The main difference between central banks in reserve currency-issuing OECD countries and central banks in emerging countries

Central banks in OECD countries have turned to quantitative easing to help finance large fiscal deficits (purchases of primarily government bonds paid for by creating money). This is relatively straightforward in countries that issue a reserve currency (United States, euro zone, United Kingdom, Japan), as, globally, economic agents will continue to hold this reserve currency even if the country’s monetary policy becomes highly expansionary. The situation is completely different for central banks in emerging countries. If they adopt a policy of vigorous money creation, the result will be a loss of confidence in their currency, large capital outflows and a significant depreciation of the exchange rate. Quantitative easing is an option for central bank s in large OECD countries, but not for central banks in emerging countries.