An EM Debt Crisis Is Really A Dollar Crisis 1

Emerging market debt crises are more often than not global Dollar crises

The head of the IMF has publicly raised concerns about higher interest rates causing financial conditions to tighten, raising the probability of an emerging market debt crisis.

Her thinking here is decidedly mainstream: high interest rates stifle economic growth by increasing borrowing costs, pulling capital away from emerging markets (EM).

It really isn’t so simple.

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