Philip Engler, Roberto Piazza and Galen Sher (members of the International Monetary Fund) Washington, DC, April 6.- The rapid adoption of vaccines in the United States and the approval of the $ 1.9 trillion financial stimulus package have encouraged expectations of an economic recovery. In anticipation, long-term interest rates in the United States have risen sharply: the 10-year Treasury rate rose from less than 1% at the beginning of the year to 1.75% in mid-March. There has been a similar rise in the UK. In January and February, interest rates in the eurozone and Japan rose slightly, before their central banks intervened to ease monetary policy. Emerging and emerging economies are watching the rising interest rates with interest. Most of them face a slower economic recovery than the advanced economies, have to wait longer for vaccinations and have a limited opportunity for their own financial stimulus. Currently, capital inflows into emerging markets are showing signs of exhaustion. There are fears that the shocking chapter on the withdrawal of the monetary stimulus (“brave trick”) will recur in 2013, when signs of a gradual withdrawal of US bond purchases were triggered earlier than expected by capital from emerging markets. Are these fears justified? According to our study included in the latest edition of the World Economic Outlook, in the case of emerging markets, it is important to note what is important for raising interest rates in the United States. Cause and Effect While this employment is good news about employment in the United States or the COVID-19 vaccine, most emerging markets see an increase in portfolio investment credits and a reduction in the spread of US dollar-denominated debt. Restructuring in measures tends to raise domestic interest rates. Overall, the impact of the central market on the emerging market is harmless. However, countries that at least export to the United States but are highly dependent on foreign debt may experience tensions in the financial markets. As news of rising inflation in the United States raises interest rates in the United States, the impact on emerging markets is largely harmless. Interest rates, exchange rates and capital flows are generally unaffected because past inflation surprises may be the result of a combination of positive economic news such as increased willingness to spend and negative news as production costs increase. However, when higher interest rates in advanced economies are driven by expectations that central banks will take more regulatory action, it could hurt emerging market economies. Our study reflects these “monetary policy surprises” as the rise in interest rates on the days when the Federal Reserve Open Market Operations Committee or the Governing Council of the European Central Bank makes periodic announcements. We note that every one percentage point increase in interest rates in the United States due to the “monetary policy surprise” immediately causes long-term interest rates of one-third of a percentage point in the average emerging market. One-third of the percentage of people with low credit rating and speculation. Because everything is equal, there is an immediate outflow of portfolio capital from emerging markets and their currencies fall against the US dollar. One of the key differences in good interest rates is the economic message that the term “premium” – compensation for risk When tight monetary policy is unexpectedly announced, long-term debt increases in the United States, and dollar-denominated emerging market debt spreads. The good news is, in fact, that it is the combination of these factors that is driving up interest rates in the United States. For now, the “good news” about the economic outlook remains the main factor. In some emerging markets, expectations of economic activity resurfaced between January and March, somewhat explaining the rise in interest rates and the rise in capital flows in January. In general, interest rates in the United States continue to rise, and markets are performing well. Although long-term interest rates have risen in the United States, short-term interest rates are close to zero there. Stock prices are high, and interest rates on corporate securities and dollar-denominated emerging market securities have not deviated from US treasuries. Moreover, market expectations for inflation appear to be close to the Fed’s long – term target of 2% per annum; If they were there, they might help control rising interest rates in the United States. Part of the rise in interest rates in the United States is the result of the normalization of investors’ expectations of inflation in that country. However, proceed with caution, as other factors play a role. The increase in interest rates in the United States is caused by a period of premium rise, which will reflect the pace of inflation and futures lending and futures lending and greater uncertainty among investors. Bond Purchase of Central Banks. Capital outflows from emerging markets in February and early March turned into inflows in the third week of March, but remained volatile thereafter. It is not clear whether the large amount of treasuries the US will release this year will allow it to borrow in some emerging markets. So the situation is weak. In advanced economies, interest rates remain low and may continue to rise. Investor confidence in emerging market economies may deteriorate. In order not to provoke such an effect, the central banks of the advanced economies can help by providing clear and transparent communications about the future course of monetary policy under different circumstances. A good example of this is guidance from the Federal Reserve on the preconditions for increasing intervention rates. In the midst of the recovery, the Federal Reserve has not yet tested the new monetary policy framework and it may be useful for market participants to seek further guidance on future conditions as they are skeptical about the pace of growth. Assets in the future. Support policies for emerging markets can continue to be provided only if domestic inflation is expected to remain stable. For example, the central banks in Turkey, Russia and Brazil raised interest rates in March to control inflation, while Mexico, the Philippines and Thailand kept them unchanged. Priority, emerging and emerging economies should seek to offset the rise in interest rates to some extent. To do this, they need some autonomy from global financial conditions. The good news is that many emerging market central banks have been able to ease their monetary policy, even in the face of capitalism, during epidemics. Our analysis shows that economies with more transparent central banks, higher rule-based financial decision-making practices and higher credit ratings have been able to drastically reduce intervention rates during a crisis. Given the greater risk tolerance in global financial markets and the potential for widening market gaps in the future, this is a good time to extend credit maturity to emerging market economies. Steps to control balanced currency mismatches and generally improve the recession. It is time to strengthen the global financial security web, with mutual taxes on debt and mechanisms such as multilateral lenders that can provide foreign exchange to countries in need. The international community must be prepared to help countries in extreme situations. The International Monetary Fund’s precautionary financial services can further strengthen the reserves of its member countries in the face of financial stability; The new allocation of special drawing rights will also help.