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Asymmetric spillovers in emerging market monetary policy

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  • Eterovic, Dalibor
  • Sweet, Cassandra
  • Eterovic, Nicolas

Abstract

Is the average impact of US short term rates on EM monetary policy independent of the direction of US monetary policy movement? Building on a variety of estimation techniques, we evaluate the relationship between US short term rates and EM monetary policy under alternative US monetary cycles. We rely on a panel of 21 countries with inflation targets and broadly flexible exchange rate regimes for the period between 2001 and 2019. Contrary to current literatures, we find that US monetary policy spillovers are larger in periods of rate reduction. The asymmetric impact of US rates cannot be explained by other drivers, such as income per capita, current account, fiscal debt and the direction of the exchange rate movement.

Suggested Citation

  • Eterovic, Dalibor & Sweet, Cassandra & Eterovic, Nicolas, 2022. "Asymmetric spillovers in emerging market monetary policy," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 650-662.
    • Handle: RePEc:eee:reveco:v:82:y:2022:i:c:p:650-662
    DOI: 10.1016/j.iref.2022.08.005
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    Cited by:

    1. Nicolas Eterovic & Dalibor Eterovic, 2022. "Stocks, Bonds and the US Dollar - Measuring Domestic and International Market Developments in an Emerging Market," Working Papers Central Bank of Chile 964, Central Bank of Chile.

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    More about this item

    Keywords

    Monetary spillovers; Monetary policy; Trilemma; Emerging markets; Asymmetries;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • 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
    • E - Macroeconomics and Monetary Economics
    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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