The global long-term interest rate, financial risks and policy choices in EMEs

Philip Turner

No 441, BIS Working Papers from Bank for International Settlements

Abstract: The global long-term interest rate now matters much more for the monetary policy choices facing emerging market economies than a decade ago. The low or negative term premium in the yield curve in the advanced economies from mid-2010 has pushed international investors into EM local bond markets: by lowering local long rates, this has considerably eased monetary conditions in the emerging markets. It has also encouraged much increased foreign currency borrowing in international bond markets by emerging market corporations, much of it by affiliates offshore. These developments strengthen the feedback effects between bond and foreign exchange markets. They also have significant implications for local banking systems.

Keywords: Term premium; international corporate bonds; monetary policy triangle; currency mismatches (search for similar items in EconPapers)
Pages: 19 pages
Date: 2014-02
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-sog
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Citations: View citations in EconPapers (88)

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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:441

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