Déjà vu in emerging markets

For decades a number of emerging markets have been evolving into advanced economies. They have improved their financial systems, property rights, policy frameworks, and growth models. As it turns out, however, the evolution was going the other way, too: advanced economies were becoming more like emerging markets, too. Debt was accumulating on household, corporate and bank balance sheets. Booms in real estate and parts of the corporate sector added to financial vulnerability. And policymakers were inattentive to the risks or lacked consensus on how to address them...

Steve Cecchetti and Kim SchoenholtzSeptember 28, 2015Emerging market economies, EMEs, China, Capital flows, Exchange rates, Globalization, International investment positions, Current account, Spillovers, Federal Reserve, Capital mobility, Real equilibrium exchange rate

It's a small world (after all)

Originally built for the 1964 New York World’s Fair, the “It’s a small world” exhibition re-opened at Disneyland two years later in 1966. At the time, the international monetary system was characterized by fixed exchange rates and widespread capital controls.

A half century later, global finance has been transformed so that exchange rates are now mostly flexible and cross-border capital mobility is generally high. As they say in Disneyland, it’s a small world after all...

Steve Cecchetti and Kim SchoenholtzSeptember 14, 2015Bretton Woods, Globalization, Capital controls, International investment positions, Spillovers, Federal Reserve policy, Global Dollar system

Commentary

Money, Banking, and Financial Markets