News and Analysis: 3-14 Feb 2014 | EmergingFrontierMarkets.com

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Posted on Fri, 14 Feb 14:

Barry Eichengreen: The dollar and the damage done, Project Syndicate, 13 Feb 14:
The US Fed is being widely blamed for the recent volatility in emerging markets. But is the Fed just a convenient whipping boy? For the emerging markets, the Fed's tapering of its massive monthly purchases of long-term assets is certainly easier to blame than their own failure to move faster on econ reform. Still, the Fed should not be absolved of all guilt, writes U Calif-Berkeley prof

Eswar Prasad: The Fed is not to blame for turmoil in emerging markets, FT, 12 Feb 14 [courtesy Brookings Inst]:
The Fed has argued that any spillover effects of its policies would be limited if other nations let their exchange rates adjust freely. Emerging markets have indeed used currency adjustments to cushion themselves from the impact of Fed policy. That is why few of them are on the verge of a classic currency crisis. But this has not prevented them from complaining vigorously, writes Inst senior fellow / Cornell U prof

Edward Lazear: The young, the restless and economic growth, WSJ, 22 Dec 13 [courtesy Hoover Inst]:
In a current study analyzing the most recent Global Entrepreneurship Monitor survey, my colleagues and I found that young societies tend to generate more new businesses than older societies. The survey is an annual assessment of the "entrepreneurial activity, aspirations and attitudes" of thousands of individuals across 65 nations, writes Pres G W Bush's Council Econ Advisers chair / Stanford prof

Posted on Wed, 12 Feb 14:

Fed to emerging markets - think on your policy shortcomings, Reuters, 12 Feb 14:
The Fed on Tue acknowledged it likely triggered a financial market sell-off in the developing world, but said policies in these nations made them vulnerable to external shocks. Fed analysts built an index measuring econ vulnerability across 15 major emerging markets, and found Turkey was the most vulnerable, followed by Brazil and India (From Fed's report: Financial stress and vulnerabilities in emerging markets)

Desmond Lachman: The Fed ignores emerging markets at its peril, The Hill, 7 Feb 14 [courtesy Amer Enterp Inst]:
The Fed's track record in anticipating events that might seriously impact the US economy is hardly stellar. For example, in '94 it failed to predict the Mexican peso crisis, while in '97 it was blindsided by the Asian currency crisis. Today, the Fed seems to be blithely oblivious to the risks that increased emerging market turbulence might pose to the US economy, writes Inst resident fellow / fmr IMF policy dept dep dir

Nancy Birdsall: Sinking statesmanship, European Magazine, 10 Jan 14:
The changing climate and its consequences is just one problem that both residents of New York and New Delhi share. There are many more: intl financial instability, food price volatility, growing microbial resistance to drugs, biodiversity losses. On these issues, the rich may have a bigger boat but they face the same storms as the poor. The ship of global governance is weak and leaky, writes Ctr Global Devt founding pres

Posted on Mon, 10 Feb 14:

A tentative calm, Inst Intl Finance Weekly Insight, 6 Feb 14 [PDF]:
It remains to be seen whether this calm translates to a return to the optimism seen late last year, or a pause in a deeper correction. Taking a step back, the selloff in emerging market currencies and equities since last May has been relatively differentiated. Nations that have witnessed the sharpest depreciation in their currencies since last May have been those with large current account deficits

D Rodrik and A Subramanian: Emerging markets' victimhood narrative, Bloomberg, 31 Jan 14 [courtesy Peterson Inst]:
From Istanbul to Brasilia to Mumbai comes a crescendo of complaints about dollar imperialism. Emerging markets need to wake up to what many should have long known: financial globalization is a decidedly mixed blessing. It is a source of volatility, and it exposes a nation to the actions of others, esp. the US, write Inst Advanced Study prof; and Inst senior fellow

Coffers: Antoinette Schoar--How to get financial advice worth your money, MarketWatch, 12 Aug 13:
Do financial professionals help retail investors make better financial decisions and educate investors? Or do they put their own interests first and attempt to generate more commissions and fees? To find answers to these questions, my research partners and I conducted an audit study of the investment advice industry for retail customers, writes MIT prof

