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Transmitting global liquidity to East Asia: policy rates, bond yields, currencies and dollar credit

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  • Dong He
  • Robert N McCauley

Abstract

We review extant work on the transmission of monetary policy, both conventional and unconventional, of the major advanced economies to East Asia through monetary policy reactions, integrated bond markets and induced currency appreciation. We present new results on the growth of foreign currency credit, especially US dollar credit, as a transmission mechanism. Restrained growth of dollar credit in Korea contrasts with very rapid growth on the Chinese mainland and in Hong Kong SAR.

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Bibliographic Info

Paper provided by Bank for International Settlements in its series BIS Working Papers with number 431.

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Length: 38 pages
Date of creation: Oct 2013
Date of revision:
Handle: RePEc:bis:biswps:431

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Keywords: global liquidity; Taylor rule; monetary policy; bond markets; exchange rates; foreign currency debt; dollarisation; macroprudential policy; capital controls;

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References

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  1. Ma, Guonan & McCauley, Robert N., 2013. "Is China or India more financially open?," Journal of International Money and Finance, Elsevier, vol. 39(C), pages 6-27.
  2. Blaise Gadanecz & Kostas Tsatsaronis & Yener Altunbasb, 2012. "Spoilt and Lazy: The Impact of State Support on Bank Behavior in the International Loan Market," International Journal of Central Banking, International Journal of Central Banking, vol. 8(4), pages 121-173, December.
  3. Robert N McCauley & Jenz Zukunft, 2008. "Asian banks and the international interbank market," BIS Quarterly Review, Bank for International Settlements, June.
  4. Brzoza-Brzezina, Michał & Chmielewski, Tomasz & Niedźwiedzińska, Joanna, 2007. "Substitution between domestic and foreign currency loans in Central Europe. Do central banks matter?," MPRA Paper 6759, University Library of Munich, Germany.
  5. Stefan Avdjiev & Robert McCauley & Patrick McGuire, 2012. "Rapid credit growth and international credit: Challenges for Asia," BIS Working Papers 377, Bank for International Settlements.
  6. Naohiko Baba & Ilhyock Shim, 2010. "Policy responses to dislocations in the FX swap market: the experience of Korea," BIS Quarterly Review, Bank for International Settlements, June.
  7. Robert N McCauley & Kazuo Ueda, 2009. "Government debt management at low interest rates," BIS Quarterly Review, Bank for International Settlements, June.
  8. Qianying Chen & Andrew Filardo & Dong He & Feng Zhu, 2012. "International spillovers of central bank balance sheet policies," BIS Papers chapters, in: Bank for International Settlements (ed.), Are central bank balance sheets in Asia too large?, volume 66, pages 220-264 Bank for International Settlements.
  9. Victor Pontines & Reza Siregar, 2012. "Exchange Rate Appreciation, Capital Flows and Excess Liquidity: Adjustment and Effectiveness of Policy Responses," Research Studies, South East Asian Central Banks (SEACEN) Research and Training Centre, number rp87, June.
  10. Dong He & Robert N McCauley, 2012. "Eurodollar banking and currency internationalisation," BIS Quarterly Review, Bank for International Settlements, June.
  11. Jack Ree & Kyoungsoo Yoon & Hail Park, 2012. "FX Funding Risks and Exchange Rate Volatility–Korea’s Case," IMF Working Papers 12/268, International Monetary Fund.
  12. Michael D. Bauer & Christopher J. Neely, 2012. "International channels of the Fed’s unconventional monetary policy," Working Papers 2012-028, Federal Reserve Bank of St. Louis.
  13. Stefan Afdjiev & Zsolt Kuti & Elod Takáts, 2012. "The euro area crisis and cross-border bank lending to emerging markets," BIS Quarterly Review, Bank for International Settlements, December.
  14. Fratzscher, Marcel & Lo Duca, Marco & Straub, Roland, 2012. "A global monetary tsunami? On the spillovers of US Quantitative Easing," CEPR Discussion Papers 9195, C.E.P.R. Discussion Papers.
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Cited by:
  1. Philip Lane, 2013. "International Capital Flows and Domestic Financial Conditions: Lessons for Emerging Asia," The Institute for International Integration Studies Discussion Paper Series iiisdp438, IIIS.
  2. Burns, Andrew & Kida, Mizuho & Lim, Jamus Jerome & Mohapatra, Sanket & Stocker, Marc, 2014. "Unconventional monetary policy normalization in high-income countries : implications for emerging market capital flows and crisis risks," Policy Research Working Paper Series 6830, The World Bank.
  3. Charles R. Bean, 2013. "Panel remarks: global aspects of unconventional monetary policies," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City.

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