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Taper Tantrum and Emerging Equity Market Slumps

Listed author(s):
  • Gemma B. Estrada
  • Donghyun Park
  • Arief Ramayandi

In the post-global financial crisis period, the central banks of the advanced economies pursued unconventional monetary policies, such as the United States (U.S.) Federal Reserve’s quantitative easing (QE). Those policies and their unwinding may significantly affect cross-border capital flows and thus destabilize the financial systems of emerging markets. For example, emerging markets experienced substantial financial instability during the taper tantrum triggered by U.S. Federal Reserve Chairman Ben Bernanke’s May 2013 announcement of the potential unwinding of QE. In this article, we examine the spillovers from the taper tantrum on emerging markets more rigorously by using econometric analysis to empirically assess the effect on equity markets in emerging markets. Our central finding that virtually all emerging-market equity markets were affected by the taper tantrum highlights the need for emerging-market authorities to remain vigilant about the effects of advanced-economy monetary policies on their financial stability.

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File URL: http://hdl.handle.net/10.1080/1540496X.2015.1105596
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Article provided by Taylor & Francis Journals in its journal Emerging Markets Finance and Trade.

Volume (Year): 52 (2016)
Issue (Month): 5 (May)
Pages: 1060-1071

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Handle: RePEc:taf:emfitr:v:52:y:2016:i:5:p:1060-1071
DOI: 10.1080/1540496X.2015.1105596
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  1. Park, Donghyun & Ramayandi, Arief & Shin, Kwanho, 2014. "Capital Flows During Quantitative Easing and Aftermath: Experiences of Asian Countries," ADB Economics Working Paper Series 409, Asian Development Bank.
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