Posted on Fri, 7 Feb 14:

Kenneth Rogoff: How fragile are emerging markets?, Project Syndicate, 6 Feb 14:
It seems like only yesterday that Goldman Sachs analysts were celebrating the growth miracle of the BRICS, and the IMF was forecasting a 3-speed global recovery led by emerging markets. Now, emerging-market equities and exchange rates are under severe downward pressure, but are the underlying economies really as fragile as global traders seem to fear?, asks fmr IMF chief economist / Harvard prof

Eswar Prasad: The US is going to be a big winner in this currency crisis, Quartz, 28 Jan 14:
Emerging markets are again being whipsawed by the two largest economies in the world. The surging Chinese economy, a large contributor to world growth in recent years, shows signs of cooling. And with the US economy firming up, the Federal Reserve has started cutting back on its bond-buying programs, writes author of The Dollar Trap (Feb 2014) / Cornell U prof

Charles Collyns: Dollar, as reserve currency, is a virtue, not a trap - a response to Prasad, Euromoney, 28 Jan 14:
Some policy makers overseas have complained about US quantitative easing and the associated surge in capital flows to emerging markets. In discussing these 'currency wars', Prasad says a couple of times that currency warfare is a zero-sum game, because one nation's exchange rate must appreciate as another's depreciates. I disagree, writes fmr US Treas asst secy / Inst Intl Finance chief economist

Posted on Wed, 5 Feb 14:

Kristin Forbes: Understanding emerging market turmoil, Vox EU, 5 Feb 14:
Emerging markets are going through another period of volatility--and the most popular bogeyman is the US Federal Reserve. The strikingly different reactions to the 'taper talk' and 'taper start' suggest that the simplistic storyline about what is causing recent volatility in emerging markets is missing something. I would argue that we need to add 3 considerations, writes fmr US Treas dep asst secy / MIT prof

Angus Deaton: American hubris, African nemesis, Lancet, 25 Jan 14:
Nina Munk's The Idealist (2013) is a deep and important book about foreign aid and development. Beyond the enormous punch that the book delivers, the quality of the writing is that of a fine novel, not of the usual social science tract. Much of its message is conveyed by the arc of the story, and it is a trip that many of us have made over the years, writes fmr Amer Econ Assn pres / Princeton U prof

How financial crisis fizzled a showdown on China's currency, Wall St Jl (blog), 9 Dec 13 [courtesy Ctr Intl Gov Innov]:
Was the Chinese yuan 'fundamentally misaligned'? That's the label the IMF was on the verge of slapping on the yuan in Sep '08, after a hard-fought battle led by the US. But just days before the IMF board meeting on the issue, the global financial crisis detonated. Instead of winning intl criticism of China's yuan policy, WashDC had to beg Beijing to keep buying US debt to help stabilize markets

Posted on Mon, 3 Feb 14:

Emerging markets--No need for panic, Intl NY Times, 2 Feb 14 [via Deccan Herald/India]:
A central bank doubles interest rates after an emergency midnight meeting. A nation is forced into a big devaluation as foreign-exchange reserves dwindle. Recent events in Turkey and Argentina have eerie echoes of the early stages of the 1997-98 emerging market crisis. That disaster started with isolated problems in Thailand, but it morphed into a general crash. Could 2014 bring a repeat?

Coffers: Looking for emerging markets bargains - Mark Mobius, MarketWatch, 3 Feb 14:
Often looked at as a guru of emerging markets investments, Mobius is bargain-hunting for emerging markets stocks. But the sell-off may need to deepen before this veteran value investor gets really interested. "We view such sell-offs as opportunities to pick up bargains if, in fact, the prices move low enough," said the globe-trotting exec chair of Templeton Emerging Markets Group

Humanity remains deeply unequal despite impressive progress, says report, UNDP, 29 Jan 14:
A sustained reduction in inequality requires a shift to more inclusive growth patterns--supported by redistributive polices and changes in social norms, says a new report by UNDP. The world's richest 1% owns about 40% of the world's assets, while the bottom half owns no more than 1%, acc to the report, 'Humanity Divided: Confronting inequality in developing countries'

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