Since the advent of the global financial crisis in 2008, interest rates in major advanced countries including the Unites States, Eurozone, and Japan have been maintained at almost zero percent. This caused enormous expansion of credit in emerging market countries and the currencies of emerging market countries appreciated noticeably. Recently there has been increasing discussion of possible rise in interest rates in the Unites States. United States actually started to raise interest rates in December of 2015. This caused turbulence in global financial markets, particularly in the emerging market. This study aims to capture the effects of the change in world interest rate on emerging market macroeconomic variables, including exchange rates, net exports, and the change in net foreign liability. We purport to quantify the effects using a nonlinear simulation of a dynamic stochastic general equilibrium model. We stress the importance of the level of foreign currency denominated debt and compare the case of Brazil or South Africa where it is very high with the case of Korea where it is low.
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