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Despite falling currencies, EMs now face disinflation

Most EM currencies have fallen significantly year-to-date, and some have seen large depreciations typically associated with high inflation. Yet, most EM central banks (EMCBs) seem relatively unfazed by this. We show that in a panel of 15 EMs, the combined disinflationary shocks of coronavirus-related GDP collapses and ultra-low oil prices outweigh the depreciation pass-through.

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