Financial crisis, US unconventional monetary policy and international spillovers

Qianying Chen (), Andrew Filardo (), Dong He and Feng Zhu

No 494, BIS Working Papers from Bank for International Settlements

Abstract: We study the impact of US quantitative easing (QE) on both the emerging and advanced economies, estimating a global vector error correction model (GVECM). We focus on the effects of reductions in the US term and corporate spreads. The estimated effects of QE are sizeable and vary across economies. First, we find the QE impact from reducing the US corporate spread to be more important than that from lowering the US term spread, consistent with Blinder's (2012) argument. Second, counterfactual exercises suggest that US QE measures, especially the cumulative effects of successive QE measures starting with the sizeable impact of the early actions, countered forces that could have led to episodes of prolonged recession and deflation in the advanced economies. Third, the estimated effects on emerging economies are diverse but generally larger than those found for the United States and other advanced economies. The estimates suggest that US monetary policy spillovers contributed to overheating in Brazil, China and some other emerging economies in 2010 and 2011, but supported their respective recoveries in 2009 and 2012. These heterogeneous effects point to unevenly distributed benefits and costs of monetary policy spillovers.

Keywords: emerging economies; financial crisis; global VAR; international monetary policy spillovers; quantitative easing; unconventional monetary policy (search for similar items in EconPapers)
Pages: 31 pages
Date: 2015-03
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-mon
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Citations: View citations in EconPapers (49)

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Related works:
Journal Article: Financial crisis, US unconventional monetary policy and international spillovers (2016)
Working Paper: Financial Crisis, US Unconventional Monetary Policy and International Spillovers (2015)
Working Paper: Financial Crisis, Unconventional Monetary Policy and International Spillovers (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:494

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