U.S. unconventional monetary policy and transmission to emerging market economies

Bowman, David; Londoño, Juan M.; Sapriza, Horacio

doi:10.1016/j.jimonfin.2015.02.016

Cited by 234 publications

(81 citation statements)

References 7 publications

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“…Because conventional monetary policy, embodied in the short-term interest rate, was pinned at the zero lower bound throughout our sample, we infer that our results reflect the effects of UMPs, including, but not limited to, QE. We focus on the cross-border effects of UMP in the United States, as it is the largest economy in the world and its financial markets have an outsized effect on other countries Bui 2010, andBowman, Londono, andSapriza 2015). Also, the United States was the first country to implement UMP in the context of the Global Financial Crisis.…”

Section: Financial Market Effects Of Us Unconventional Monetary Policmentioning

confidence: 99%

“…where C i are country-specific variables, each considered in a separate regression to avoid potential collinearity (Hausman andWongswan, 2011 andBowman, Londono, andSapriza, 2015). We consider variables that characterize each country's degree of capital mobility, depth of the financial system, their exchange rate regime, sovereign risk, and trade integration with the United States.…”

Section: B Relating Financial Spillovers To Country Characteristicsmentioning

confidence: 99%

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Unconventional Monetary and Exchange Rate Policies

Gagnon

Bayoumi²,

Londoño

et al. 2017

Int. finance discuss. pap.

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This paper explores the direct effects and spillovers of unconventional monetary and exchange rate policies. We find that official purchases of foreign assets have a large positive effect on a country's current account that diminishes considerably as capital mobility rises. There is an important additional effect through the lagged stock of official assets. Official purchases of domestic assets, or quantitative easing (QE), appear to have no significant effect on a country's current account when capital mobility is high, but there is a modest positive impact when capital mobility is low. The effects of purchases of foreign assets spill over to other countries in proportion to their degree of international financial integration. We also find that increases in US bond yields are associated with increases in foreign bond yields and in stock prices, as well as with depreciations of foreign currencies, but that all of these effects are smaller on days of US unconventional monetary policy announcements. We develop a theoretical model that is broadly consistent with our empirical results and that highlights the potential usefulness of domestic unconventional policies as responses to the effects of foreign policies of a similar type.JEL Classification: F36, F42.

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Section: Financial Market Effects Of Us Unconventional Monetary Policmentioning

confidence: 99%

Section: B Relating Financial Spillovers To Country Characteristicsmentioning

confidence: 99%

Unconventional Monetary and Exchange Rate Policies

Gagnon

Bayoumi²,

Londoño

et al. 2017

Int. finance discuss. pap.

Self Cite

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“…Bowman, Londono and Sapriza (2015) use the identificationthrough-heteroskdasticity methods of Rigobon (2003) and Wright (2012) to identify US monetary policy shocks on sovereign bond yields, USD foreign exchange rates and stock prices. They employ a daily VAR(1) with data from January 2006 to December 2013 from 17 emerging market economies.…”

Section: Us Treasury Housing and Corporate Bondsmentioning

confidence: 99%

An Analysis of the Literature on International Unconventional Monetary Policy

Bhattarai

Neely

2016

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This paper reviews and critically evaluates the empirical literature on the effects of U.S. unconventional monetary policy on both financial markets and the real economy. In order to understand how such policies could work, we also briefly review the literature on the theory of such policies. We show that event studies provide very strong evidence that U.S. unconventional policy announcements have strongly influenced international bond yields, exchange rates, and equity prices in the desired manner. In addition, such studies indicate that such policies curtailed market perceptions of extreme events. Calibrated modeling and vector autoregressive (VAR) exercises strongly suggest that these policies significantly improved macroeconomic outcomes, raising U.S. GDP and CPI, through these changes in asset prices. Both event studies and VARs imply positive international spillovers of such policies.

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“…These asset purchase programs are the main components of the so-called unconventional monetary policy adopted by the US Federal Reserve, when compared to traditional "interest-rate" policies. While the positive effect of this unconventional monetary policy on the recovery of the post-GFC US economy is generally agreed upon, a major point of debate and, to a certain extent, concern are its cross-border spillover effects on the rest of the world, and especially emerging market economies (Chen, Mancini-Griffoli, and Sahay 2014;Lim, Mohapatra, and Stocker 2014;Bowman, Londono, and Sapriza 2015;Morais, Paydro, and Ruiz 2015).…”

Section: Introductionmentioning

confidence: 99%

“…These conceptualized channels range from the exchange rate, to exports, financial markets, and monetary policy response (Bruno and Shinn 2003;Caruana 2013;Kawai 2015). Empirically, spillover effects are established on (i) prices, such as the exchange rate and interest rates (both short-term and long-term); and (ii) quantities, such as exports and capital flows (Hausman and Wongswan 2011;He and McCaulay 2013;Wright 2014;Bowman, Londono, and Sapriza 2015). This paper examines spillover effects on capital flows, specifically bank flows.…”

Section: Introductionmentioning

confidence: 99%

Spillovers of the United States’ Unconventional Monetary Policy to Emerging Asia: The Bank Lending Channel

2017

Emerging Markets Finance and Trade

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Working papers are subject to formal revision and correction before they are finalized and considered published.Asian Development Bank Institute Kasumigaseki Building, 8th Floor 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, JapanTel:+81-3-3593-5500 Fax:+81-3-3593-5571 URL:www.adbi.org E-mail: info@adbi.org © 2016 Asian Development Bank Institute ADBI Working Paper 619 Xu and La AbstractThis paper assesses the spillover effects of the United States' unconventional monetary policy (i.e., quantitative easing programs adopted during 2008-2014) on the Asian credit market. With a focus on cross-border bank lending, we employed firm-level loan data with regard to the syndicated loan market and measured the international bank lending channel through changes in United States dollar-denominated loans extended to Asian borrowers. We found that the growth of dollar credit in Asia increased substantially in response to quantitative easing in the United States financial market. The results of this study confirm the existence of the bank lending channel in Asia and emphasize the role of credit flows in transmitting financial conditions. The paper also provides new evidence of cross-border liquidity spillover in the syndicated loan market. We found that the overall spillover effect was large but differed significantly in Asia by types of borrowing firms, financing purposes, and loan terms at different stages of the quantitative easing programs. The paper concludes with a discussion of relevant policy implications for the region.

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U.S. unconventional monetary policy and transmission to emerging market economies

Cited by 234 publications

References 7 publications

Unconventional Monetary and Exchange Rate Policies

Unconventional Monetary and Exchange Rate Policies

An Analysis of the Literature on International Unconventional Monetary Policy

Spillovers of the United States’ Unconventional Monetary Policy to Emerging Asia: The Bank Lending Channel

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