Rapid Federal Reserve interest rate increases last year and earlier this year have not, at least so far, triggered financial crises in emerging markets and developing economies—in stark contrast to spillovers from U.S. interest rate hikes in the 1980s and 1990s, notes a paper to be discussed at the Brookings Papers on Economic Activity (BPEA) conference on September 28. The reason, according to the paper, “Global Transmission of Fed Hikes: The Role of Policy Credibility and Balance Sheets,” is that many emerging market countries have strengthened the credibility of their monetary policies; reduced the foreign debt of their non-financial corporations, governments, and household; and made sure their banks protected their balance sheets from a steep drop in the value of local currencies. […]