In the summer of 2018 the currencies of a number of emerging market economies, including Argentina, Turkey, India, South Africa, and Indonesia, started to plummet.  Argentina approached the IMF for an emergency loan. The Turkish authorities negotiated a $15 billion loan from Qatar and urged Turkish citizens to sell gold and dollars to buy Turkish lira.

• 1. Explain why this was happening paying particular attention to:
  • a. loans which businesses in these economies had borrowed  from foreign financial institutions;
  • b. the increase in interest rates in the USA;
  • c. the rising value of the US dollar against other currencies.

• 2.
  • a. In the context of international finance, what is meant by the term, contagion?
  • b. Assess whether contagion affected:
    • i. currencies in other emerging market economies;
    • ii. financial institutions in rich economies.   

Websites

https://www.theguardian.com/business/2018/sep/08/emerging-economies-crisis-looms-shadow-america-boom-interest-rates

https://www.bbc.co.uk/news/business-45451208

https://www.bis.org/publ/arpdf/ar2018e.pdf

https://www.theguardian.com/world/2018/aug/13/turkey-financial-crisis-lira-plunges-again-amid-contagion-fears

https://www.youtube.com/watch?v=VGCD5_4v1cM

https://www.cnbc.com/video/2018/08/13/argentina-rate-hike-comes-after-currency-tumbles-45-percent-interest-rate-turkey-lira-peso.html

https://www.cnbc.com/video/2018/08/15/former-rbi-governor-rajan-on-emerging-markets-during-a-currency-crisis.html

http://www.thejakartapost.com/news/2018/08/31/why-pain-in-argentina-and-turkey-is-hurting-indonesia.html