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Dealing with Quantitative Easing Spillovers in East Asia: The Role of Institutions and Macroprudential Policy

Author

Listed:
  • Saiki, Ayako

    (Asian Development Bank Institute)

  • Chantapacdepong, Pornpinun

    (Asian Development Bank Institute)

  • Volz, Ulrich

    (Asian Development Bank Institute)

Abstract

This paper explores the impact of advanced countries’ quantitative easing on emerging market economies (EMEs) and how macroprudential policy and good governance play a role in preventing potential financial vulnerabilities. We used confidential locational bank statistics data from the Bank for International Settlements to examine whether quantitative easing has caused an appreciation of EMEs’ currencies and how it has done so, and whether this has in turn boosted foreign-currency borrowing, thus making EMEs vulnerable to balance sheet and maturity mismatch problems. While focusing our analysis on East Asian economies, we compare them with Latin American economies, which were also major recipients of quantitative easing capital inflows. We found that government effectiveness plays an important role in curbing excessive borrowing when the exchange rate is overvalued.

Suggested Citation

  • Saiki, Ayako & Chantapacdepong, Pornpinun & Volz, Ulrich, 2016. "Dealing with Quantitative Easing Spillovers in East Asia: The Role of Institutions and Macroprudential Policy," ADBI Working Papers 604, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0604
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    References listed on IDEAS

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    Cited by:

    1. Ulrich Volz & Ansgar Belke & Irina Dubova, 2017. "Bond Yield Spillovers from Major Advanced Economies to Emerging Asia," Working Papers 203, Department of Economics, SOAS University of London, UK.
    2. Ulrich Volz, 2016. "Regional Financial Integration in East Asia against the Backdrop of Recent European Experiences," International Economic Journal, Taylor & Francis Journals, vol. 30(2), pages 272-293, June.

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    More about this item

    Keywords

    Quantitative easing; spillover effects; macroprudential policy; good governance; capital inflows; emerging market economies (EMEs); East Asia; Latin America;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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