Reprint: Discussion of “monetary policy uncertainty and monetary policy surprises”

Swanson, Eric T.

doi:10.1016/j.jimonfin.2021.102402

Cited by 1 publication

(1 citation statement)

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“…Before the COVID-19 pandemic, there were many studies that were conducted to examine the spillover effects of the US unconventional monetary policy on emerging economies (Sugimoto and Matsuki 2019;Kenourgios and Ntaikou 2021;Kolasa and Wesołowski 2020). There are a number of research papers assessing the impact of a large assets purchasing program on the domestic macroeconomy and financial markets (Curdia and Woodford 2011;Ihrig et al 2018;Papadamou et al 2019;Lyonnet and Werner 2012;Swanson 2021).…”

Section: Literature Reviewmentioning

confidence: 99%

The Spillover Effects of US Unconventional Monetary Policy on Inflation and Non-Inflation Targeting Emerging Markets

2023

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This study employs the panel vector autoregressive (PVAR) model to examine the spillover effect of US unconventional monetary policy on inflation and non-inflation targeting emerging markets post credit crunch and during COVID-19 from 2000Q1 to 2020Q4. Unlike other analyses, this paper adds to the existing body of knowledge by employing a dummy variable to represent the United States’ quantitative easing. Other included control variables are equity prices, the federal reserve rate, the exchange rate, central bank assets and the short-term interest rate. This paper estimated two-panel VARs, Model one and Model two, for inflation and non-inflation targeting emerging markets, respectively. Model one consists of eight inflation-targeting markets, and Model two consists of four non-inflation-targeting countries. Other included control variables are equity prices, the federal reserve rate, the nominal effective exchange rate, and the central bank policy rate. According to the empirical results, the US unconventional monetary policy induces a surge in the exchange rate and a decrease in the central bank policy rate for both inflation and non-inflation targeting emerging markets. However, there was no significant impact on the equity prices. The empirical results are statistically significant, robust, and consistent with previous studies except for the response of equity prices. Unconventional monetary policy is effective in steering macroeconomic variables in developed economies. The monetary policymakers in emerging markets must also use the currency reserve to stabilise the macroeconomic variables in response to US unconventional monetary policy shocks.

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