"Following the initiation of Unconventional Monetary Policies, we have seen episodes of asset price increases and rising capital flows by one measure, cumulative net flows to emerging markets rose by $1.1 trillion since 2008, squarely above its long-run structural trend by an estimated $470 billion. Corporate leverage and foreign exchange exposures also increased in several cases. Real estate prices have been buoyant, for example, in Brazil, Canada, China, Korea, and Thailand. Stock prices rebounded for a considerable time in China, Mexico and Russia. And credit expanded rapidly in Brazil, China, Korea and Turkey. In recent months, some of these developments have been partly reversed.
These positive trends, of course, are what we would expect, even with conventional policy. Again, it is the recipe of low interest rates and the hunt for return investors search for other opportunities, capital flows into emerging markets, with the usual potential for appreciation and credit growth.
We all know that the situation can turn quickly—as we have seen in recent days in some emerging market economies. These risks require constant monitoring and reassessment"
Christine Legarde
