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Asset Purchase Programs in European Emerging Markets

September 24, 2021
Several emerging market central banks in Europe deployed asset purchase programs (APPs) amid the 2020 pandemic. The common main goals were to address market dysfunction and impaired monetary transmission, distinct from the quantitative easing conducted by major advanced economy central banks. Likely reflecting the global nature of the crisis, these APPs defied the traditional emerging market concern of destabilizing the exchange rate or inflation expectations and instead alleviated markets successfully. We uncover some evidence that APPs in European emerging markets stabilized government bond markets and boosted equity prices, with no indication of exchange rate pressure. Examining global and domestic factors that could limit the usability of APPs, in the event of renewed market dysfunction we see a potential scope for scaling up APPs in most European emerging markets that used APPs during the pandemic, provided that they remain consistent with the primary objective of monetary policy and keep a safe distance from the risk of fiscal dominance. As central banks in the region move towards monetary policy tightening, the tapering, ending, and unwinding of APPs must also be carefully considered. Clear and transparent communication is critical at each step of the process, from the inception to the closure of APPs, particularly when a large shock hits and triggers a major policy shift.

Unlocking Access to Climate Finance for Pacific Islands Countries

September 24, 2021
This departmental paper provides an in-depth overview of access to climate finance for Pacific Island Countries, evaluating successes and challenges faced by countries and proposes a way forward to unlock access to climate funds.

Brazil: Sustaining a Strong Recovery

September 23, 2021
Brazil’s economy has returned to pre-pandemic levels, supported by booming terms of trade and robust private sector credit growth.

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