Monetary Policy Shocks, Capital Flows, and Emerging Market Returns

With new fears of a recession affecting a third of the global economy, and recent suggestions of a ‘shallow but long’ recession in the US, all eyes are fixed on the timing of the Fed’s move to ease in 2023.  The Fed remains steadfast in its commitment to reduce employment/demand-driven inflation in the US but the markets are pricing in cuts this year.

Assuming the latter – when it happens – is significant for investors and firms in emerging markets.

So, what’s the connection between US monetary policy shocks, net capital flows, and emerging market equity and bond returns?

This interesting piece, which uses our ICRG data as one of the various country specific ‘pull’ factors, provides some good insights into these relationships, especially in terms of sequencing and flow volumes.


Note for the month of January, we are offering 15% discounts on our data subscriptions to the International Country Risk Guide (ICRG) and CountryData Online (CDO).  Contact us a for more information.

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