The hot debate among macro-economists now is whether the recent volatility in emerging market stocks is due to the Fed's tapering program. In other words, is the Fed responsible for the problems of emerging markets around the world? This cartoon summarizes the criticism:
I think this is unfair. Yes, emerging markets are more sensitive to capital flows than developed markets, and capital has in fact been flowing out of emerging markets and back into the developed markets; because that's where the growth is, not because of some conspiracy by Ben Bernanke. More importantly, the emerging markets are very dependent on commodities, which have been in a tailspin for almost a year. In addition, some emerging nations are trying to shift their economies from export-oriented to consumption-oriented, such as China, which can easily stall growth temporarily .
And, by the way, since when is the Fed responsible for the rest of the world anyway?
I think this is unfair. Yes, emerging markets are more sensitive to capital flows than developed markets, and capital has in fact been flowing out of emerging markets and back into the developed markets; because that's where the growth is, not because of some conspiracy by Ben Bernanke. More importantly, the emerging markets are very dependent on commodities, which have been in a tailspin for almost a year. In addition, some emerging nations are trying to shift their economies from export-oriented to consumption-oriented, such as China, which can easily stall growth temporarily .
And, by the way, since when is the Fed responsible for the rest of the world anyway?
