Monday, July 25, 2016

This study examines the role of U.S. monetary policy in determining the incidence of emerging market crises. We analyze the determinants of currency crises, banking crises, and sovereign defaults in a group of 27 emerging economies. The results indicate that the probability of crises is substantially higher (1) when the federal funds rate is above its natural level, (2) during Fed policy tightening cycles, and (3) when market participants are surprised by signals that the Fed will tighten policy faster than previously expected.

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IIF Authors

Robin Koepke

Robin
Koepke
Senior Economist
+1-202-857-3313
rkoepke@iif.com

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