The Taper This Time

Eichengreen, Barry and Gupta, Poonam and Choudhary, Rishabh (2022): The Taper This Time. Published in: Indian Public Policy Review No. Vol. 3 No. 1 (Jan-Feb) (2022)

Abstract

On November 3, 2021, the Federal Open Market Committee announced that it would reduce the scale of its asset purchases by $15 billion a month starting immediately. Do emerging markets, such as India, need to prepare for a replay of the taper tantrum of 2013? We show that emerging markets, including India, have strengthened their external economic and financial positions since 2013. At the same time, fiscal deficits are much wider, and public debts are much heavier. As U.S. interest rates now begin moving up, servicing existing debts and preventing the debt-to-GDP ratio from rising still further will become more challenging. Either taxes have to be raised or public spending must be cut to generate additional revenues for debt servicing.

• Item Type: MPRA Paper
• Language: English
• Keywords: Capital Flows, Emerging Markets, Monetary Policy, Tapering, India
• Subjects: F - International Economics > F3 - International Finance > F32 - Current Account Adjustment ; Short-Term Capital Movements; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F42 - International Policy Coordination and Transmission; F - International Economics > F6 - Economic Impacts of Globalization > F62 - Macroeconomic Impacts

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