EM: vicious cycle at work

seem to be, that some EM's are starting to raise rates for “protect your own currency”.

I always had a question for this part of the theory. see, you take money from the country for what reasons? if other investments have become more profitable with comparable risk – ок, you increase the yield on obligations and, really, you can return part “fleeing” offering a higher yield. if you withdraw money due to increased risks (what is happening now everywhere in relation to the entire EM group, can they “дополнительные” 0,5% stop you, all the more considering that, that the yield on liabilities has already increased, which allows you to average well, if you don't think, that the risks have risen. certainly, won't stop.

what then gives us a boost % ставок?

several options:

1) squeezing liquidity inside your financial system, which lowers the domestic demand for foreign exchange (classic example of countries with a fixed exchange rate)

but further, у меня проблема :) option with “stop running capital” does not fit, for it is not a factor in making a decision. option with a preventive fight against inflation due to the depreciation that happened and the increased cost of imports – rave, because prices do not rise because of the so-called. “demand inflation”.

what in reality can you get by raising rates – this is a strengthening of expectations for the deterioration of economic growth expectations, that in the case of EMs – a direct road to even greater risk growth, since then the issue of the radically increased debt burden in recent years will begin to play. net effect – increased outflow.

all in all, I don't like all this.
very far away, but I really don't like it.

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