Report
There is clearly a close link between capital flows to (and from) emerging countries and long-term interest rates in "safe" OECD countries
We want to demonstrate the existence of the following mechanism: When capital flows out of (for example) emerging countries, the ir exchange rates obviously depreciate, but capital also returns to OECD countries; Capital outflows (for example) from emerging countries go hand-in-hand with a rise in risk aversion, and capital therefore return s to government bonds of OECD countries considered "safe" (United States, core euro-zone countries); The long-term interest rates on these countries’ government bonds therefore depend on the direction of capital flows, to or from emerging countries.
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Natixis
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Patrick Artus
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