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Taper Tantrums: Quantitative Easing, Its Aftermath, and Emerging Market Capital Flows
[Pricing the term structure with linear regressions]

Author

Listed:
  • Anusha Chari
  • Karlye Dilts Stedman
  • Christian Lundblad
  • Andrew Karolyi

Abstract

This paper examines the spillover effects of U.S. unconventional monetary policy (UMP) on emerging market capital flows and asset prices. Affine term structure model estimates show that U.S. monetary policy shocks, identified with high-frequency Treasury futures data, represent revisions to expected short-term yields and term premia, especially during the UMP period. The policy shocks exhibit sizable effects on U.S. holdings of emerging market assets. These effects disproportionately manifest through valuation changes versus physical flows, are more pronounced for equity relative to bond markets, and are asymmetric between the quantitative easing and tapering periods, with flows more important during the unwinding.

Suggested Citation

  • Anusha Chari & Karlye Dilts Stedman & Christian Lundblad & Andrew Karolyi, 2021. "Taper Tantrums: Quantitative Easing, Its Aftermath, and Emerging Market Capital Flows [Pricing the term structure with linear regressions]," The Review of Financial Studies, Society for Financial Studies, vol. 34(3), pages 1445-1508.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:3:p:1445-1508.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhaa044
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    More about this item

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G1 - Financial Economics - - General Financial Markets

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