Taper Tantrum and Emerging Equity Market Slumps

Estrada, Gemma; Park, Donghyun; Ramayandi, Arief

doi:10.1080/1540496x.2015.1105596

Cited by 10 publications

(4 citation statements)

References 13 publications

(16 reference statements)

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…For example, there is a literature examining developing country exposure to the 2013 taper tantrum, but no straightforward conclusions have emerged. Some articles focus on the role of capital flows, while others focus on 'fundamentals' such as current account balances and foreign exchange reserves (Avdjiev and Takáts, 2014;Eichengreen and Gupta, 2015;Estrada et al, 2016;Park et al, 2016;Shin, 2017). 'Fundamentals' such as healthy reserve positions can obviously help countries weather periods of heightened capital market volatility, and many middle-and high-income developing countries, including the so-called 'fragile five', were in a relatively good position by most fundamental measures in both 2013 and 2020.…”

Section: The Role Of Capital Market Opennessmentioning

confidence: 99%

Section: The Role Of Capital Market Opennessmentioning

confidence: 99%

See 1 more Smart Citation

Dollar Liquidity, Financial Vulnerability and Monetary Sovereignty

Jump,

Michell

2023

Development and Change

View full text Add to dashboard Cite

Periods of dollar‐led global monetary tightening generate negative effects in many lower‐ and middle‐income countries. The tightening cycle which commenced in early 2022 has exacerbated the financial dislocation experienced by countries including Zambia, Sri Lanka and Pakistan. How can policy makers protect their economies from such external shocks and foster a stable developmental environment? Some recent contributions argue that the capacity of countries to insulate domestic policy from global financial conditions depends upon ‘monetary sovereignty’. This contribution argues that this misrepresents the constraints to macroeconomic policy and development strategy. Monetary sovereignty, if narrowly defined, is necessary but not sufficient for domestic policy autonomy. Stronger definitions impose unrealistic requirements on debt denomination and exchange rate regimes. The authors argue that, outside of currency unions, the main policy constraints for developing countries are limited domestic productive capacity and integration into global trade and financial networks rather than monetary arrangements. The discussion is illustrated with an empirical examination of three recent episodes of global illiquidity and/or policy tightening: the 2013 taper tantrum, the March 2020 liquidity shock and the 2022 dollar tightening cycle. The authors find evidence that monetary sovereignty does not insulate a country from episodes of dollar illiquidity. While ‘fundamentals’ such as current account deficits and foreign exchange reserves provide limited power in identifying vulnerability, measures of financial depth and activity do appear related to vulnerability.

show abstract

Section: The Role Of Capital Market Opennessmentioning

confidence: 99%

Section: The Role Of Capital Market Opennessmentioning

confidence: 99%

Dollar Liquidity, Financial Vulnerability and Monetary Sovereignty

Jump,

Michell

2023

Development and Change

View full text Add to dashboard Cite

show abstract

“…Existing research on the drivers of financial spillovers, such as the studies of Aizenman et al ( 2014), Chen et al (2016), Rai and Suchanek (2014), Neely (2015), Estrada et al (2016), andFratzscher et al (2018), have used the event study approach to examine the effect of the announcement of both QE and tapering. Bauer and Neely (2014) also used the event study approach and Gaussian dynamic term structure models to investigate the relative importance of signalling and portfolio balance channels for international effects originating from the large-scale asset purchases in 2008 and 2009 by the US Federal Reserve (Fed).…”

Section: Literature Reviewmentioning

confidence: 99%

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

2023

View full text Add to dashboard Cite

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.

show abstract

“…Este nuevo proceso de endeudamiento genera inquietudes, no solo por sus efectos financieros, sino también por las implicancias para la estructura productiva, para la distribución del ingreso y por los compromisos financieros que genera y que pueden llegar a ser un condicionante en la etapa de reversión de dichos flujos. El episodio del llamado "taper tantrum" es un ejemplo histórico de los posibles efectos de las súbitas reversiones de flujos de capitales sobre la estabilidad financiera en países emergentes (Estrada, Park y Rayamandi, 2016).…”

Section: Introductionunclassified