New Investment Findings from University of Maryland Reported (Global Transmission of Fed Hikes: the Role of Policy Credibility and Balance Sheets): Investment

Economics Daily Report

2024 NOV 21 (NewsRx) -- By a News Reporter-Staff News Editor at Economics Daily Report -- Fresh data on Investment are presented in a new report. According to news reporting out of College Park, Maryland, by NewsRx editors, research stated, “Contrary to historical episodes, the 2022-2023 tightening of US monetary policy has not yet triggered financial crisis in emerging markets. Why is this time different? To answer this question, we analyze the current situation through the lens of historical evidence.”

Our news journalists obtained a quote from the research from the University of Maryland, “In emerging markets, the financial channel-based transmission of US policy historically led to more adverse outcomes compared to advanced economies, where the trade channel fails to smooth out these negative effects. When the Federal Reserve increases interest rates, global investors tend to shed risky assets in response to the tightening global financial conditions, affecting emerging markets more severely due to their lower credit ratings and higher risk profiles. This time around, the escape from emerging market assets and the increase in risk spreads have been limited. We document that the historical experience of higher risk spreads and capital outflows can be largely explained by the lack of credible monetary policies and dollar-denominated debt.”

According to the news editors, the research concluded: “The improvement in monetary policy frameworks combined with reduced levels of dollar-denominated debt have helped emerging markets weather the recent Federal Reserve hikes.”

This research has been peer-reviewed.

For more information on this research see: Global Transmission of Fed Hikes: the Role of Policy Credibility and Balance Sheets. Brookings Papers on Economic Activity, 2023;2023(2):169-248. Brookings Papers on Economic Activity can be contacted at: Johns Hopkins Univ Press, Journals Publishing Division, 2715 North Charles St, Baltimore, MD 21218-4363, USA.

Our news journalists report that additional information may be obtained by contacting Sebnem Kalemli-Ozcan, University of Maryland, College Park, MD 20742, United States.

The direct object identifier (DOI) for that additional information is: https://doi.org/10.1353/eca.2023.a935420. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.