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The global long-term interest rate, financial risks and policy choices in EMEs

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  • Philip Turner

Abstract

The global long-term interest rate now matters much more for the monetary policy choices facing emerging market economies than a decade ago. The low or negative term premium in the yield curve in the advanced economies from mid-2010 has pushed international investors into EM local bond markets: by lowering local long rates, this has considerably eased monetary conditions in the emerging markets. It has also encouraged much increased foreign currency borrowing in international bond markets by emerging market corporations, much of it by affiliates offshore. These developments strengthen the feedback effects between bond and foreign exchange markets. They also have significant implications for local banking systems.

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  • Philip Turner, 2014. "The global long-term interest rate, financial risks and policy choices in EMEs," BIS Working Papers 441, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:441
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    References listed on IDEAS

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    1. Jagjit S Chadha & Philip Turner & Fabrizio Zampolli, 2013. "The interest rate effects of government debt maturity," BIS Working Papers 415, Bank for International Settlements.
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    Keywords

    Term premium; international corporate bonds; monetary policy triangle; currency mismatches;
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