The Impact of Low Interest Rates on Emerging Markets

In response to the 2007-08 Global Financial Crisis, central banks across the world, particularly in advanced economies, cut policy rates and implemented numerous unconventional expansionary policies to chart a recovery from crisis. This phenomenon of low interest rates has persisted even beyond the recovery from the crisis. This Capstone project aimed to understand the impact of enduring low global interest rates on emerging market economies, specifically considering the period between 2009 and 2015. The study was centered around the recovery and post-crisis growth trajectories of 7 emerging economies namely Brazil, Indonesia, Turkey, Mexico, China, Czech Republic, and South Korea.

The report considered how each country’s economy, central bank and financial markets were impacted by the low interest rate environment. It examined how these countries’ trade balances, current account positions, funding flows, exchange rates and sovereign debt markets evolved over the period of interest. The report documented similarities and differences across each country and aimed to classify the countries into groups based on these findings.