In the latest issue of the Pimco’s Emerging Markets Watch , managing director Mohamed El-Erian looks at the impact on emerging markets of tighter monetary policy at a time financial conditions continue remain favourable. It’s a policy that would seem to be counter intuitive, he says.

“Central bakers in several emerging economies are having to explain to politicians why they are hiking interest rates in the midst of historically low inflation, unusually strong balance of payments, and a surge in capital inflows,” he says. “It is yet another indication of the ongoing process of structural transformation impacting the EM asset class. Specifi...