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Fed Study Shows U.S. Hikes Hit High-CPI Emerging Markets Hardest

  • Trade ties the key factor for advanced countries: Fed study
  • Financial vulnerability most important for developing nations
Inside The Asiatique Market Ahead Of Bank Of Thailand Revised GDP Forecast
Photographer: Brent Lewin/Bloomberg

Emerging markets with the weakest financial metrics, especially those with high inflation, tend to be the worst affected by U.S. interest-rate shocks, according to a study by Federal Reserve Board economists.

“Both the bright and the dark side of foreign responses to U.S. interest rate increases” are highlighted by the discussion paper, wrote the authors, Matteo Iacoviello and Gaston Navarro. “On the dark side, these responses seem to be large, to the point that they suggest that foreign economies -- especially vulnerable, emerging economies -- may react to U.S. monetary shocks more so than the U.S. economy itself.”