New-breed global investors and emerging-market financial stability

Gaston Gelos, Hiroko Oura, 23 August 2014

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

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

Central banks in developing countries should consider targeting nominal GDP

Pranjul Bhandari, Jeffrey Frankel, 21 August 2014

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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.

Topics: Monetary policy
Tags: emerging markets, inflation targeting, NGDP targeting

The transmission of Federal Reserve tapering news to emerging financial markets

Joshua Aizenman, Mahir Binici, Michael M Hutchison, 4 April 2014

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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.

Topics: Exchange rates, International finance, Monetary policy
Tags: asset prices, Credit Default Swaps, emerging markets, exchange rates, Federal Reserve, stock markets, tapering

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

Atish R Ghosh, Jonathan D Ostry, Mahvash Saeed Qureshi, 2 April 2014

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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).

Topics: Exchange rates
Tags: emerging markets, exchange rates, managing floats

Political connections in turbulent times

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

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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.

Topics: Politics and economics
Tags: emerging markets, political connections, US

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

Kristin Forbes, 5 February 2014

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

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

Why fiscal sustainability matters

Willem Buiter, 10 January 2014

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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.

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

The next sudden stop

Sebnem Kalemli-Ozcan, 7 January 2014

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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).

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

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

Barry Eichengreen, Poonam Gupta, 19 December 2013

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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.

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

A new eBook: Understanding Banks in Emerging Markets

Thorsten Beck, Ralph De Haas, Steven Ongena, 6 November 2013

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Banking is often modelled as a black box – especially banks in emerging markets where details of bank operations are less widely appreciated.

Topics: Frontiers of economic research
Tags: banking research, emerging markets

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