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on International Finance |
| By: | Pietro Patelli; Jimmy Shek; Ilhyock Shim |
| Abstract: | Currency appreciation in emerging market economies (EMEs) has gone hand in hand with greater risk-taking, higher capital flows and more accommodative financial conditions, against the backdrop of the increasing share of foreign investment in local currency assets in EMEs' external financing since 2007. The historically positive correlation between US dollar strength against EME currencies and EME sovereign bond spreads over US Treasuries up to 2021 continued in Latin America but reversed in emerging Asia in 2022–23. Such a divergence reflects a range of policy responses by EME central banks in the face of the unprecedented combination of shocks in 2022. In particular, central banks in emerging Asia intervened more actively in FX markets and relied less on monetary policy tightening than those in Latin America. |
| Date: | 2023–11–02 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:79 |
| By: | Jean-Sébastien Fontaine; Ingomar Krohn; James Kyeong; Rishi Vala; Konrad Zmitrowicz |
| Abstract: | Changes in domestic interest rates affect the value of the Canadian dollar less than changes in the risk premium do. These variations often occur when a broad shift in risk sentiment occurs in global markets. Ultimately, the value of the currency reflects long-term, slow-moving features of the economies. |
| Keywords: | Asset pricing; Econometric and statistical methods; Exchange rates; Interest rates; Monetary policy |
| JEL: | E4 E43 F3 F31 G1 G12 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocsan:25-2 |
| By: | Bryan Hardy; Deniz Igan; Enisse Kharroubi |
| Abstract: | Emerging market economies broke with the past by showing resilience in the face of rapid monetary tightening in advanced economies. Structural factors were at play, with better monetary policy and prudential frameworks being key. Conjunctural factors also played a role. The commonality of the Covid-19 shock ameliorated policy trade-offs, while the strong showing in advanced economies supported financial market sentiment globally. Nevertheless, as with the rest of the world economy, emerging markets are not out of the woods. More persistent inflation, in particular in advanced economies, could keep global financial conditions tighter for longer and test emerging market resilience going forward. |
| Date: | 2024–06–06 |
| URL: | https://d.repec.org/n?u=RePEc:bis:bisblt:88 |