International Monetary and Financial Hierarchies: Macroeconomic Implications for Emerging Market Economies

Abstract

This paper discusses the hierarchic features of the international monetary and financial system and the implications these hierarchies have for macroeconomic conditions in Emerging Capitalist Economies (ECEs) using the example of the Covid Shock in March 2020. In particular, it draws attention to two key macroeconomic implications: first, the existence of external vulnerability and adverse exchange rate dynamics, increasingly independent of economic conditions in ECEs; second, the external constraint on monetary policy in ECEs. Analytical emphasis is placed on how recent changes in the global financial system, such as the rise of non-bank financial institutions (NBFIs) and the general move to market-based financial systems, might affect those international monetary and financial hierarchies and their consequences.

JEL classification: F31 ; F32 ; F36 ; F38 ; F62