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In this interview on “La Hora N”, the most respectable news program in Peru, CGD senior fellow Liliana Rojas-Suarez explains the effects of economic developments in advanced economies on emerging markets. While the increased growth rate in the US and the incipient recovery in Europe is supporting global trade and economic activity, the ongoing increases in US interest rates is exposing vulnerabilities in some emerging markets – especially in those that have maintained significant fiscal deficits.
Liliana says China’s fragile financial system, while worrisome for its own sustainable long-term growth, will not pose significant dangers to the world economy in 2014. As she points out, Chinese authorities counter their fragile system with abundant international reserves and significant powers to control asset prices and avoid a financial meltdown, at least in the short-term.