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The Ghanaian cedi has lost more than 30% against the US dollar over the past year and the sell-off in the currency has escalated since the beginning of the year as the Ghanaian markets have been hit by the same turmoil we have seen in other Emerging Markets.
Yesterday I wrote a short blog post praising Colombian central bank governor Jose Dario Uribe for not fighting ten weakening of the Colombian peso. This post is a follow-up post. It is slightly less positive about the performance of the Colombian central bank, but I also give some policy advise (for free!) to Uribe and his colleagues.
The turmoil in the Emerging Markets currencies markets continues. Most EM central bankers seem to be very scared by the continued sell-off in Emerging Markets and central banks around the world have moved to hike interest rates and have intervened to curb the weakening of the Emerging Markets sell-off. This means that most EM central banks effectively are tightening monetary policy in response to a negative external demand shock. This is hardly wise in my view.
This week has brought more turmoil in the global Emerging Markets and this has caused a number of EM central banks to move to hike interest rates to "defend" their currencies (despite most Emerging Markets today officially have floating exchange rate regimes). Most notable the the Turkish central bank on Tuesday in a desperate move hiked its key policy aggressively. So far the aggressive actions from EM central banks around the world have done little to calm nerves in the global markets.
I have an up-ed in today's edition of UK's City AM on the risk of major monetary policy mistakes - a repeat of the 1997 Asian crisis - in Emerging Markets in response to the recent currency sell-off across the EM universe.
This is my hero George Selgin:
This is what I just told Ambrose Evans-Pritchard at the Telegraph:
Emerging Markets are once again back in the headlines in the global financial media – from Turkey to Argentina market volatility has spiked from the beginning of the year.