Unconventional Monetary Policies in Emerging Markets and Frontier Countries
IMF Working Papers, January 22, 2021
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- Unconventional Monetary Policies in Emerging Markets and Frontier Countries
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Bibliographic details
- Authors: Chiara Fratto, Brendan Harnoys Vannier, Borislava Mircheva, David de Ferranti, Hélène Poirson
- Published: January 22, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513567211.001
Overview
- The COVID-19 crisis induced an unprecedented launch of unconventional monetary policy through asset purchase programs (APPs) by emerging market and developing economies.
- The paper presents a new dataset of APP announcements and implementation from March until August 2020 for 27 emerging markets and 8 small advanced economies.
- APPs’ effects on bond yields, exchange rates, equities, and debt spreads are estimated using different methodologies.
Dataset and Methodology
- Coverage period: March until August 2020.
- Economies covered: 27 emerging markets and 8 small advanced economies.
- Outcomes analyzed: bond yields, exchange rates, equities, and debt spreads.
- Approaches: different estimation methodologies (specific methods not reproduced beyond description in source).
Key Findings
- APPs were successful in significantly reducing bond yields in EMDEs.
- The effects of APPs on bond yields were stronger than those of policy rate cuts.
- These results suggest that such unconventional monetary policy (UMP) could be important tools for EMDEs during financial market stress.
Policy Implications
- APPs can serve as effective instruments to lower bond yields in emerging market and developing economies during periods of market stress.
- Given that APP effects on yields exceeded those of policy rate cuts, APPs represent a complementary or alternative policy lever for EMDEs facing dysfunctional markets.
Content in this bundle
- 1. Stress in Financial Markets, January–July 2020