Are Rising U.S. Interest Rates Destabilizing for Emerging Market Economies?

Jasper Hoek, Steven B. Kamin and Emre Yoldas

No 2021-06-23-2, FEDS Notes from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Rising U.S. interest rates are often thought to be bad news for emerging market economies (EMEs) as they increase debt burdens, trigger capital outflows, and generally cause a tightening of financial conditions that can lead to financial crises. Indeed, as shown in Figure 1 below, the rise in the federal funds rate (the black line) during the Volcker disinflation of the early 1980s was associated with a sharp rise in the incidence of financial crises in EMEs (the green bars).

Date: 2021-06-23
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfn:2021-06-23-2

DOI: 10.17016/2380-7172.2930

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