Journal article

Publication year: 2016

Pages: 136-156

Journal: Journal of International Money and Finance

Volume number: 66

DOI Link: https://doi.org/10.1016/j.jimonfin.2015.12.010

Publisher: Elsevier

Abstract: 

Unconventional monetary policy such as Quantitative Easing (QE) is often considered to have considerable spillover effects on emerging market economies (EME). Aims at quantifying these effects so far mostly use high-frequency data around announcement dates, panels or VAR models. This paper proposes an alternative way to estimate the effects of QE on emerging markets that allows us to include macroeconomic, i.e. low-frequency, data together with announcement dates. A Qual VAR is estimated that integrates binary information of QE announcements with an otherwise standard VAR, including US and emerging market variables. A key advantage is that the model accounts for the endogeneity and forecastability of QE announcements. The model uncovers the Fed's latent, unobservable propensity for QE and generates impulse responses for EME variables to QE shocks. The results suggest that QE has significant effects on EME's financial conditions and plays a sizable role in explaining capital inflows, equity prices and exchange rates.

Harvard Citation style: Tillmann, P. (2016) Unconventional monetary policy and the spillovers to emerging markets, Journal of International Money and Finance, 66, pp. 136-156. https://doi.org/10.1016/j.jimonfin.2015.12.010

APA Citation style: Tillmann, P. (2016). Unconventional monetary policy and the spillovers to emerging markets. Journal of International Money and Finance. 66, 136-156. https://doi.org/10.1016/j.jimonfin.2015.12.010