s, was the bipolar prescription: countries should choose between either floats (the soft end of the prescription) or hard pegs (monetary union, dollarisation, currency board). The thinking was that intermediate regimes (conventional pegs, horizontal bands, crawling arrangements, managed floats) left countries more susceptible to crises.

a

A

Topics:  Exchange rates

Tags:  exchange rates, emerging markets, managing floats

Political connections in turbulent times

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak, Todd Mitton 25 February 2014

a

A

When assessing the political situation in many countries, it is common practice, and entirely reasonable, to consider who has what kind of personal connection to people in, or contending for, power.

a

A

Topics:  Politics and economics

Tags:  US, emerging markets, political connections

Turmoil in emerging markets: What’s missing from the story?

Kristin Forbes 05 February 2014

a

A

Emerging markets are going through another period of volatility – and the most popular boogeyman is the US Federal Reserve.

The basic storyline is that less accommodative US monetary policy has caused foreign investors to withdraw capital from emerging markets, causing currency depreciations, equity declines, and increased borrowing costs. In many cases, these adjustments will slow growth and increase the risk of some type of crisis.

a

A

Topics:  International finance

Tags:  Federal Reserve, capital flows, emerging markets, global financial crisis, tapering

Why fiscal sustainability matters

Willem Buiter 10 January 2014

a

A

Does fiscal sustainability matter only when there is a fiscal house on fire, as was the case with the Greek sovereign insolvency in 2011–12? Far from it.

a

A

Topics:  Financial markets Global crisis International finance Macroeconomic policy

Tags:  eurozone, sovereign debt, capital flows, financial crisis, credit booms, fiscal policy, emerging markets, global financial crisis, banking, banks, Eurozone crisis, Currency wars, fiscal sustainability, banking union, sovereign debt restructuring, balance-sheet recession

The next sudden stop

Sebnem Kalemli-Ozcan 07 January 2014

a

A

The ominous facts are well known – the strongest predictors of financial crises are domestic credit booms and external debts (Reinhart and Rogoff 2011). In emerging markets, credit booms are generally preceded by large capital inflows (Reinhart and Reinhart 2010). Many high-growth emerging markets have been receiving capital inflows for the last five years as the developed economies have been attending to their wounds from the Global Financial Crisis. Now the tide is reversing. Emerging markets are experiencing slowdowns in growth and widening current-account deficits.

a

A

Topics:  Financial markets International finance

Tags:  capital flows, emerging markets, global financial crisis, sudden stops, Turkey, tapering, liability dollarisation

Tapering talk: The impact of expectations of reduced Federal Reserve security purchases on emerging markets

Barry Eichengreen, Poonam Gupta 19 December 2013

a

A

In May 2013, Federal Reserve officials first began to talk of the possibility of the US central bank tapering its securities purchases from $85 billion a month to something lower. A milestone to which many observers point is 22 May 2013, when Chairman Bernanke raised the possibility of tapering in his testimony to Congress. This ‘tapering talk’ had a sharp negative impact on economic and financial conditions in emerging markets.

Three aspects of that impact are noteworthy:

a

A

Topics:  Exchange rates Monetary policy

Tags:  exchange rates, monetary policy, Federal Reserve, emerging markets, capital controls, Macroprudential policies, Capital inflows, currency war, tapering

Pages

Events