The Performance of Emerging Markets During the Fed’s Easing and Tightening Cycles: A Cross-Country Resilience Analysis

Joshua Aizenman, Donghyun Park, Irfan Qureshi, Gazi Uddin and Jamel Saadaoui

No 32303, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate the determinants of emerging markets performance during five U.S. Federal Reserve monetary tightening and easing cycles during 2004 - 2023. We study how macroeconomic and institutional conditions of an Emerging Market (EM) at the beginning of a cycle explain EM resilience during each cycle. More specifically, our baseline cross-sectional regressions examine how those conditions affect three measures of resilience, namely bilateral exchange rate against the USD, exchange rate market pressure, and country-specific Morgan Stanley Capital International index (MSCI). We then stack the five cross-sections to build a panel database to investigate potential asymmetry between tightening versus easing cycles. Our evidence indicates that macroeconomic and institutional variables are associated with EM performance, determinants of resilience differ during tightening versus easing cycles, and institutions matter more during difficult times. Our specific findings are largely consistent with economic intuition. For instance, we find that current account balance, international reserves, and inflation are all important determinants of EM resilience.

JEL-codes: E58 F32 F36 F44 G12 (search for similar items in EconPapers)
Date: 2024-04
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-ifn, nep-mon and nep-opm
Note: IFM
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Published as Joshua Aizenman & Donghyun Park & Irfan A. Qureshi & Jamel Saadaoui & Gazi Salah Uddin, 2024. "The performance of emerging markets during the Fed’s easing and tightening cycles: A cross-country resilience analysis," Journal of International Money and Finance, .

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Journal Article: The performance of emerging markets during the Fed’s easing and tightening cycles: A cross-country resilience analysis (2024)
Working Paper: The performance of emerging markets during the Fed’s easing and tightening cycles: a cross-country resilience analysis (2024)
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