Board of Governors of the Federal Reserve System

Figure 1: Real GDP Growth in EMEs

Figure 2: Net Quarterly Private Flows to Major Emerging Markets

Figure 3: Flows to Dedicated Emerging Market Funds

Figure 4: Emerging Market Equities and Credit Spreads

Series: MSCI* and EMBI global bond spreads
Horizon: January 2014 to October 2, 2017
Description: The data are weekly averages of daily data and are plotted as two curves. Units for the EMBI global bond spread are in basis points, and the MSCI is indexed with January 9, 2008 = 100.

In early 2014, there is a sizable drop in the EMBI spreads, bottoming out in late June 2014 at around 275 basis points. It then increases until January 2015, reaching over 450 basis points. The spreads then decrease to around 375 basis points by mid-2015 before rising sharply to 460 basis points in September 2015. In October 2015, EMBI global bond spreads decrease sharply, followed shortly by a rapid increase, peaking around 525 basis points in March 2016. Since March 2016, spreads have fallen at a fairly constant pace to their October 2, 2017, value of just above 300 basis points.

MSCI experienced a constant increase in the first two-thirds of 2014, rising from around 90 in January to near 100 by October. As MSCI is indexed with January 9, 2008 = 100, this reveals that the MSCI was around the same level in October 2014 as it was in January 2008. With minor decreases and increases, the MSCI remains fairly constant around 100 until March 2015. From March to May 2015, the index rises to near 105 before starting a steady decline, cratering just above 80 in January 2016. From January 2016 to October 2, 2017, the index increases at a steady pace, exempting the period from July 2016 to January 2017, when it was constant at around 95. By October 2, 2017, the MSCI has reached nearly 115, the highest level in the range of this figure.

Figure 5: Contributions to Net Private Inflows to Major EMEs ex. China

Figure 6: Emerging Market Vulnerabilities and Credit Spreads

Series: Emerging Market Economies Vulnerability Index (13 EMEs)* and EMBI global spread**
Horizon: 1995:Q1 to 2017:Q3
Description: The EMBI global spreads data are quarterly averages of daily data. The units for the EMBI global bond spread are basis points.

The EMBI global spread is at its maximum in 1995:Q1, at nearly 1,400 basis points. It decreases sharply until 1997:Q2, where it reaches a local minimum of just below 400. It then increases sharply and constantly until 1998:Q3, where it is back to nearly 1,200 basis points. From 1998:Q3 to 1999:Q2, it falls down below 1,000 basis points. In 1999:Q3, it ticks back up above 1,000 before falling again through 2000:Q2, descending to around 625 basis points. From 2000:Q2 to 2001:Q3, the spreads increase back to nearly 900 before sharply falling the next quarter back to around 625 and increasing back to 850 in 2002:Q3. From 2002:Q3 to 2007:Q1, the spreads decline, sharply at first and less sharply over time. In 2007, it reaches its minimum in the 1995 to 2017 range of just below 200 basis points. Following 2007:Q2, the EMBI spreads sharply increase to around 750 basis points by 2008:Q4 before declining sharply back down to 300 basis points in 2009:Q4. Through 2010 and up to 2011:Q2, the spreads remain fairly constant before a modest increase to 400 basis points in 2011:Q3. The spreads remain near 400 basis points through 2012:Q2 before declining to near 275 basis points in 2013:Q1. The spreads increase modestly until 2016:Q1, with only a small decrease in 2014:Q1. In 2016:Q1, the EMBI global spreads reach back above 400 for the first time since 2011:Q4 and their highest since 2009:Q2. Since 2016:Q1, EMBI spreads have decreased constantly until the end of the available data in 2017:Q3, reaching down to just above 300 basis points.

The EME vulnerability index tracks the EMBI global spread fairly closely. The index is only calculated yearly and shown from 1995 to 2016, unlike the EMBI spreads, which are shown quarterly. In 1995, the vulnerability index is at its maximum value of 3.5. In 1996, it decreases to 3.3, representing an improvement in vulnerability, and in 1997 it declines further to 2.7. In 1998, it holds constant at 2.7, but in 1999 and 2000 it declines further to 2.5 and 2.2, respectively. In 2001, it holds constant at 2.2, and in 2002 and 2003 it declines, leaving the index at 1.8 in 2003. The vulnerability index remains constant at 1.8 until 2007, when it drops further to 1.5. In 2008, the index reaches its lowest value of 1.3 before rising back to 1.8 in 2009 and 2.0 in 2010. The index falls to 1.8 in 2011 but promptly increases again in 2012 and 2013, reaching 2.3 by 2013. There is another small decrease in 2014, bringing the index back down to 2.0, but the index climbs back to 2.2 in 2015 and 2.3 in 2016. This line reveals that the index has declined substantially from the late 1990s, reached a minimum in 2008, and has since climbed back to levels in 2013 and 2016 not seen since 1999.

Figure 7: Emerging Market Nonfinancial Corporate Debt

Figure 8: Emerging Market Nonfinancial Corporate Debt at Risk

Figure 9: Emerging Market Nonfinancial Corporate Debt at Risk, 2017:Q1

Figure 10: U.S. Federal Funds Rate

Figure 11: U.S. 10-Year Government Bond Yield