Emerging Markets: Prospects and Challenges
IMF Working Papers, February 18, 2022
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Bibliographic details
- Authors: Tryggvi Gudmundsson, Vladimir Klyuev, Leandro Medina, Boaz Nandwa, Dmitry Plotnikov, Francisco Schiffrer, Di Yang
- Published: February 18, 2022
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400203954.001
Overview
- Title: Emerging Markets: Prospects and Challenges
- Authors: Tryggvi Gudmundsson, Vladimir Klyuev, Leandro Medina, Boaz Nandwa, Dmitry Plotnikov, Francisco Schiffrer, Di Yang
- Date: February 18, 2022
- Scope: Documents recent developments in emerging markets (EMs) in the context of the COVID-19 pandemic, assesses prospects and challenges, and discusses appropriate policy settings for the medium term.
Key findings and diagnostics
- The EM recovery is described as incomplete and uneven.
- EM policymakers’ ability to respond will be constrained by:
- high public debt
- uncertain inflation prospects
- external risks surrounding capital flows and exchange rate developments
- The paper analyzes potential impacts of:
- a tightening in global financial conditions
- an appreciation of the US dollar
- Triggers considered for those impacts include:
- a general increase in risk aversion
- a reassessment of the likely path of US monetary policy
Risks and scenarios highlighted
- External risks: capital flow volatility and exchange rate pressures in EMs.
- Global-financial-conditions tightening and US dollar appreciation are central downside scenarios considered.
- Pandemic context: COVID-19 is the backdrop shaping recent EM developments and prospects.
Policy implications and areas for medium-term focus
- Policymakers should account for constraints posed by high public debt when designing medium-term policy settings.
- Inflation uncertainty implies a need for careful inflation monitoring and possibly adaptable monetary frameworks.
- External-sector preparedness: policies to manage capital flow volatility and exchange rate developments are important.
- Contingency planning for scenarios involving higher global risk aversion or shifts in US monetary policy is recommended.
Subjects and keywords (as provided)
- Subject: COVID-19, Emerging and frontier financial markets, Exchange rates, Financial markets, Foreign exchange, Health, Inflation, Prices, Public debt
- Keywords: COVID-19, EM inflation, EM NEER, EM policymakers' ability, Emerging and frontier financial markets, emerging market bond yields, Emerging markets, Exchange rates, Global, Inflation, Monetary Policy, monetary policy tightening
IMF Working Papers — Emerging Markets: Prospects and Challenges (February 18, 2022) by Tryggvi Gudmundsson et al.
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