Emerging Market Economies’ Challenge: Managing the Yield Curve in a Financially Globalized World

Ito, Hiro; Tran, Phuong Ha-Lien

doi:10.1007/s11079-021-09661-3

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Estimating the Impact Of The Cost Of Servicing Debt On Outpu...1

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2022

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“…The significantly negative estimates on the interactions mean that the negative impacts are greater for financially developed countries. Ito and Tran (2019) found that developing economies with more developed or open financial markets tend to have a weaker interest rate passthrough, that is, find it harder to control the longer‐end of the yield curve by manipulating the short‐term policy rate. Greater financial development and openness would raise the substitutability between domestic and foreign financial bonds.…”

Section: Estimating the Impact Of The Cost Of Servicing Debt On Outpu...mentioning

confidence: 99%

PostCOVID‐19 exit strategies and emerging markets economic challenges

Aizenman

Ito

2022

Rev International Economics

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We study emerging markets' 1980s lost growth decade, triggered by the massive reversal of the snowball effect in the US during 1974–1984, finding that higher flow costs of servicing debt overhang explain the dramatic decline in growth rates of exposed emerging markets. We also show how lowering the US cost of servicing its public debt has been associated with higher US, Japan, and Western Europe real output growth rates during the post WWII recovery decades, 1946–1956, and validate that fiscal adjustments of large countries have strong growth and volatility spillovers effects on exposed emerging markets and developing countries.

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Section: Estimating the Impact Of The Cost Of Servicing Debt On Outpu...mentioning

confidence: 99%