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Quantitative Tightening: Theory, Research, and Impact on Selected Emerging Market Economies

Author

Listed:
  • Hedvig Gal

    (Department of Economics, Corvinus University of Budapest, Budapest, Hungary)

  • Attila Juhasz

    (Treasury, World Bank, Washington, USA)

Abstract

This paper reflects on the experience of the Federal Reserve Bank (Fed) related to its policy of Quantitative Tightening (QT) and spillover effect on BRICS (Brazil, Russia, India, China, South-Africa) and other selected emerging market economies. We have chosen a sample of countries to examine the impact of the Fed’s QT on 10-year government bond yields, between the period of 2012-2022. The result proves that the highest correlation between the long-end yields of the United States and the selected EM has materialized during the first QT (QT1) operation by the Fed between 2017 and 2019 for Peru, Brazil, India and Hungary. We expect the same behaviour of long-end yields during the second QT (QT2) policy for the selected emerging market countries.

Suggested Citation

  • Hedvig Gal & Attila Juhasz, 2025. "Quantitative Tightening: Theory, Research, and Impact on Selected Emerging Market Economies," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 14(1), pages 163-181.
    • Handle: RePEc:cbk:journl:v:14:y:2025:i:1:p:163-181
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    Keywords

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    JEL classification:

    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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