A decision made by a central bank thousands of kilometres away can eventually show up in the price of imports, the value of a currency and the cost of borrowing in Zambia.
Interest rates are usually presented as domestic policy decisions.
The US Federal Reserve changes its policy rate to influence the American economy. The European Central Bank does the same for the euro area. But in an increasingly interconnected financial system, these decisions rarely remain within their own borders.
For emerging markets, changes in global interest rates can have very real consequences.
It starts with investors
International investors are constantly comparing returns.
When interest rates in advanced economies rise, government bonds and other assets in those markets can become more attractive relative to riskier emerging-market investments.
Some investors may therefore reduce their exposure to emerging markets and move funds into assets perceived as safer or offering better risk-adjusted returns.
The reverse can happen when global rates decline.
Lower returns in advanced economies can push investors to search for yield in emerging and frontier markets.
These movements can influence the availability and cost of foreign capital.
The currency channel
One of the most visible effects can appear in foreign-exchange markets.
If international investors reduce their holdings of local assets, demand for the local currency can weaken. Depreciation can follow.
For an economy that imports fuel, machinery, medicines, food or industrial inputs, this matters.
A weaker currency means that the same dollar-priced import costs more in local currency.
That can feed into domestic inflation.
Central banks may then face a difficult balancing act. Cutting interest rates could support economic activity, but doing so while the currency and inflation are under pressure may create additional risks.
Governments feel it too
The impact does not stop with private investors.
Emerging-market governments often rely on domestic and international borrowing to finance public expenditure and investment.
When global interest rates rise, international borrowing can become more expensive. Investors may also demand higher yields to compensate for the increased opportunity cost and perceived risk of holding emerging-market debt.
Foreign-currency debt creates another vulnerability.
If the local currency depreciates against the dollar, the domestic-currency cost of servicing dollar-denominated debt increases even if the amount owed in dollars has not changed.
This can place additional pressure on government budgets.
Why Zambia is exposed
Zambia provides a useful illustration of these transmission channels.
The country is integrated into global markets through trade, investment and external financing. Copper exports generate foreign exchange, while the economy also depends on imported fuel, machinery and other goods.
Global financial conditions therefore matter.
A change in the attractiveness of US or European assets can influence international investor appetite for emerging and frontier markets. Changes in commodity prices can simultaneously affect Zambia's export earnings and foreign-exchange position.
The result is that the impact of a global interest-rate shift is not necessarily straightforward.
A period of higher global rates may create pressure through financing costs and capital flows, while strong copper prices could provide an offset through higher export receipts.
Domestic policy and economic fundamentals matter as well.
Not every emerging market experiences the same shock
The phrase "emerging markets" can sometimes make very different economies sound identical.
They are not.
A country with substantial foreign-exchange reserves, strong export earnings and relatively manageable external debt may respond differently to a global rate increase than a country with large external financing needs and weak reserves.
The structure of the economy matters too.
Commodity exporters, for example, may benefit from rising prices for their major exports even as tighter global financial conditions create pressure elsewhere.
This is why global interest rates should be understood as one part of a larger transmission mechanism rather than a single cause of economic outcomes.
From Washington to Lusaka
The important point is that monetary policy has become increasingly global in its consequences.
A rate decision in Washington can influence international capital flows.
Capital flows can affect exchange rates.
Exchange-rate movements can influence import prices and inflation.
Global borrowing costs can affect government financing.
And these pressures can eventually feed into decisions made by businesses, households and policymakers in countries far from the original decision.
The chain is not always immediate, and it does not operate in exactly the same way everywhere.
But it helps explain why emerging-market economies pay close attention to decisions made by the world's major central banks.
For countries such as Zambia, understanding this connection is increasingly important.
The price of money is globalising, even when economic policy remains largely national.
