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International Spillovers of Monetary Policy: US Federal Reserve's Quantitative Easing and Bank of Japan's Quantitative and Qualitative Easing

Author

Listed:
  • Kawai, Masahiro

    (Asian Development Bank Institute)

Abstract

This paper assesses the impact of unconventional United States (US) and Japanese monetary policies on emerging economies, and explores policy coordination issues to promote macroeconomic and financial stability in developed and emerging economies. The paper first considers a theoretical framework that allows us to analyze the impact of one country's monetary policy on other economies. There are two important theoretical predictions. One is that the greater the positive impact of monetary policy easing on a country's real output, the less its beggar-thy-neighbor impact on other countries. The other is that news on future changes in monetary policy can affect exchange rates and stock prices today as financial markets are inherently forward looking. The paper then examines the impact of the US Fed's QE policy on emerging economies, including the introduction of QE, the expectation of its tapering, and the anticipation of an eventual hike in the interest rate. It also discusses the implications of "Abenomics," particularly qualitative and quantitative easing (QQE) by the Bank of Japan (BOJ), for Asian emerging economies. It finds that the impact of BOJ QQE has been positive and, in contrast to US QE1, has not created negative consequences for emerging economies. The paper finally explores policy implications for both developed and emerging economies and suggests policies to be adopted at the country, regional and global levels, emphasizing the importance of communication among central banks and with the market and the need to strengthen global financial safety nets.

Suggested Citation

  • Kawai, Masahiro, 2015. "International Spillovers of Monetary Policy: US Federal Reserve's Quantitative Easing and Bank of Japan's Quantitative and Qualitative Easing," ADBI Working Papers 512, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0512
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    File URL: http://www.adbi.org/files/2015.01.21.wp512.international.spillovers.monetary.policy.pdf
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    References listed on IDEAS

    as
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    Cited by:

    1. Georgiadis, Georgios & Grab, Johannes, 2015. "Global financial market impact of the announcement of the ECB's extended asset purchase programme," Globalization Institute Working Papers 232, Federal Reserve Bank of Dallas.

    More about this item

    Keywords

    monetary policy; quantitative and qualitative easing; monetary policy spillover and coordination; us federal reserve; bank of japan;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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