Emerging Economies’ Misinsurance Problem
Over the last decade, America’s expansionary monetary policy and China’s rapid GDP growth have been the two key drivers of global financial flows. Whether emerging economies are able to cope with the reversal of these dynamics will depend on whether they are sufficiently insured against domestic credit risks.
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LONDON – Over the last decade, America’s expansionary monetary policy and China’s rapid growth have been the two key drivers of global financial flows. Now, both dynamics are being reversed, generating new risks for the global economy – particularly for emerging countries. Whether they can cope with these changes will depend on whether they have taken out enough insurance against the right risks.