Unconventional Monetary Policy Normalization in High-Income Countries : Implications for Emerging Market Capital Flows and Crisis Risks

Burns, Andrew ; Kida, Mizuho ; Lim, Jamus Jerome ; Mohapatra, Sanket ; Stocker, Marc

World Bank, Washington, DC

关键词: ACCOUNTING;    AGRICULTURAL COMMODITY;    ASSET PRICE;    ASSET PRICES;    BALANCE OF PAYMENT;   

DOI  :  10.1596/1813-9450-6830
RP-ID  :  WPS6830

学科分类：社会科学、人文和艺术（综合）

来源: World Bank Open Knowledge Repository

【 摘 要 】

As the recovery in high-income countriesfirms amid a gradual withdrawal of extraordinary monetarystimulus, developing countries can expect stronger demandfor their exports as global trade regains momentum, but alsorising interest rates and potentially weaker capitalinflows. This paper assesses the implications of anormalization of policy and activity in high-incomecountries for financial flows and crisis risks in developingcountries. In the most likely scenario, a relatively orderlyprocess of normalization would imply a slowdown in capitalinflows amounting to 0.6 percent of developing-country GDPbetween 2013 and 2016, driven in particular by weakerportfolio investments. However, the risk of more abruptadjustments remains significant, especially if increasedmarket volatility accompanies the unwinding of unprecedentedcentral bank interventions. According to simulations, abruptchanges in market expectations, resulting in global bondyields increasing by 100 to 200 basis points within a coupleof quarters, could lead to a sharp reduction in capitalinflows to developing countries by between 50 and 80 percentfor several months. Evidence from past banking crisessuggests that countries having seen a substantial expansionof domestic credit over the past five years, deterioratingcurrent account balances, high levels of foreign andshort-term debt, and over-valued exchange rates could bemore at risk in current circumstances. Countries withadequate policy buffers and investor confidence may be ableto rely on market mechanisms and countercyclicalmacroeconomic and prudential policies to deal with aretrenchment of foreign capital. In other cases, where thescope for maneuver is more limited, countries may be forcedto tighten fiscal and monetary policy to reduce financingneeds and attract additional inflows.