Monetary Matters with Jack Farley The EM Financial Stability Report Card | Rohit Goel on Emerging Markets, Dollar Dominance, and Term Premia
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Feb 5, 2025 Rohit Goel, a partner and head of global macro at Breakout Capital, dives into the complexities of emerging markets and the dominance of the U.S. dollar. He discusses how fiscal policies impact financial stability, especially amid currency fluctuations. Goel highlights the dual nature of a strong dollar, benefiting exporters while hurting equity markets. Additionally, he explores opportunities in agricultural commodities and the evolving dynamics of bond yields in China, along with the shift towards diverse currency reserves in a multipolar economic landscape.
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Emerging Markets Post-COVID
- Emerging markets exited the COVID-19 crisis in relatively good shape, with fewer defaults than anticipated.
- However, their main challenge now is fiscal stability, requiring policy orthodoxy.
Fiscal Discipline for EMs
- Emerging markets must maintain fiscal discipline, avoiding excessive spending and subsidies.
- Unlike the US, they lack the "exorbitant privilege" of running large deficits.
EM Debt Distress
- Despite predictions of widespread debt distress, emerging markets experienced fewer defaults than expected during the pandemic.
- This resilience stemmed from domestic policy adjustments and relatively supportive global financial conditions.