Unconventional Monetary Policy Normalization in High-Income Countries : Implications for Emerging Market Capital Flows and Crisis Risks

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dc.creatorBurns, Andrew
dc.creatorKida, Mizuho
dc.creatorLim, Jamus Jerome
dc.creatorMohapatra, Sanket
dc.creatorStocker, Marc
dc.date2014-04-10T18:47:19Z
dc.date2014-04-10T18:47:19Z
dc.date2014-04
dc.date.accessioned2026-07-01T00:46:01Z
dc.descriptionAs the recovery in high-income countries firms amid a gradual withdrawal of extraordinary monetary stimulus, developing countries can expect stronger demand for their exports as global trade regains momentum, but also rising interest rates and potentially weaker capital inflows. This paper assesses the implications of a normalization of policy and activity in high-income countries for financial flows and crisis risks in developing countries. In the most likely scenario, a relatively orderly process of normalization would imply a slowdown in capital inflows amounting to 0.6 percent of developing-country GDP between 2013 and 2016, driven in particular by weaker portfolio investments. However, the risk of more abrupt adjustments remains significant, especially if increased market volatility accompanies the unwinding of unprecedented central bank interventions. According to simulations, abrupt changes in market expectations, resulting in global bond yields increasing by 100 to 200 basis points within a couple of quarters, could lead to a sharp reduction in capital inflows to developing countries by between 50 and 80 percent for several months. Evidence from past banking crises suggests that countries having seen a substantial expansion of domestic credit over the past five years, deteriorating current account balances, high levels of foreign and short-term debt, and over-valued exchange rates could be more at risk in current circumstances. Countries with adequate policy buffers and investor confidence may be able to rely on market mechanisms and countercyclical macroeconomic and prudential policies to deal with a retrenchment of foreign capital. In other cases, where the scope for maneuver is more limited, countries may be forced to tighten fiscal and monetary policy to reduce financing needs and attract additional inflows.
dc.formatapplication/pdf
dc.formattext/plain
dc.identifierhttp://documents.worldbank.org/curated/en/2014/04/19333380/unconventional-monetary-policy-normalization-high-income-countries-implications-emerging-market-capital-flows-crisis-risks
dc.identifierhttps://hdl.handle.net/10986/17711
dc.identifier10.1596/1813-9450-6830
dc.identifier.urihttp://hdl.handle.net/123456789/410661
dc.languageEnglish
dc.languageen_US
dc.publisherWorld Bank, Washington, DC
dc.relationPolicy Research Working Paper;No. 6830
dc.rightsCC BY 3.0 IGO
dc.rightshttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectACCOUNTING
dc.subjectAGRICULTURAL COMMODITY
