Gallagher in FP: Emerging Markets Will Hate Yellen
Kevin Gallagher, Associate Professor of Global Development Policy at the Frederick S. Pardee School of Global Studies at Boston University, said that emerging markets, already strained by policies enacted by the Federal Reserve, will be further tested when quantitative easing ends later this year.
Gallagher made his case in an August 4 op-ed in Foreign Policy entitled “Your Dollar, Our Problem.”
From the text of the article:
Emerging-market and developing countries resented U.S. Federal Reserve Chair Ben Bernanke during his spell in office. In 2012, Brazilian President Dilma Rousseff scolded Bernanke and the Fed’s loose monetary policy for creating a “tsunami” of financial flows to emerging markets that was appreciating currencies, causing asset bubbles, and exporting financial instability to the developing world.
It may just turn out that they dislike Janet Yellen even more. Although it was Bernanke who started tapering the Fed’s loose policy, Yellen will be the one to end quantitative easing and, eventually, raise short-term interest rates. And those could be an even bigger problem for emerging markets that the initial tsunami.
You can read the entire article here.
Gallagher’s work was referenced in an August 8 article on Money Market UK entitled “The Tapering Policy and its Effect on U. S. Economic Recovery:”
In an article just published in Foreign Policy, Professor Kevin Gallagher of the Frederick S. Pardee School of Global Studies explains that this U.S. monetary policy also features serious disadvantages for other emerging markets.
“The big question that emerging markets are now asking is how quickly and how suddenly interest rates will go up”, he said. “When U.S. monetary policy tightens, it will wreak financial havoc in some emerging markets.
Higher interest rates in the United States will cause capital to flock into the U.S. market and away from developing and emerging-market countries—drying up credit and sometimes worse”.
You can read the entire article here.
Gallagher co-directs the Global Economic Governance Initiative and the Global Development Policy Program. Learn more about him here.