Spillovers from United States Monetary Policy on Emerging Markets: Different This Time?

By Jiaqian Chen, Tommaso Mancini Griffoli, Ratna Sahay

December 24, 2014

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Format: Chicago

Jiaqian Chen, Tommaso Mancini Griffoli, and Ratna Sahay. Spillovers from United States Monetary Policy on Emerging Markets: Different This Time?, (USA: International Monetary Fund, 2014) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The impact of monetary policy in large advanced countries on emerging market economies—dubbed spillovers—is hotly debated in global and national policy circles. When the U.S. resorted to unconventional monetary policy, spillovers on asset prices and capital flows were significant, though remained smaller in countries with better fundamentals. This was not because monetary policy shocks changed (in size, sign or impact on stance). In fact, the traditional signaling channel of monetary policy continued to play the leading role in transmitting shocks, relative to other channels, affecting longer-term bond yields. Instead, we find that larger spillovers stem more from structural factors, such as the use of new instruments (asset purchases). We obtain these results by developing a new methodology to extract, separate, and interpret U.S. monetary policy shocks.

Subject: Asset prices, Emerging and frontier financial markets, Financial markets, Financial sector policy and analysis, Financial services, Monetary policy, Prices, Spillovers, Unconventional monetary policies, Yield curve

Keywords: Asset price, Asset prices, Bond markets, Capital flows, Emerging and frontier financial markets, Emerging markets, Equity markets, Exchange rates, Financial crisis, Global, Market factor, Market surprise, Monetary policy announcement, Monetary policy announcements, Monetary policy shock, Monetary policy stance, Monetary policy surprise, Spillovers, Unconventional monetary policies, WP, Yield curve

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/240
Stock No:

WPIEA2014240
ISBN:

9781498380423
ISSN:

1018-5941

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