Working paper/research report

Publication year: 2016

URL: https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232016-014%20_PeterTill.pdf

Title of series: Global Research Unit Working Paper

Number in series: 2016-014

Abstract: 

When in 2013 the Federal Reserve started to discuss unwinding its asset purchases and exiting unconventional monetary policy (”tapering talk”), mar- kets adjusted expectations and asset prices dropped sharply, in particular in emerging markets.  In this paper we quantify the effect of the tapering talk on emerging financial markets.  We use the entire stream of tapering-related messages sent on Twitter.com, the social media network, to build a series of market participants’ beliefs of an early tapering.  This series is then included in  a  VAR  system,  in  which  a  tapering  belief  shock  is  identified  using  sign restrictions.  We find that the tapering shock has significant effects on emerg- ing financial market and explains almost the entire dynamics of bond prices, stock  prices,  exchange  rates  and  CDS-spreads  during  the  ”taper  tantrum”. The results remain robust if we exclude retweets and control for major policy events.

Harvard Citation style: Tillmann, P. (2016) Tapering Talk on Twitter and the Transmission to Emerging Economies. (Global Research Unit Working Paper, 2016-014). Hong Kong: City University of Hong Kong. https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232016-014%20_PeterTill.pdf

APA Citation style: Tillmann, P. (2016). Tapering Talk on Twitter and the Transmission to Emerging Economies. (Global Research Unit Working Paper, 2016-014). City University of Hong Kong. https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232016-014%20_PeterTill.pdf