What are the risks in #EmergingMarkets?
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https://abs.twimg.com/emoji/v2/... draggable="false" alt="➡️" title="Rightwards arrow" aria-label="Emoji: Rightwards arrow"> Domestic financial conditions depend as much on global financial cycles as domestic monetary policy even with flexible FX. https://twitter.com/elinaribakova/status/1246244018301927428">https://twitter.com/elinariba...
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https://abs.twimg.com/emoji/v2/... draggable="false" alt="➡️" title="Rightwards arrow" aria-label="Emoji: Rightwards arrow"> It can be due to “original sin” i.e. borrowing in FX directly @upanizza and/or
Due to large shares of FX holdings of local debt @Brad_Setser @adam_tooze @Gavekal via @SoberLook
@helene_rey wrote about it extensively https://www.nber.org/papers/w21162 ">https://www.nber.org/papers/w2...
Due to large shares of FX holdings of local debt @Brad_Setser @adam_tooze @Gavekal via @SoberLook
@helene_rey wrote about it extensively https://www.nber.org/papers/w21162 ">https://www.nber.org/papers/w2...
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https://abs.twimg.com/emoji/v2/... draggable="false" alt="➡️" title="Rightwards arrow" aria-label="Emoji: Rightwards arrow"> As a result, many EMs cut rates, but instead see their government curves widening and steepening. @AndrianovaAnna @TheTerminal
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https://abs.twimg.com/emoji/v2/... draggable="false" alt="➡️" title="Rightwards arrow" aria-label="Emoji: Rightwards arrow"> Benchmark investing may exacerbate run for the exit from #EmergingMarkets. Here an example of weight allocation by some of the key globally followed benchmark for local currency (blue, GBI) and hard currency (green, EMBIG). It explains the holdings above.
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https://abs.twimg.com/emoji/v2/... draggable="false" alt="➡️" title="Rightwards arrow" aria-label="Emoji: Rightwards arrow"> Counties particularly exposed are those that
a) lack deep domestic long term sources of savings, a great majority of #EmergingMarkets
b) with banking systems already holding a lot of government debt as a share of their assets.
a) lack deep domestic long term sources of savings, a great majority of #EmergingMarkets
b) with banking systems already holding a lot of government debt as a share of their assets.
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https://abs.twimg.com/emoji/v2/... draggable="false" alt="➡️" title="Rightwards arrow" aria-label="Emoji: Rightwards arrow"> In the end, not only monetary policy effectiveness is at risk, but also room for fiscal spending. Who will buy their debt, when foreign investors flee?