(Version in Español)
Governments in most emerging economies, including in Latin America, have reduced their exposure to U.S. interest rates over the past decade, by issuing a greater share of public debt in domestic currencies.
Even so, sudden changes in U.S. interest rates still have the power to roil financial markets in emerging economies. Witness last year’s “taper tantrum”—when the Fed hinted at the possibility of tapering its bond purchases sooner than previously expected, causing bond yields to rise sharply. Continue reading
Filed under: Economic outlook, Emerging Markets, Fiscal policy, Government, growth, International Monetary Fund | Tagged: Brazil, capital flows, emerging economies, emerging markets, financial stability, IMF, interest rates, International Monetary Fund, Latin America, monetary policy, South Africa, taper tantrum, Treasury, Turkey, U.S. interest rates, United States | Leave a comment »