Emerging Markets Perspectives on G-20 led Financial Reforms

The chapter examines progress as well as continuing concerns in G-20 led financial reforms, with particular emphasis on emerging markets (EMs). Although risks remain they are of a lower order of magnitude compared to those in the pre global crisis period. But progress is slowest in areas of concern to EMs. Question marks over liquidity in markets as quantitative easing is withdrawn are echoed in EMs, which also face risk-off outflows and volatile exchange rates in this period. Leverage is high in some EMs after a period of low global interest rates and risk-on inflows in search of yields. But EMs are largely left to handle volatility themselves. Even the advice given to them or its understanding in policy circles or markets is not sufficiently nuanced. There are arguments for and against financial tightening as the best response to achieve financial stability. These are examined in the context of experiences in some specific EMs. Implications are drawn for G-20 policies and for its advice to EMs.