dc.subjectASSET PRICE
dc.subjectASSET PRICES
dc.subjectBALANCE OF PAYMENT
dc.subjectBALANCE OF PAYMENTS
dc.subjectBALANCE SHEET
dc.subjectBANK BALANCE SHEETS
dc.subjectBANK LENDING
dc.subjectBANK LOANS
dc.subjectBANKING CRISES
dc.subjectBANKING CRISIS
dc.subjectBANKING SECTOR
dc.subjectBASIS POINTS
dc.subjectBOND FLOWS
dc.subjectBOND ISSUANCE
dc.subjectBOND SPREADS
dc.subjectBOND YIELDS
dc.subjectBONDS
dc.subjectBUSINESS CYCLES
dc.subjectCAPITAL ACCOUNT
dc.subjectCAPITAL ACCOUNTS
dc.subjectCAPITAL FLOW
dc.subjectCAPITAL FLOWS
dc.subjectCAPITAL INFLOW
dc.subjectCAPITAL INFLOWS
dc.subjectCAPITAL OUTFLOW
dc.subjectCAPITAL OUTFLOWS
dc.subjectCENTRAL BANK
dc.subjectCENTRAL BANKS
dc.subjectCOMMODITY PRICES
dc.subjectCREDIT EXPANSION
dc.subjectCREDIT EXPANSIONS
dc.subjectCREDIT GROWTH
dc.subjectCREDIT QUALITY
dc.subjectCREDIT RATINGS
dc.subjectCREDIT RISK
dc.subjectCREDIT RISKS
dc.subjectCREDITORS
dc.subjectCRISIS COUNTRIES
dc.subjectCURRENCY CRISES
dc.subjectCURRENCY CRISIS
dc.subjectCURRENCY DEPRECIATION
dc.subjectCURRENCY DEPRECIATIONS
dc.subjectCURRENCY MISMATCH
dc.subjectCURRENT ACCOUNT DEFICITS
dc.subjectDEBT CRISES
dc.subjectDEBT CRISIS
dc.subjectDEBT RATIO
dc.subjectDEBT RATIOS
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPING COUNTRY
dc.subjectDOMESTIC BOND
dc.subjectDOMESTIC CREDIT
dc.subjectDOMESTIC CURRENCIES
dc.subjectDOMESTIC FINANCIAL MARKETS
dc.subjectDUMMY VARIABLE
dc.subjectDUMMY VARIABLES
dc.subjectEMERGING ECONOMIES
dc.subjectEMERGING MARKET
dc.subjectEMERGING MARKET BOND
dc.subjectEMERGING MARKET ECONOMIES
dc.subjectEMERGING MARKETS
dc.subjectEQUITY FLOWS
dc.subjectEQUITY ISSUANCE
dc.subjectEQUITY ISSUANCES
dc.subjectEQUITY MARKETS
dc.subjectEXCHANGE RATE
dc.subjectEXCHANGE RATE MOVEMENTS
dc.subjectEXCHANGE RATES
dc.subjectEXTERNAL DEBT
dc.subjectFEDERAL RESERVE
dc.subjectFEDERAL RESERVE BANK
dc.subjectFEDERAL RESERVE SYSTEM
dc.subjectFINANCIAL ASSETS
dc.subjectFINANCIAL CONTAGION
dc.subjectFINANCIAL CRISES
dc.subjectFINANCIAL CRISIS
dc.subjectFINANCIAL DEVELOPMENTS
dc.subjectFINANCIAL EXPOSURE
dc.subjectFINANCIAL FLOWS
dc.subjectFINANCIAL MARKET
dc.subjectFINANCIAL MARKETS
dc.subjectFINANCIAL RISK
dc.subjectFINANCIAL SHOCKS
dc.subjectFINANCIAL STABILITY
dc.subjectFINANCIAL STRESS
dc.subjectFINANCIAL SYSTEM
dc.subjectFISCAL POLICIES
dc.subjectFIXED INCOME
dc.subjectFIXED INCOME PORTFOLIOS
dc.subjectFLEXIBLE EXCHANGE RATE
dc.subjectFLOATING EXCHANGE RATES
dc.subjectFOREIGN CAPITAL
dc.subjectFOREIGN CURRENCIES
dc.subjectFOREIGN CURRENCY
dc.subjectFOREIGN DIRECT INVESTMENT
dc.subjectFOREIGN DIRECT INVESTMENTS
dc.subjectFOREIGN EXCHANGE
dc.subjectFOREIGN EXCHANGE MARKETS
dc.subjectFOREIGN EXCHANGE RESERVES
dc.subjectFOREIGN INVESTORS
dc.subjectGLOBAL BOND
dc.subjectGLOBAL CAPITAL
dc.subjectGLOBAL ECONOMY
dc.subjectGLOBAL FINANCIAL STABILITY
dc.subjectGLOBAL MARKET
dc.subjectGLOBAL TRADE
dc.subjectGLOBALIZATION
dc.subjectGOVERNMENT BOND
