Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

An interesting disconnect has taken shape between local currency- and hard currency-denominated bonds in emerging markets with respect to their portfolio flows and prices since the start of the recovery from the COVID-19 pandemic. Emerging market assets have recovered sharply from the COVID-19 sell-off in 2020, but the post-pandemic recovery in 2021 has been highly uneven. This note seeks to answer why. Yields of local currency-denominated bonds have risen faster and are approaching their pandemic highs, while hard currency bond yields are still near their post-pandemic lows. Portfolio flows to local currency debt have similarly lagged flows to hard currency bonds. This disconnect is closely linked to the external environment and fiscal and inflationary pressures. Its evolution remains a key consideration for policymakers and investors, since local markets are the main source of funding for emerging markets. This note draws from the methodology developed in earlier Global Financial Stability Reports on fundamentals-based asset valuation models for funding costs and forecasting models for capital flows (using the at-risk framework). The results are consistent across models, indicating that local currency assets are significantly more sensitive to domestic fundamentals while hard currency assets are dependent on the external risk sentiment to a greater extent. This suggests that the post-pandemic, stressed domestic fundamentals have weighed on local currency bonds, partially offsetting the boost from supportive global risk sentiment. The analysis also highlights the risks emerging markets face from an asynchronous recovery and weak domestic fundamentals.

Foreign exchange. --- Monetary policy. --- Balance of payments --- Bonds --- Capital flows --- Capital market --- Capital movements --- Currencies --- Currency crises --- Economic & financial crises & disasters --- Economic sectors --- Economics of specific sectors --- Economics --- Economics: General --- Emerging and frontier financial markets --- Exports and Imports --- Finance --- Finance: General --- Financial crises --- Financial institutions --- Financial markets --- Financial services industry --- Foreign Exchange --- General Financial Markets: General (includes Measurement and Data) --- Government and the Monetary System --- Informal Economy --- Informal sector --- International economics --- International Investment --- Investment & securities --- Investments: Bonds --- Long-term Capital Movements --- Macroeconomics --- Monetary economics --- Monetary Systems --- Money and Monetary Policy --- Money --- Payment Systems --- Regimes --- Securities markets --- Standards --- Underground Econom --- China, People's Republic of

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

The COVID-19 pandemic led many emerging market central banks to adopt, for the first time, unconventional policies in the form of asset purchase programs. In this study, we analyze the effects of these announcements on domestic financial markets using both event studies and local projections methodology. We find that these asset purchase announcements lowered bond yields, did not lead to a depreciation of domestic currencies, and did not have much effect on equities. While the immediate effect of asset purchases appears positive, further consideration of the risks and longer-term effects of unconventional monetary policies is needed. We highlight the trade-offs involved with the implementation of these measures, and discuss their risks. This working paper adds to the debate on how asset purchase programs should be a regular part of the emerging market policy toolkit.

South Africa --- Banks and Banking --- Finance: General --- Investments: Bonds --- Money and Monetary Policy --- Money Supply --- Credit --- Money Multipliers --- Central Banks and Their Policies --- International Finance: General --- Information and Market Efficiency --- Event Studies --- International Financial Markets --- General Financial Markets: General (includes Measurement and Data) --- Interest Rates: Determination, Term Structure, and Effects --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Finance --- Investment & securities --- Banking --- Monetary economics --- Bond yields --- Yield curve --- Central bank policy rate --- Stock markets --- Currencies --- Interest rates --- Bonds --- Stock exchanges --- Money

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

The paper intends to highlight challenges in Asian housing markets linked to fast price rises especially in the advanced economies since COVID, and more broadly including many EMs in the period leading up to COVID. It aims to draw policy lessons on how to manage stability aspects through macroprudential and other policies and how to support affordability through structural policies and targeted government support.

Housing policy. --- Banks --- Depository Institutions --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Economic policy --- Economics --- Finance --- Financial institutions --- Financial Markets and the Macroeconomy --- Financial sector policy and analysis --- Housing prices --- Housing Supply and Markets --- Housing --- Industries: Financial Services --- Infrastructure --- International agencies --- International Agreements and Observance --- International Economics --- International institutions --- International organization --- International Organizations --- Macroeconomics --- Macroprudential policy instruments --- Macroprudential policy --- Micro Finance Institutions --- Mortgages --- National accounts --- Political Economy --- Political economy --- Prices --- Property & real estate --- Public Policy --- Real Estate --- Saving and investment --- New Zealand

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Macroprudential policy in Europe aligns with the objective of limiting systemic risk, namely the risk of widespread disruption to the provision of financial services that is caused by an impairment of all or parts of the financial system and that can cause serious negative consequences for the real economy.

Economic policy. --- Fiscal policy. --- Banks --- Credit --- Depository Institutions --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Finance --- Finance: General --- Financial institutions --- Financial risk management --- Financial sector policy and analysis --- General Financial Markets: Government Policy and Regulation --- Housing prices --- Housing Supply and Markets --- Housing --- Industries: Financial Services --- Infrastructure --- Macroeconomics --- Micro Finance Institutions --- Monetary economics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Money and Monetary Policy --- Money --- Mortgages --- National accounts --- Prices --- Property & real estate --- Real Estate --- Saving and investment --- Systemic risk --- Norway