Monetary policy of emerging markets: overview of select economies; RBS Markets, London

Abstract

World Economic Landscape has permanently changed after the subprime crisis of 2007 and 2008. From the collapse of Lehman Brothers to the current sovereign debt crisis that plagues Europe, world governments have taken various measures to curb the wide spread panic among the investors. As the developed world struggled to stand ground, the emerging economies were hugely impacted by loss of export revenue and reduction in foreign investments as the confidence in their economies eroded away. Though none of the emerging market economies were technically in recession, various measures had to be taken by their government to keep the growth momentum going and stabilize their currency. Monetary Policy is one of the key instruments used by Central Banks to stabilize the economy and boost growth. Emerging market central banks have tried various measures from reducing interest rates to increasing reserve requirements to give a jolt for growth. This project aims to study short and medium term monetary policy decisions taken by select emerging market economies of Hungary, Poland, Israel, Singapore and South Africa. The selection of the countries was based on RBS’s Short Term Interest Rate Trading desks preference for future expansion. The project aims to satisfy the dual aim of getting a complete understanding of the basic pattern of function of the foresaid Central Banks and generate trading ideas based on current market conditions and expected moves by the banks.