{ "title": "Impact of Fed Tapering Announcements on Emerging Markets", "publication": "IMF Working Papers, June 17, 2014", "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/31/impact-of-fed-tapering-announcements-on-emerging-markets-41655", "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/31/impact-of-fed-tapering-announcements-on-emerging-markets-41655", "overlayPath": "/en/publications/wp/issues/2016/12/31/impact-of-fed-tapering-announcements-on-emerging-markets-41655/index.md", "summary": "This paper analyzes market reactions to the 2013–14 Fed announcements relating to tapering of asset purchases and their relationship to macroeconomic fundamentals and country economic and financial structures.", "sections": [ { "heading": "Summary", "content": "- Paper analyzes market reactions to the 2013–14 Fed announcements relating to tapering of asset purchases and their relationship to macroeconomic fundamentals and country economic and financial structures.\n- Uses daily data on exchange rates, government bond yields, and stock prices for 21 emerging markets.\n- Finds evidence of markets differentiating across countries around volatile episodes.\n- Countries with stronger macroeconomic fundamentals, deeper financial markets, and a tighter macroprudential policy stance in the run-up to the tapering announcements experienced smaller currency depreciations and smaller increases in government bond yields.\n- There was less differentiation in the behavior of stock prices based on fundamentals." }, { "heading": "Methodology and Data", "content": "- Frequency: daily data.\n- Assets analyzed: exchange rates, government bond yields, stock prices.\n- Sample: 21 emerging markets.\n- Event window: 2013–14 Fed announcements relating to tapering of asset purchases." }, { "heading": "Key Findings", "content": "- Markets differentiated across countries during volatile episodes linked to tapering announcements.\n- Cross-country differentiation by asset type:\n - Exchange rates: Countries with stronger fundamentals, deeper financial markets, and tighter macroprudential stances experienced smaller currency depreciations.\n - Government bond yields: Those same country characteristics were associated with smaller increases in government bond yields.\n - Stock prices: Less differentiation in behavior based on fundamentals compared with exchange rates and bond yields." }, { "heading": "Policy Implications and Interpretations", "content": "- Strong macroeconomic fundamentals can mitigate currency depreciation and government bond yield spikes associated with external shocks such as Fed tapering announcements.\n- Deeper financial markets appear to reduce vulnerability to sudden shifts in global financial conditions.\n- Tighter macroprudential policy stances in the run-up to tapering episodes are associated with smaller adverse market reactions for currencies and sovereign yields.\n- Stock markets showed more homogeneous reactions across countries, suggesting equity valuations may be driven by factors beyond domestic fundamentals during global announcement episodes.\n\n---\n\n Content in this bundle\n\n- PDP-Working Paper\n - PDP-Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - PDP-Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/31/impact-of-fed-tapering-announcements-on-emerging-markets-41655" } ], "bullets": [ "[Markdown version](/en/publications/wp/issues/2016/12/31/impact-of-fed-tapering-announcements-on-emerging-markets-41655/index.md)", "[Structured JSON version](/en/publications/wp/issues/2016/12/31/impact-of-fed-tapering-announcements-on-emerging-markets-41655/index.json)", "[Bundle manifest](/en/publications/wp/issues/2016/12/31/impact-of-fed-tapering-announcements-on-emerging-markets-41655/bundle-manifest.json)", "Authors: Prachi Mishra, Kenji Moriyama, Papa M N'Diaye, Lam Nguyen", "Published: June 17, 2014", "Series: IMF Working Papers", "DOI: https://doi.org/10.5089/9781498361484.001", "Paper analyzes market reactions to the 2013–14 Fed announcements relating to tapering of asset purchases and their relationship to macroeconomic fundamentals and country economic and financial structures.", "Uses daily data on exchange rates, government bond yields, and stock prices for 21 emerging markets.", "Finds evidence of markets differentiating across countries around volatile episodes.", "Countries with stronger macroeconomic fundamentals, deeper financial markets, and a tighter macroprudential policy stance in the run-up to the tapering announcements experienced smaller currency depreciations and smaller increases in government bond yields.", "There was less differentiation in the behavior of stock prices based on fundamentals.", "Frequency: daily data.", "Assets analyzed: exchange rates, government bond yields, stock prices.", "Sample: 21 emerging markets.", "Event window: 2013–14 Fed announcements relating to tapering of asset purchases.", "Markets differentiated across countries during volatile episodes linked to tapering announcements.", "Cross-country differentiation by asset type:", "Strong macroeconomic fundamentals can mitigate currency depreciation and government bond yield spikes associated with external shocks such as Fed tapering announcements.", "Deeper financial markets appear to reduce vulnerability to sudden shifts in global financial conditions.", "Tighter macroprudential policy stances in the run-up to tapering episodes are associated with smaller adverse market reactions for currencies and sovereign yields.", "Stock markets showed more homogeneous reactions across countries, suggesting equity valuations may be driven by factors beyond domestic fundamentals during global announcement episodes.", "**PDP-Working Paper**" ], "related": [ { "title": "PDP-Working Paper", "role": "document", "sourceUrl": "https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp14109.pdf", "summary": { "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp14109.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp14109.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/wp/issues/2016/12/31/impact-of-fed-tapering-announcements-on-emerging-markets-41655/index.md", "json": "/en/publications/wp/issues/2016/12/31/impact-of-fed-tapering-announcements-on-emerging-markets-41655/index.json", "bundleManifest": "/en/publications/wp/issues/2016/12/31/impact-of-fed-tapering-announcements-on-emerging-markets-41655/bundle-manifest.json" }, "generatedAtUtc": "2026-09-17T15:57:09.501Z" }