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Have QE Programs Affected Capital Flows to Emerging Markets?: A Regional Analysis

In: International Spillovers of Monetary Policy

Author

Listed:
  • Claudia Ramírez

    (Banco de México)

  • Miriam González

    (Banco de México)

Abstract

In the aftermath of the 2008-2009 financial crisis, international capital flows to emerging markets increased substantially and have remained close to alltime highs, although with volatility. The most recent episode of capital inflows has taken place in the context of extremely accommodative monetary policies in advanced economies, characterized by exceptionally low interest rates and the implementation of unconventional monetary policies, which have generated additional reductions in long-term interest rates. This paper presents an empirical analysis of the drivers of international capital flows to emerging economies in the postcrisis period. Using the pull versus push framework, we estimate a panel for 15 emerging economies, and we find that external factors remain the main determinants of capital flows. Within external factors, QE programs implemented in the United States, measured both directly through treasuries purchases and indirectly through the long-term interest rate, had an impact on capital flows. However, the effect was different across regions, playing an important role in Asia and Latin America. Finally, we found that risk aversion seems to be an important driver of these flows for all regions.

Suggested Citation

  • Claudia Ramírez & Miriam González, 2017. "Have QE Programs Affected Capital Flows to Emerging Markets?: A Regional Analysis," Investigación Conjunta-Joint Research, in: Ángel Estrada García & Alberto Ortiz Bolaños (ed.), International Spillovers of Monetary Policy, edition 1, chapter 6, pages 155-188, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
    • Handle: RePEc:cml:incocp:3-06
    Note: Joint Research Program XX Meeting of the Central Bank Researchers Network
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    References listed on IDEAS

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    1. Arias, Fernando & Parra-Amado, Daniel & Garrido, Daira, 2013. "¿Responden los diferentes tipos de flujos de capitales a los mismos fundamentos y en el mismo grado? : evidencia reciente para países emergentes," Chapters, in: Rincón-Castro, Hernán & Velasco, Andrés M. (ed.), Flujos de capitales, choques externos y respuestas de política en países emergentes, chapter 2, pages 53-81, Banco de la Republica de Colombia.
    2. Broner, Fernando & Didier, Tatiana & Erce, Aitor & Schmukler, Sergio L., 2013. "Gross capital flows: Dynamics and crises," Journal of Monetary Economics, Elsevier, vol. 60(1), pages 113-133.
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    Cited by:

    1. Carrillo Julio A. & Elizondo Rocío & Rodríguez-Pérez Cid Alonso & Roldán-Peña Jessica, 2018. "What Determines the Neutral Rate of Interest in an Emerging Economy?," Working Papers 2018-22, Banco de México.

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    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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