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World Bank warns emerging economies of big capital outflow

  • The World Bank warned of the risk of a large decline in capital flows to emerging economies in the upcoming US monetary policy tightening cycle.

    If the tightening cycle were accompanied by a surge in US long-term yields, as happened during the taper tantrum in 2013, the reduction in capital flows to emerging economies could be substantial, media reports cited a new research paper released by the World Bank ahead of this week's US Federal Reserve meeting to discuss whether to raise interest rates.

    Its research shows a 100 basis point jump in US long-term yields, as occurred during the taper tantrum, could temporarily reduce aggregate capital flows to the emerging markets by up to 2.2 percentage points of their combined gross domestic product (GDP). (Source: IANS)