Bank of Canada paper flags risk of spillovers from emerging to developed economies
Researchers show how a search for safe assets could transmit instability
Emerging market investors looking for a safe haven for their money could transmit instability to developed countries, according to research published by the Bank of Canada on August 7.
In the working paper Cheap but flighty: how global imbalances create financial fragility, Toni Ahnert and Enrico Perotti outline a mechanism for how the search for safety could end up creating the very opposite. In their model, investors in countries with weak property rights risk losing their money, which
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