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U.S. Unconventional Monetary Policy and Transmission to Emerging Market Economies

Author

Listed:
  • Bowman, David

    () (Board of Governors of the Federal Reserve System (U.S.))

  • Londono, Juan M.

    () (Board of Governors of the Federal Reserve System (U.S.))

  • Sapriza, Horacio

    () (Board of Governors of the Federal Reserve System (U.S.))

Abstract

We investigate the effects of U.S. unconventional monetary policies on sovereign yields, foreign exchange rates, and stock prices in emerging market economies (EMEs), and we analyze how these effects depend on country-specifc characteristics. We find that, although EME asset prices, mainly those of sovereign bonds, responded strongly to unconventional monetary policy announcements, these responses were not outsized with respect to a model that takes into account each country's time-varying vulnerability to U.S. interest rates affected by monetary policy shocks.

Suggested Citation

  • Bowman, David & Londono, Juan M. & Sapriza, Horacio, 2014. "U.S. Unconventional Monetary Policy and Transmission to Emerging Market Economies," International Finance Discussion Papers 1109, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1109
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    References listed on IDEAS

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    1. Ben S. Bernanke & Kenneth N. Kuttner, 2005. "What Explains the Stock Market's Reaction to Federal Reserve Policy?," Journal of Finance, American Finance Association, vol. 60(3), pages 1221-1257, June.
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    Cited by:

    1. Liu, Zheng & Spiegel, Mark M. & Tai, Andrew, 2017. "Measuring the effects of dollar appreciation on Asia: A FAVAR approach," Journal of International Money and Finance, Elsevier, vol. 74(C), pages 353-370.
    2. Ahmed, Shaghil & Coulibaly, Brahima & Zlate, Andrei, 2015. "International Financial Spillovers to Emerging Market Economies: How Important Are Economic Fundamentals?," International Finance Discussion Papers 1135, Board of Governors of the Federal Reserve System (U.S.).
    3. Gustavo Adler & Carolina Osorio Buitron, 2017. "Tipping the Scale? The Workings of Monetary Policy through Trade," IMF Working Papers 17/142, International Monetary Fund.
    4. Ag�nor, Pierre-Richard & Gambacorta, Leonardo & Kharroubi, Enisse & Lombardo, Giovanni & Pereira da Silva, Luiz A., 2017. "The International Dimensions of Macroprudential Policies," CEPR Discussion Papers 12108, C.E.P.R. Discussion Papers.
    5. Kose,Ayhan & Lakatos,Csilla & Ohnsorge,Franziska Lieselotte & Stocker,Marc, 2017. "The global role of the U.S. economy: linkages, policies and spillovers," Policy Research Working Paper Series 7962, The World Bank.
    6. Joseph E. Gagnon & Tamim Bayoumi & Juan M. Londono & Christian Saborowski & Horacio Sapriza, 2017. "Direct and Spillover Effects of Unconventional Monetary and Exchange Rate Policies," Open Economies Review, Springer, vol. 28(2), pages 191-232, April.
    7. Belke, Ansgar & Dubova, Irina & Volz, Ulrich, 2017. "Bond Yield Spillovers from Major Advanced Economies to Emerging Asia," GLO Discussion Paper Series 41, Global Labor Organization (GLO).
    8. Georgiadis, Georgios & Gräb, Johannes, 2016. "Global financial market impact of the announcement of the ECB's asset purchase programme," Journal of Financial Stability, Elsevier, vol. 26(C), pages 257-265.
    9. Gustavo Adler & Carolina Osorio Buitron, 2017. "Policy Mix and the US Trade Balance," IMF Working Papers 17/204, International Monetary Fund.
    10. Lo Duca, Marco & Adam, Tomáš, 2017. "Modeling euro area bond yields using a time-varying factor model," Working Paper Series 2012, European Central Bank.
    11. Brainard, Lael, 2017. "Cross-Border Spillovers of Balance Sheet Normalization : a speech at "Normalizing Central Banks' Balance Sheets: What Is the New Normal?" a conference sponsored by Columbia University’s Scho," Speech 963, Board of Governors of the Federal Reserve System (U.S.).
    12. Ying Xu & Hai Anh La, 2017. "Spillovers of the United States’ Unconventional Monetary Policy to Emerging Asia: The Bank Lending Channel," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 53(12), pages 2744-2769, December.
    13. Banerjee, Ryan & Devereux, Michael B. & Lombardo, Giovanni, 2016. "Self-oriented monetary policy, global financial markets and excess volatility of international capital flows," Journal of International Money and Finance, Elsevier, vol. 68(C), pages 275-297.
    14. Njindan Iyke, Bernard, 2016. "Are Monetary Policy Disturbances Important in Ghana? Some Evidence from Agnostic Identification," MPRA Paper 70205, University Library of Munich, Germany.
    15. Hernández Vega Marco A., 2017. "Portfolio Investment Response to U.S. Monetary Policy Announcements: An Event," Working Papers 2017-02, Banco de México.
    16. MacDonald, Margaux, 2017. "International capital market frictions and spillovers from quantitative easing," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 135-156.
    17. repec:lje:journl:v:22:y:2017:i:sp:p:111-134 is not listed on IDEAS
    18. Punzi, Maria Teresa & Chantapacdepong, Pornpinun, 2017. "Spillover Effects of Unconventional Monetary Policy in Asia and the Pacific," ADBI Working Papers 630, Asian Development Bank Institute.
    19. Simon Gilchrist & Vivian Z. Yue & Egon Zakrajsek, 2018. "US Monetary Policy and International Bond Markets," Finance and Economics Discussion Series 2018-014, Board of Governors of the Federal Reserve System (U.S.).
    20. Lim, Jamus Jerome & Mohapatra, Sanket, 2016. "Quantitative easing and the post-crisis surge in financial flows to developing countries," Journal of International Money and Finance, Elsevier, vol. 68(C), pages 331-357.
    21. repec:eee:jimfin:v:78:y:2017:i:c:p:21-43 is not listed on IDEAS
    22. Dimitris Malliaropulos & Petros M. Migiakis, 2016. "The re-pricing of sovereign risks following the global financial crisis," Working Papers 210, Bank of Greece.
    23. Claudio Borio & Anna Zabai, 2016. "Unconventional monetary policies: a re-appraisal," BIS Working Papers 570, Bank for International Settlements.
    24. McInish, Thomas & Neely, Christopher J. & Planchon, Jade, 2017. "Unconventional monetary Policy and Long Yields During QE1: Learning from the Shorts," Working Papers 2017-31, Federal Reserve Bank of St. Louis.
    25. Prabu A, Edwin & Bhattacharyya, Indranil & Ray, Partha, 2016. "Is the stock market impervious to monetary policy announcements: Evidence from emerging India," International Review of Economics & Finance, Elsevier, vol. 46(C), pages 166-179.

    More about this item

    Keywords

    Unconventional monetary policy; emerging markets; large-scale asset purchase program; quantitative easing; Federal Reserve;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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