Spillovers to Emerging Markets from US Economic News and Monetary Policy
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Summary:
When the U.S. economy sneezes, do emerging markets catch a cold? We show that economic news, and not just monetary policy, in the United States affects financial conditions in emerging markets. News about U.S. employment has the strongest effects, followed by news about economic activity and about vaccines during the COVID-19 pandemic. News about inflation has instead limited effects on average. A key channel of international transmission of U.S. economic news appears to be the risk perceptions or risk aversion of international investors. We also show that some of the transmission of U.S. economic news occurs independently of the U.S. monetary policy reaction. Finally, we expand on evidence that financial conditions in the U.S. and emerging markets respond differently to U.S. monetary policy surprises, depending on the reaction of US stock prices.
Series:
Working Paper No. 2023/107
Subject:
Asset prices Emerging and frontier financial markets Financial institutions Financial markets Financial services Market interest rates Monetary policy Monetary tightening Prices Sovereign bonds
Frequency:
regular
English
Publication Date:
May 19, 2023
ISBN/ISSN:
9798400234811/1018-5941
Stock No:
WPIEA2023107
Format:
Paper
Pages:
36
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