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The Impact of Industrialized Countries’ Monetary Policy on Emerging Economies

Author

Listed:
  • Vincenzo Quadrini

    (University of Southern California
    Peking University HSBC Business School
    CEPR)

Abstract

Following the low interest rate policies adopted by industrialized countries after the 2008 financial crisis, there has been a reduction in capital outflows from emerging countries to industrialized countries. Together with the lower outflows of capital, emerging countries experienced a decline in output growth bigger than industrialized countries. This paper develops a model capable of replicating this pattern. Contrary to conventional wisdom, the model shows that lower interest rates in industrialized countries could have negative macroeconomic consequences for emerging countries even though emerging economies experience increased inflows (or decreased outflows) of capital.

Suggested Citation

  • Vincenzo Quadrini, 2020. "The Impact of Industrialized Countries’ Monetary Policy on Emerging Economies," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 68(3), pages 550-583, September.
    • Handle: RePEc:pal:imfecr:v:68:y:2020:i:3:d:10.1057_s41308-020-00115-3
    DOI: 10.1057/s41308-020-00115-3
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    Cited by:

    1. Vladimir Asriyan & Luc Laeven & Alberto Martin & Alejandro Van der Ghote & Victoria Vanasco, 2021. "Falling Interest Rates and Credit Misallocation: Lessons from General Equilibrium," Working Papers 1268, Barcelona School of Economics.
    2. Popov, Alexander A. & Steininger, Lea, 2023. "Monetary Policy and Local Industry Structure," Department of Economics Working Paper Series 333, WU Vienna University of Economics and Business.
    3. Vladimir Asriyan & Luc Laeven & Alberto Martin & Alejandro Van der Ghote & Victoria Vanasco, 2021. "Falling interest rates and credit reallocation: Lessons from general equilibrium," Economics Working Papers 1784, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 2022.

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    More about this item

    Keywords

    E44; F32; F41;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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