Monetary Policies of Large Industrialised Countries, Emerging Market Credit Cycles and Feedback Effects

31 Pages Posted: 24 Apr 2014

See all articles by Andreas Hoffmann

Andreas Hoffmann

Leipzig University

Gunther Schnabl

University of Leipzig - Institute for Economic Policy

Date Written: March 24, 2014

Abstract

This paper explores the link between monetary policies of large industrial countries and international credit cycles. Based on an overinvestment framework, we show that in the prevailing asymmetric world monetary system, monetary policies of large centre countries can fuel credit booms in emerging markets. We argue that the absorption of inflationary pressure by emerging markets during boom periods as well as the fear of feedback effects of crises in emerging markets encourage delayed monetary tightening in centre countries. The paper helps explain asymmetric monetary policy patterns in centre countries and why the current global low interest rate environment is likely to prevail.

Keywords: asymmetric world monetary system, credit cycles, monetary policy, financial crisis, contagion

JEL Classification: E420, E580, F330, F440

Suggested Citation

Hoffmann, Andreas and Schnabl, Gunther, Monetary Policies of Large Industrialised Countries, Emerging Market Credit Cycles and Feedback Effects (March 24, 2014). CESifo Working Paper Series No. 4723. Available at SSRN: https://ssrn.com/abstract=2428617

Andreas Hoffmann

Leipzig University ( email )

Institute for Economic Policy
Grimmaische Str. 12
Leipzig, 04109
Germany

HOME PAGE: http://www.a-hoffmann.info

Gunther Schnabl (Contact Author)

University of Leipzig - Institute for Economic Policy ( email )

Institute for Economic Policy
Grimmaische Straße 12
Leipzig, 04109
Germany

HOME PAGE: http://www.wifa.uni-leipzig.de/iwp/

Register to save articles to
your library

Register

Paper statistics

Downloads
112
rank
239,736
Abstract Views
570
PlumX Metrics