Jonathan Fortun · Benjamin Hilgenstock · Elina Ribakova / Institute of International Finance
Daily flow indicators signaled substantial emerging market outflows from early March 2021 as rising US long term real interest rates put pressure on assets. Jonathan Fortun, Benjamin Hilgenstock and Elina Ribakova found local markets already under strain while emerging market credit had been more resilient. Comparing the shock with the taper tantrum, they warned that further stress was possible, especially where large government financing needs met shallow domestic markets.
Jonathan Fortun · Sergi Lanau / Institute of International Finance
Emerging market fiscal space depended heavily on borrowing costs in March 2021. Jonathan Fortun and Sergi Lanau assess solvency and refinancing risks under persistently low rates and under a return to higher rates. Brazil and South Africa appeared especially vulnerable, with the required fiscal adjustments large relative to historical experience.
Robin Brooks · Jonathan Fortun / Institute of International Finance
The IIF’s March 2021 valuation update found greater dollar overvaluation even after its real effective depreciation. Robin Brooks and Jonathan Fortun linked the result to a widening US current account deficit amid fiscal stimulus and rapid recovery. Their model identified substantial undervaluation in China’s renminbi, Brazil’s real and Russia’s ruble, while Argentina and South Africa showed overvaluation. These are the study’s estimates for 2021, not current currency assessments.
Robin Brooks · Jonathan Fortun · Ugras Ulku / Institute of International Finance
Slowing credit offered Turkey a route away from consumption driven external imbalances in early 2021. Robin Brooks, Jonathan Fortun and Ugras Ulku connect the previous year’s credit expansion with reserve losses and a wider current account deficit. They argue that preventing excessive lira appreciation would help redirect the economy toward exports and investment.
Jonathan Fortun · Sergi Lanau / Institute of International Finance
Low borrowing costs improve fiscal sustainability, but do not make deficits unlimited. Jonathan Fortun and Sergi Lanau examine the limits of that argument in February 2021: interest rates below economic growth help debt dynamics, yet sufficiently large deficits can overwhelm the benefit. Their assessment suggests that low rates could make primary deficits of 3 to 4 percent of GDP feasible in developed economies, rather than removing the need to assess fiscal constraints.
Jonathan Fortun · Yuanliu Hu · Sergi Lanau / Institute of International Finance
India’s budget offered an immediate spending boost after a limited fiscal response to the pandemic in 2020. Jonathan Fortun and coauthors expected that support to strengthen growth in the first quarter of 2021, followed by a broadly neutral budgetary contribution. Their assessment links the wider medium term deficit target to debt stabilization, while stressing that a high debt burden would continue to constrain room for fiscal policy.
Robin Brooks · Jonathan Fortun / Institute of International Finance
The authors use inflation evidence to assess economic slack in Italy and Spain, comparing their estimates with IMF output gaps and emphasizing measurement uncertainty.