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Spillovers of U.S. monetary policy uncertainty on inflation targeting emerging economies

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  • Azad, Nahiyan Faisal
  • Serletis, Apostolos

Abstract

We investigate for spillovers from monetary policy uncertainty in the United States to the policy rates of seven inflation targeting emerging economies — Brazil, Chile, Colombia, Indonesia, Mexico, Poland, and South Africa. We use monthly data, with the start of the sample period being dictated by the start of the inflation targeting regime, and a multivariate GARCH-in-Mean vector autoregression (VAR), controlling for the traditional Taylor rule type variables. We also use a multivariate structural VAR and a different measure of U.S. monetary policy uncertainty, achieving identification by a combination of short-run and long-run restrictions. Our evidence shows that U.S. monetary policy uncertainty, irrespective of how it is measured, has negative effects on the macroeconomic and financial fundamentals of emerging economies.

Suggested Citation

  • Azad, Nahiyan Faisal & Serletis, Apostolos, 2022. "Spillovers of U.S. monetary policy uncertainty on inflation targeting emerging economies," Emerging Markets Review, Elsevier, vol. 51(PA).
    • Handle: RePEc:eee:ememar:v:51:y:2022:i:pa:s1566014121000832
    DOI: 10.1016/j.ememar.2021.100875
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    More about this item

    Keywords

    Emerging markets; Monetary policy uncertainty; GARCH-in-Mean VAR;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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