From global markets to questions of development, money and economic activity.
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The pandemic widened emerging market fiscal deficits largely through higher spending, making an economic recovery alone insufficient to restore earlier balances. A new dataset of historical spending surges shows that much of the increase often becomes permanent. The January 2021 analysis therefore frames deficit reduction as a spending adjustment challenge as well as a growth question.
Read the workA strong December rebound brought emerging market portfolio inflows to $313 billion for 2020. Jonathan Fortun reports $45.9 billion entering during the final month, comprising $29.3 billion in equities and $16.6 billion in debt. Chinese equities accounted for $13.2 billion of December’s inflows into stocks.
Read the workAccess to international bond markets improved for emerging and frontier borrowers during 2020. Jonathan Fortun and coauthors find the recovery concentrated in sovereigns with investment grade ratings, while riskier issuers also regained access. Côte d’Ivoire’s return marked the first issuance from sub Saharan Africa since the pandemic began, with Ghana, Kenya and Nigeria expected to follow in 2021.
Read the workEmerging markets responded to the pandemic differently from earlier crises by easing monetary policy to support domestic activity. Jonathan Fortun and coauthors explain how additional liquidity helped governments borrow in local bond markets. Their December 2020 assessment nevertheless finds smaller fiscal support than in advanced economies and anticipates tightening across most emerging markets in 2021.
Read the workA broader sample tests whether large currency depreciations support exports. Robin Brooks and Jonathan Fortun lower their real depreciation threshold to 20%, expanding the historical sample from nine to 24 episodes since 1980. Their December 2020 analysis finds median export volume growth doubling in the following years, challenging the view that dollar invoicing neutralizes the trade response.
Read the workCurrency valuations varied sharply across emerging markets in November 2020 despite broad dollar overvaluation. Robin Brooks and Jonathan Fortun distinguish an undervalued renminbi and several Latin American commodity currencies from overvaluation in Argentina, Egypt and South Africa. China’s rising external surplus supported their contemporary assessment of its currency.
Read the workChanges in bond holdings reflect both transactions and movements in asset values. Jonathan Fortun and Sergi Lanau extend their emerging market government bond database to distinguish those effects in November 2020. Outflows and valuation losses reduced positions in many markets, while China attracted investment without comparable valuation losses and gained portfolio weight.
Read the workEmerging markets attracted $17.9 billion in portfolio investment in October 2020, with external issuance supporting inflows. Jonathan Fortun’s tracker reported $11.7 billion entering debt and $6.3 billion entering equities, including $4.7 billion into Chinese stocks. The headline total is retained as published rather than recomputed from rounded components.
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