Context:
India to stay alert for ‘hot money’ after JP Morgan GBI-EM index inclusion
JP Morgan Government Bond Index-Emerging Markets (GBI-EM):
- What is it? – A benchmark index that tracks the performance of local-currency-denominated Sovereign Bonds issued by emerging market countries.
- Launched in – 2005
- Aim – To provide investors with a representative measure of the fixed income market within emerging market economies.
- Status of India – Index will include India from June 2024
- Significance – Inclusion in the list can attract foreign investors who use index-tracking funds and passive investment strategies.
- Challenge – Can result in volatile currency called the Hot Money
Hot Money:
- Hot Money – Quick flow of money in and out of markets potentially leading to market instability.
- Reason – Interest rate differences and anticipated exchange rate across nations.
Other associated terms:
- Helicopter Money – Unconventional monetary policy tool, which involves printing large sums of money and distributing it to the public, to stimulate the economy during a recession
Source: The Indian Express
Previous Year Question
Which one of the following statements correctly describes the meaning of legal tender money?
[UPSC Civil Service Exam – 2018 Prelims]
(a) The money which is tendered in courts of law to defray the fee of legal cases.
(b) The money which a creditor is under compulsion to accept in settlement of his claims.
(c) The bank money in the form of cheques, drafts, bills of exchange, etc.
(d) The metallic money in circulation in a country
Answer: (b)
