Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301975 
Year of Publication: 
2024
Series/Report no.: 
ADB Economics Working Paper Series No. 735
Publisher: 
Asian Development Bank (ADB), Manila
Abstract: 
We investigate the determinants of the performance of emerging markets (EMs) during five United States (US) Federal Reserve monetary tightening and easing cycles from 2004 to 2023. We study how macroeconomic and institutional conditions of an EM at the beginning of a cycle explain EM resilience during each cycle. More specifically, our baseline cross-sectional regressions examine how those conditions affect three measures of resilience: bilateral exchange rate against the US dollar, exchange rate market pressure, and economy-specific Morgan Stanley Capital International (MSCI) index. We then stack the five cross-sections to build a panel database to investigate potential asymmetry between tightening versus easing cycles. Our evidence indicates that macroeconomic and institutional variables are associated with EM performance, determinants of resilience differ during tightening versus easing cycles, and institutions matter more during difficult times. Our specific findings are largely consistent with economic intuition. For instance, we find that current account balance, international reserves, and inflation are all important determinants of EM resilience.
Subjects: 
monetary policy cycle
emerging markets
resilience
macroeconomic fundamentals
Federal Reserve
JEL: 
E58
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

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