The political economy of the QE: the rise and fall of cheap money and its impact on the Emerging Market Economies

Abstract

The Quantitative easing (Qe) monetary policy was the response from developed economies to the sub-prime financial crises in 2007/2008. In central economies, the adoption of this policy worsened inequality, started a bank flow retraction and deepened a debt-led growth model. In the periphery, the low interest rates fueled the capital inflows. after 2009, there was a growth of foreign dollar nominated debt in eMe. In this context, capital control measures were stablished, in order to regulate the derivative and money market inflows, specially in latin america and africa. But this doesn’t change the low regulatory level or pattern. in the context of a normalization of the Fed monetary policy, the Quantitative tightening (Qt) will produce the re-flow of capital to central economies.