Effects of Emerging Market Asset Purchase Program Announcements on Financial Markets During the COVID-19 Pandemic

Author/Editor:

Can Sever ; Rohit Goel ; Dimitris Drakopoulos ; Evan Papageorgiou

Publication Date:

December 18, 2020

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

The COVID-19 pandemic led many emerging market central banks to adopt, for the first time, unconventional policies in the form of asset purchase programs. In this study, we analyze the effects of these announcements on domestic financial markets using both event studies and local projections methodology. We find that these asset purchase announcements lowered bond yields, did not lead to a depreciation of domestic currencies, and did not have much effect on equities. While the immediate effect of asset purchases appears positive, further consideration of the risks and longer-term effects of unconventional monetary policies is needed. We highlight the trade-offs involved with the implementation of these measures, and discuss their risks. This working paper adds to the debate on how asset purchase programs should be a regular part of the emerging market policy toolkit.

Series:

Working Paper No. 2020/292

Frequency:

regular

English

Publication Date:

December 18, 2020

ISBN/ISSN:

9781513564661/1018-5941

Stock No:

WPIEA2020292

Format:

Paper

Pages:

21

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