dc.subjectGOVERNMENT BOND YIELDS
dc.subjectGOVERNMENT BONDS
dc.subjectGOVERNMENT FINANCING
dc.subjectINDEBTEDNESS
dc.subjectINFLATION
dc.subjectINFLATIONARY PRESSURES
dc.subjectINSTITUTIONAL INVESTOR
dc.subjectINSTITUTIONAL INVESTORS
dc.subjectINTEREST RATE
dc.subjectINTEREST RATE CHANGES
dc.subjectINTEREST RATE DIFFERENTIAL
dc.subjectINTEREST RATE DIFFERENTIALS
dc.subjectINTEREST RATES
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL BANK LENDING
dc.subjectINTERNATIONAL CAPITAL
dc.subjectINTERNATIONAL ECONOMICS
dc.subjectINTERNATIONAL FINANCE
dc.subjectINTERNATIONAL FINANCIAL INSTITUTIONS
dc.subjectINTERNATIONAL SETTLEMENTS
dc.subjectINVESTMENT CLIMATE
dc.subjectINVESTMENT RATES
dc.subjectINVESTOR CONFIDENCE
dc.subjectISSUANCES
dc.subjectLABOR MARKETS
dc.subjectLENDING PORTFOLIO
dc.subjectLEVEL OF DEBT
dc.subjectLIQUIDITY
dc.subjectLIQUIDITY RISKS
dc.subjectLOAN
dc.subjectLOAN QUALITY
dc.subjectLONG-TERM DEBT
dc.subjectLONG-TERM INTEREST
dc.subjectLONG-TERM INTEREST RATE
dc.subjectLONG-TERM INTEREST RATES
dc.subjectMACROECONOMIC POLICIES
dc.subjectMACROECONOMIC POLICY
dc.subjectMACROECONOMIC STABILIZATION
dc.subjectMARKET ACCESS
dc.subjectMARKET CONDITIONS
dc.subjectMARKET CONFIDENCE
dc.subjectMARKET MECHANISMS
dc.subjectMARKET RISKS
dc.subjectMONETARY AUTHORITIES
dc.subjectMONETARY FUND
dc.subjectMONETARY POLICIES
dc.subjectMONETARY POLICY
dc.subjectMONEY SUPPLY
dc.subjectMORTGAGE
dc.subjectMORTGAGE-BACKED SECURITIES
dc.subjectMUTUAL FUND
dc.subjectMUTUAL FUNDS
dc.subjectNONPERFORMING LOANS
dc.subjectOPEN ECONOMIES
dc.subjectOUTSTANDING CREDIT
dc.subjectPENSION
dc.subjectPOLICY RESPONSE
dc.subjectPOLITICAL ECONOMY
dc.subjectPORTFOLIO
dc.subjectPORTFOLIO FLOWS
dc.subjectPORTFOLIO INFLOWS
dc.subjectPORTFOLIO INVESTMENT
dc.subjectPORTFOLIO INVESTMENTS
dc.subjectPOST-CRISIS PERIOD
dc.subjectPOST-CRISIS PERIODS
dc.subjectPRIVATE CAPITAL
dc.subjectPRIVATE CAPITAL INFLOW
dc.subjectPRIVATE CAPITAL INFLOWS
dc.subjectPRIVATE CREDIT
dc.subjectPUSH FACTORS
dc.subjectRATE OF RETURN
dc.subjectREAL EXCHANGE RATE
dc.subjectREAL INTEREST
dc.subjectREAL INTEREST RATE
dc.subjectREPAYMENT
dc.subjectRESERVES
dc.subjectRETURN
dc.subjectRISK ASSESSMENTS
dc.subjectRISK AVERSION
dc.subjectRISK FACTORS
dc.subjectSECONDARY MARKETS
dc.subjectSHORT TERM DEBT
dc.subjectSHORT-TERM DEBT
dc.subjectSHORT-TERM EXTERNAL DEBT
dc.subjectSHORT-TERM INTEREST RATE
dc.subjectSHORT-TERM INTEREST RATES
dc.subjectSOLVENCY
dc.subjectSOVEREIGN DEBT
dc.subjectSTOCK MARKET
dc.subjectSTOCK MARKET VOLATILITY
dc.subjectSWAP
dc.subjectSWAPS
dc.subjectTOTAL DEBT
dc.subjectTRADING
dc.subjectTRANSACTION
dc.subjectTREASURY
dc.subjectTREASURY BILLS
dc.subjectWITHDRAWAL
dc.subjectWORLD MARKET INTEGRATION
dc.subjectYIELD CURVE
dc.titleUnconventional Monetary Policy Normalization in High-Income Countries : Implications for Emerging Market Capital Flows and Crisis Risks

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