When the U.S. Sneezes, Does the World Have to Catch a Cold? The Implications of U.S. Monetary Policy for Emerging Markets

Anisha Dash

This paper examines the role that exchange rate regimes and capital controls play on the varying effects that U.S. interest rates have on emerging markets. As technology advances and a global civil society grows, emerging market economies face financial sensitivities while adjusting to the global market. Theory and academic research points to capital controls and exchange rate regime as potential buffers. Using a cross-sectional time series analysis of thirteen emerging market economies with data spanning from March 2022 to September 2024, this paper aims to find conditions that can improve resilience for emerging markets. Contrary to expectations, the results are inconclusive, suggesting a more complex relationship is at play. Regardless, there is a large potential for understanding the market dynamics to decrease vulnerability, which can inform policy choices.