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

Author Info

Listed author(s):
  • 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.

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File URL: http://www.federalreserve.gov/pubs/ifdp/2014/1109/ifdp1109.pdf
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Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 1109.

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Length: 44 pages
Date of creation: 23 Jun 2014
Handle: RePEc:fip:fedgif:1109
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Web page: http://www.federalreserve.gov/

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Order Information: Web: http://www.federalreserve.gov/pubs/ifdp/order.htm

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

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Find related papers by 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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  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, 06.
  2. Roberto Rigobon & Brian Sack, 2003. "Measuring The Reaction of Monetary Policy to the Stock Market," The Quarterly Journal of Economics, Oxford University Press, vol. 118(2), pages 639-669.
  3. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 215-287.
  4. Bekaert, Geert & Hoerova, Marie & Lo Duca, Marco, 2013. "Risk, uncertainty and monetary policy," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 771-788.
  5. Ahmed, Shaghil & Zlate, Andrei, 2014. "Capital flows to emerging market economies: A brave new world?," Journal of International Money and Finance, Elsevier, vol. 48(PB), pages 221-248.
  6. repec:pri:cepsud:237b%20shin is not listed on IDEAS
  7. Hausman, Joshua & Wongswan, Jon, 2011. "Global asset prices and FOMC announcements," Journal of International Money and Finance, Elsevier, vol. 30(3), pages 547-571, April.
  8. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
  9. Michiel De Pooter & Patrice Robitaille & Ian Walker & Michael Zdinak, 2014. "Are Long-Term Inflation Expectations Well Anchored in Brazil, Chile, and Mexico?," International Journal of Central Banking, International Journal of Central Banking, vol. 10(2), pages 337-400, June.
  10. Bruno, Valentina & Shin, Hyun Song, 2015. "Capital flows and the risk-taking channel of monetary policy," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 119-132.
  11. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2011. "The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy," NBER Working Papers 17555, National Bureau of Economic Research, Inc.
  12. Jessica James & Kristjan Kasikov, 2008. "Impact of economic data surprises on exchange rates in the inter-dealer market," Quantitative Finance, Taylor & Francis Journals, vol. 8(1), pages 5-15.
  13. Fratzscher, Marcel & Lo Duca, Marco & Straub, Roland, 2012. "A global monetary tsunami? On the spillovers of US Quantitative Easing," CEPR Discussion Papers 9195, C.E.P.R. Discussion Papers.
  14. Jonathan H. Wright, 2012. "What does Monetary Policy do to Long‐term Interest Rates at the Zero Lower Bound?," Economic Journal, Royal Economic Society, vol. 122(564), pages 447-466, November.
  15. Michael A. S. Joyce & Ana Lasaosa & Ibrahim Stevens & Matthew Tong, 2011. "The Financial Market Impact of Quantitative Easing in the United Kingdom," International Journal of Central Banking, International Journal of Central Banking, vol. 7(3), pages 113-161, September.
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