The impact of QE2 on emerging markets
The intention of the second wave of quantitative easing by the Federal Reserve in November might be to boost the supply of credit and reinvigorate the US economy, but the money may end up chasing higher yielding assets in the emerging markets.
The second round of quantitative easing now being implemented by the US Federal Reserve is leading to a sharp divide between developed countries, which are pushing for accommodative fiscal and monetary policies to avert disinflationary trends, and emerging market countries, which are currently under pressure to control already high inflation.
The new quantitative easing, known as QE2, will create significant amounts of liquidity in the financial system, and this will need to find a home. If the
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