Ryan Avent: The global economy: The emerging-market squeeze, short version: Noted for August 22, 2013
Ryan Avent: The global economy: The emerging-market squeeze, short version:
Paul Krugman [wrote]: "This would be scary if India was like the Asian crisis countries of 1997-1998 or Argentina in 2001, with large amounts of debt denominated in foreign currency. But unless I’m misreading the data, it isn’t…. So at first examination this doesn’t look like as big a deal as some headlines are suggesting. What am I missing?" I had the same question…. My conclusion was that the big risk is a policy overreaction in affected economies. Governments or central bankers worried about depreciation or its effect on inflation will be tempted to move monetary policy in an inappropriately tight direction. And that risks turning a broad regional slowdown into a recession. That would be really bad, particularly in economies where expectations of steady improvements in employment opportunities and living standards are key to maintaining social order. But this isn't the Asian financial crisis all over again, and we should be clear about that.
