Emerging economies are substantially reliant on foreign corporate debt issuance, which has major macroeconomic implications. This column quantifies the extent to which debt issuance matters for macroeconomic performance in emerging economies, and how much macro vulnerability it has entailed. It finds evidence that a large increase in debt reliance has had a considerable effect on macroeconomic performance, but suggests that potential negative impacts on overall health of economies can be reduced in the future if policymakers have access to more and better information.
Julián Caballero, Andrés Fernández, Jongho Park, 19 December 2016
Robert Barro, 04 February 2016
China’s diminished growth prospects are in the news and seem to spell bad news for just about everybody. This column assesses the evidence, arguing that China’s economic growth will be much slower from now on, reducing international trade. Perhaps the biggest challenge for China will be future political tensions in reconciling economic dreams with economic realities.
George Karolyi, David Ng, Eswar Prasad, 12 December 2015
Few economists understate the importance of emerging market economies in terms of world GDP and global growth prospects. This column asks where the future of emerging markets’ investments lie. Where investors have focused in the past and institutional path dependency are important determinants of emerging markets’ allocation of international investment portfolios. This has implications for the geographical distribution of emerging markets’ portfolio investments, a force to reckon with in international financial markets.
Jeffrey Frankel, 09 December 2015
Calls for coordination of macroeconomic policy have made a comeback since the Global Crisis. This column reviews this return of international policy coordination, both in terms of fiscal and monetary policy. It discusses recent developments and considerations in fiscal and monetary policy games, and cautions that most but not all calls for coordination are useful.
Maximiliano Sosa Andrés, Christiane Krieger-Boden, Peter Nunnenkamp, 08 March 2012
Investors from emerging and developing economies are becoming bigger players in FDI, particularly in developing countries. While some raise concerns that emerging economies might gain control over raw materials, others are hopeful that non-traditional investors might provide new opportunities for development. This column analyses these new FDI flows and finds that while fears may be exaggerated so too is the optimism.
Nicolas Magud, Carmen Reinhart, Esteban Vesperoni, 24 January 2012
The prospect of expansionary monetary policy in Europe and elsewhere has triggered memories of hot flows of money, credit booms, and instability in emerging economies. This column shows that during capital-inflow bonanzas credit grows more rapidly and its composition tilts to foreign currency more markedly in economies with less flexible exchange-rate regimes. It proposes policies to help mitigate the boom and bust in these countries.
Joshua Aizenman, Daniel Riera-Crichton, Sebastian Edwards, 14 January 2012
Last year’s surge in commodity prices was a reminder, if we needed one, of the problems caused by terms-of-trade volatility in emerging economies. This column looks at the real exchange rate adjustments to commodity terms-of-trade shocks in the region exposed to the highest volatility – Latin America. It finds that active reserve management not only lowers the short-run impact of shocks, but also substantially reduces real exchange rate volatility.
Marcel Fratzscher, 23 August 2011
Capital flows are booming—rising to unprecedented magnitudes since the global crisis. What should policymakers do to avoid the vagaries of such fickle flows? This column argues that while there are global factors, much of the flows to emerging markets stem from nation-specific “pull” factors. This suggests that policy responses should focus on improving institutions, deepening financial markets, and enhancing macroeconomic and prudential policies.
Luiz de Mello, Pier Carlo Padoan, Linda Fache Rousová, 18 June 2011
For developing and emerging economies, current-account reversals are rarely welcome news. Often they lead to financial ruin and political turmoil. This column explores what current-account reversals mean for the long run. It argues that they can cause structural breaks in trend GDP growth, rather than short-lived deviations.
Raphael Auer, 10 December 2010
Do skill-intensive imports from rich nations reduce skill accumulation in emerging economies? This column presents new evidence from 41 emerging economies to suggest that being close to the global supply of skilled labour decreases domestic human capital. A one-standard deviation higher geographic proximity to skilled labour is associated with a 12% lower average education length of the country’s workforce. This may have profound consequences for the ability of poorer nations to catch up with richer ones.
Javier Santiso, 22 February 2010
FDI has fallen dramatically as a result of the global financial crisis. But this column shows that the trend for the decade is still up, suggesting a greater resilience of investment inflows towards emerging markets. Emerging markets are no longer considered a remote and exotic category for European companies; they are now a vital part of the “euro-emerging” multinationals.
Eduardo Levy Yeyati, Andrea Kiguel, 29 August 2009
After a crisis-induced hiatus, the exchange rate landscape seems to be moving back to a situation that resembles 2007. This column says that fear of appreciation is part of a leaning-against-the-wind exchange rate policy that promises to be the norm for emerging economy currencies for years to come. That may pose difficulties for global rebalancing.
Stephan Danninger, Ravi Balakrishnan, Selim Elekdag, Irina Tytell, 27 April 2009
Financial stress reached unprecedented levels in 2008. This column presents a new IMF financial stress index and puts the current crisis into historical perspective. It also shows that bank-lending linkages appear to be the main driver of the transmission of stress. International financial integration brings both opportunities for growth and risks of contagion.
Andreas Freytag, Sebastian Voll, 25 March 2009
The crisis offers an opportunity for emerging countries to use their increased economic weight and take the lead in international trade policy, putting the industrialised countries’ own reforms and global initiatives under pressure. This column argues that emerging markets should take this opportunity to liberalise their external policies.
Kemal Derviş, 19 March 2009
What policy measures might reduce the economic damage developing countries suffer from the global crisis? This column says that developing economies should seek emergency liquidity, IMF reforms, greater fiscal support, and more humanitarian development assistance at the London summit next month.
Morris Goldstein, 19 February 2009
The global crisis has laid bare the inadequacies of the existing global financial architecture. Absent a grand bargain to address the need for major reforms, countries will resort to beggar-thy-neighbour policies. This column outlines a major package – including increased IMF lending, significant IMF governance reform, coordinated fiscal stimulus, and greater WTO discipline – that could meet the needs of both developed and developing economies. Negotiations should start at the London summit.