The Emerging Market Economies in Times of Taper-Talk and Actual Tapering

Abstract: I study the financial distress recently experienced by the emerging market economies (EME). I distinguish two periods: Summer 2013, when there was talk about the Fed tapering monetary policy (the “taper-talk” period), and December 2013–January 2014, when the actual tapering began (the “actual-taper” period). Consistent with previous work, I find that current account deficits and real exchange rate appreciation were key factors in explaining the observed crosscountry differences. I also construct market pressure indices to identify crises, and I use leading indicators to find signals of likely crises in the near future. The analysis suggests that the recent events were relatively mild, with only a small number of identified crises.