The Taper This Time

Barry Eichengreen, Poonam Gupta and Rishabh Choudhary

MPRA Paper from University Library of Munich, Germany

Abstract: On November 3, 2021, the Federal Open Market Committee announced that it would reduce the scale of its asset purchases by $15 billion a month starting immediately. Do emerging markets, such as India, need to prepare for a replay of the taper tantrum of 2013? We show that emerging markets, including India, have strengthened their external economic and financial positions since 2013. At the same time, fiscal deficits are much wider, and public debts are much heavier. As U.S. interest rates now begin moving up, servicing existing debts and preventing the debt-to-GDP ratio from rising still further will become more challenging. Either taxes have to be raised or public spending must be cut to generate additional revenues for debt servicing.

Keywords: Capital Flows; Emerging Markets; Monetary Policy; Tapering; India (search for similar items in EconPapers)
JEL-codes: F32 F41 F42 F62 (search for similar items in EconPapers)
Date: 2022-01-14
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Working Paper: The taper this time (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:112657

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