Follow the link for the full summary:

https://markusacademy.substack.com/p/emerging-markets-taper-tantrum-redux

Link to sign up for the webinar series:

https://markusacademy.substack.com/

On April 1, 2021, Robin Brooks joined Markus’ Academy for a lecture on “Emerging Markets: Taper Tantrum Redux?” Brooks is the Chief Economist of the Institute of International Finance.

Download the slides here.

Summary:

• The taper tantrum began in 2013 when Bernake floated the idea of adjusting the monthly volume of purchases, shocking markets.
• Financial markets in 2013 became very sensitive to data surprises. 
• With the rising US long-term yields, the risk of an overshoot in real interest rates is building. 
• Tracking foreign investor flows to emerging markets shows that there was a huge drawdown in flows at the height of COVID shock.
• EMs can still have large currency devaluations if emerging market flows are not greatly negative due to account deficits. 
• Some pre-existing conditions coming into 2021 look better than 2013. 
• Although emerging markets are better positioned now, growth in EMs has been struggling for many years.