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Direct and Spillover Effects of Unconventional Monetary and Exchange Rate Policies

Author

Listed:
  • Mr. Joseph E. Gagnon
  • Mr. Tamim Bayoumi
  • Juan M. Londono
  • Christian Saborowski
  • Horacio Sapriza

Abstract

This paper explores the effects of unconventional monetary and exchange rate policies. We find that official foreign asset purchases have large effects on current accounts that diminish as capital mobility rises and spill over to financially integrated countries. There is an additional effect through the stock of central bank assets. Domestic asset purchases have an effect on current accounts only when capital mobility is low. We also find that rising US bond yields drive foreign yields, stock prices and depreciations, but less so on days of policy announcements. We develop a theoretical model that is broadly consistent with our results.

Suggested Citation

  • Mr. Joseph E. Gagnon & Mr. Tamim Bayoumi & Juan M. Londono & Christian Saborowski & Horacio Sapriza, 2017. "Direct and Spillover Effects of Unconventional Monetary and Exchange Rate Policies," IMF Working Papers 2017/056, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2017/056
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    Cited by:

    1. Mariam Camarero & Josep Lluís Carrion‐i‐Silvestre & Cecilio Tamarit, 2021. "External imbalances from a GVAR perspective," The World Economy, Wiley Blackwell, vol. 44(11), pages 3202-3245, November.
    2. Guo, Junjie & Li, Xuelian & Zhang, Weiran & Li, Youshu, 2024. "Monetary policy spillovers among five systemic economies: Evidence from the time and frequency domains," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    3. Gustavo Adler & Carolina Osorio Buitron, 2020. "Tipping the scale? The workings of monetary policy through trade," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 744-759, August.
    4. Jon Frost & Patty Duijm & Clemens Bonner & Leo Haan & Jakob Haan, 2019. "International Lending of Dutch Insurers and Pension Funds: the Impact of ECB Monetary Policy and Prudential Policies in the Host Country," Open Economies Review, Springer, vol. 30(3), pages 445-456, July.
    5. Stephanos Papadamou & Nikolaos A. Kyriazis & Panayiotis G. Tzeremes, 2019. "Spillover Effects of US QE and QE Tapering on African and Middle Eastern Stock Indices," JRFM, MDPI, vol. 12(2), pages 1-20, April.
    6. Willem THORBECKE, 2016. "Investigating the Effect of U.S. Monetary Policy Normalization on the ASEAN-4 Economies," Discussion papers 16070, Research Institute of Economy, Trade and Industry (RIETI).
    7. Enzo Rossi & Vincent Wolff, 2020. "Spillovers to exchange rates from monetary and macroeconomic communications events," Working Papers 2020-18, Swiss National Bank.
    8. Rafael Cezar & Maéva Silvestrini, 2021. "Impact of the ECB Quantitative Easing on the International Investment Position," International Economics, CEPII research center, issue 165, pages 241-263.
    9. Joseph E. Gagnon, 2017. "Do Governments Drive Global Trade Imbalances?," Working Paper Series WP17-15, Peterson Institute for International Economics.
    10. Simon Gilchrist & Vivian Yue & Egon Zakrajšek, 2019. "U.S. Monetary Policy and International Bond Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(S1), pages 127-161, December.
    11. Jon Frost & Patty Duijm & Clemens Bonner & Leo Haan & Jakob Haan, 2019. "International Lending of Dutch Insurers and Pension Funds: the Impact of ECB Monetary Policy and Prudential Policies in the Host Country," Open Economies Review, Springer, vol. 30(3), pages 445-456, July.
    12. Stephanie E. Curcuru & Steven B. Kamin & Canlin Li & Marius del Giudice Rodriguez, 2018. "International Spillovers of Monetary Policy : Conventional Policy vs. Quantitative Easing," International Finance Discussion Papers 1234, Board of Governors of the Federal Reserve System (U.S.).
    13. Margaux MacDonald & Michał Ksawery Popiel, 2020. "Unconventional Monetary Policy in a Small Open Economy," Open Economies Review, Springer, vol. 31(5), pages 1061-1115, November.
    14. Stephanos Papadamou & Νikolaos A. Kyriazis & Panayiotis G. Tzeremes, 2020. "US non-linear causal effects on global equity indices in Normal times versus unconventional eras," International Economics and Economic Policy, Springer, vol. 17(2), pages 381-407, May.
    15. Cristiana Fiorelli & Alfredo Cartone & Matteo Foglia, 2021. "Shadow rates and spillovers across the Eurozone: a spatial dynamic panel model," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(1), pages 223-245, February.
    16. Rohit, Abhishek Kumar & Dash, Pradyumna, 2019. "Dynamics of monetary policy spillover: The role of exchange rate regimes," Economic Modelling, Elsevier, vol. 77(C), pages 276-288.
    17. Domenico Lombardi & Pierre Siklos & Samantha St. Amand, 2018. "A Survey Of The International Evidence And Lessons Learned About Unconventional Monetary Policies: Is A ‘New Normal’ In Our Future?," Journal of Economic Surveys, Wiley Blackwell, vol. 32(5), pages 1229-1256, December.
    18. Chinn, Menzie D. & Ito, Hiro, 2022. "A Requiem for “Blame It on Beijing” interpreting rotating global current account surpluses," Journal of International Money and Finance, Elsevier, vol. 121(C).
    19. Saba Ndayezhin Danladi, 2022. "Spillover Effects of US Monetary Policy and Macreconomic Conditions in Nigeria: Evidence from Time-Varying Parameter Structural Vector Autoregression (TVP-SVAR)," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 101-120.
    20. Mészáros Mercédesz & Kiss Gábor Dávid, 2020. "Spillover effects of unconventional monetary policy on capital markets in the shadow of the Eurozone: A sample of non-Eurozone countries," Review of Economic Perspectives, Sciendo, vol. 20(2), pages 171-195, June.

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