The Federal Reserve can't afford to overlook the effects of its policies on emerging economies because what happens in the rest of the world can have consequences for the U.S., said Christine Lagarde, managing director of the International Monetary Fund. "Very negative spillover effects on the emerging-market economies could very much backfire on other economies," she said. "So to assume that [the] domestic economy is totally isolated, that a country is an island, would not be the right approach."

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