A compendium of our previously-published EM “Bad Rules of Thumb” notes, all in one
place:
Bad Rule of Thumb #1 – Nominal interest rates are supposed to be close to nominal growth
rates in emerging economies.
Bad Rule of Thumb #2 – Price/income ratio levels are a good statistic for gauging the health
of EM housing markets.
Bad Rule of Thumb #3 – Narrow money M1 “drives” asset markets.
Bad Rule of Thumb #4 – PPP exchange rates tell us a lot about EM currency under- or
overvaluation.
Bad Rule of Thumb #5 – Currencies tend to appreciate in real terms as economies grow.
Bad Rule of Thumb #6 – Countries with low credit penetration rates perform better than
those with high credit penetration.
Bad Rule of Thumb #7 – Poor countries are “normally” net borrowers from rich countries.
Bad Rule of Thumb #8 – High consumption/GDP shares are a good thing.
Bad Rule of Thumb #9 – Pegging your exchange rate means “importing” foreign monetary
policy.
Bad Rule of Thumb #10 – Emerging economies are taking over developed manufacturing
capacity.