Massive stimulus measures by advanced economies may help shore up economic growth in the short term, but they have long-term negative impacts on emerging countries by denting exports and economic growth, a central bank report said Thursday.
Central banks in the U.S., the eurozone and Japan recently pledged to take fresh quantitative easing (QE) steps, spawning concerns that hot money would flow into emerging markets, sparking risks of asset bubbles and currency appreciation.
The Bank of Korea (BOK) report said that the quantitative easing is mostly leading export-dependent emerging countries to take soft monetary policies on concerns that a wider gap in cross-border interest rates will strengthen currencies and dent export growth.
The report said that a fall in short-term real interest rates in major economies would jack up inflation of emerging markets for two straight quarters.
"Following short-lived gains for two quarters, exports and the gross domestic product in emerging countries would fall afterwards for three to five quarters," it added.
The report came as a series of credit rating upgrades on South Korea and massive bond-buying programs by such central banks are luring more foreign capital flow to into Asia's fourth-largest economy, making the won appreciate more than 5 percent to the U.S. dollar so far this year.
On Oct. 1, Federal Reserve Chairman Ben Bernanke strongly defended the central bank's bond-buying program, saying that it is necessary to shore up a flagging economic recovery.
BOK Gov. Kim Choong-soo has repeatedly stressed the need to closely watch negative spillover impacts by such stimulus measures on emerging countries.
"Emerging economies should focus on beefing up their economic fundamentals to minimize negative effects of easing policies by advanced economies," the report said, adding that advanced economies should also take a timely exit strategy after pumping efforts to support their economies. (Yonhap)