Who’s Afraid of Tapering?
The Federal Reserve’s exit from quantitative easing has financial markets and policymakers worried, with warnings of capital-flow reversals and collapsing asset prices dominating policy discussions worldwide. But, given that most major economies operate under a flexible exchange-rate regime, such concerns are largely unwarranted.
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TOKYO – The US Federal Reserve’s gradual exit from so-called quantitative easing (QE) – open-ended purchases of long-term assets – has financial markets and policymakers worried, with warnings of capital flight from developing economies and collapsing asset prices dominating policy discussions worldwide. But, given that most major economies operate under a flexible exchange-rate regime, these concerns are largely unwarranted.