1. the Evolving Global Economy Sr. Vice President and Chief Economist
Emerging Nations and
the Evolving Global Economy
2013 Sakip Sabanci Lecture
Kaushik Basu
Sr. Vice President and Chief Economist
The World Bank
Brookings Institution
Washington DC
May 2, 2013

2. Changing global structure
Increases in share of BRICS in global GDP and global trade
Changing global structure

3. Changing global structure
Increase in South-South trade
Changing global structure

4. Salient features of the global crisis
Capital market turbulence affected borrowing costs of developing countries,
Developing Country Sovereign Bond Spread

5. Salient features of the global crisis
The Rebirth of Differentiated Sovereign Risk in the Euro-Zone.

6. Salient features of the global crisis
Emerging markets challenge: exchange rates, capital flows and inflation targeting.
Figure 1: Standard quantity intervention in FX markets
Dollars p S D0 D1 p0 p1 F E
Devaluation

7. Theory of alternative approaches to exchange rate management: schedule intervention
Figure 2: Net excess demand after central bank
schedule intervention p D1 A2 B2 P2 P’ E1 • p0 A E0 D0
Dollars

8. In countries where central banks practiced some form of rules-based FX intervention (Mexico, Colombia, Guatemala, Chile); or preannounced intervention (Turkey), the volatility of changes in FX reserves was below the average for 22 emerging market economies over