Emerging markets: Prospects and challenges

Tryggvi Gudmundsson; Vladimir Klyuev; Leandro Medina; Boaz Nandwa; Dmitry Plotnikov; Francisco Schiffrer; Di Yang

doi:10.1016/j.jpolmod.2022.09.012

Emerging markets: Prospects and challenges

J Policy Model. 2022 Jul-Aug;44(4):827-841. doi: 10.1016/j.jpolmod.2022.09.012. Epub 2022 Sep 13.

Authors

Tryggvi Gudmundsson¹, Vladimir Klyuev¹, Leandro Medina¹, Boaz Nandwa¹, Dmitry Plotnikov¹, Francisco Schiffrer¹, Di Yang¹

Affiliation

¹ International Monetary Fund, 700 19th Street, N.W. Washington DC 20431, United States.

Abstract

This article documents recent developments in emerging markets in the context of the COVID-19 pandemic, assesses their prospects and challenges, and discusses appropriate policy settings for the medium term. It argues that EM policymakers' ability to grapple with an incomplete and uneven recovery will be constrained by high public debt and uncertain inflation prospects as well as external risks surrounding capital flows and exchange rate developments. The paper also discusses potential impact of a tightening in global financial conditions and appreciation of the US dollar that could be triggered by a general increase in risk aversion or a reassessment of the likely path of US monetary policy.

Keywords: COVID-19; Emerging markets; Monetary policy.