Expert Zone

Straight from the Specialists

Why the Fed is not worried by emerging market moves

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

Several emerging market central banks have been forced to react to market events already this year. Interest rate increases in India, Turkey and South Africa followed bond or currency market volatility. Argentina has endured dramatic moves in its currency, and Brazil has been forced to tighten policy.

The moves in these markets, unlike those of 1997-1998, do not suggest a systemic threat to all emerging markets. Investors have distinguished markets where errors in fiscal policy, monetary policy or political risk created a fundamental mispricing. Such errors are generally most visible in a current account deficit or a government budget deficit, or both.

The prospect of rising global bond yields has offered investors alternative investment opportunities to these troubled countries, with fewer risks. Countries that have followed a more orthodox policy approach, and have generous foreign exchange reserves and current account surpluses or equilibrium have been less threatened.

Decoding political risk no mean feat

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

Politics is playing a dominant role in financial markets today — and generally speaking, investors do not like it. Political risk is an additional layer of uncertainty that has to be factored in while making investment decisions. Because political risk is intimately linked with the uncertainties of human behaviour, the impact of political risk can at times seem to be almost random. After over two decades as a professional economist, I can assert that forecasting economies is tough. Trying to forecast what politicians are going to do is even worse.

What the Euro means for Asia

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(The views expressed in this column are the author’s own and do not represent those of Reuters)

The Euro should not exist. In a perfect world (run by economists) the Euro would never have been created. Sadly, however, the world is not perfect — and it is run by politicians. The result is an entirely dysfunctional monetary union.

There is no place like home

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(Paul Donovan is a Managing Director and Global Economist at UBS. The views expressed in this column are the author’s own and do not represent those of Reuters)

Most economists believe that nearly everything in this life can be reduced to an economic explanation.

Asia and the euro crisis

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(Paul Donovan is a Managing Director and Global Economist at UBS. The views expressed in this column are the author’s own and do not represent those of Reuters)

The euro should not exist. More precisely, the euro should not exist in its current form, with its current membership.

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