Impact of Fed Tapering Announcements on Emerging Markets

Prachi Mishra, Kenji Moriyama, Papa N'Diaye and Lam Nguyen

No 2014/109, IMF Working Papers from International Monetary Fund

Abstract: 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. The study uses daily data on exchange rates, government bond yields, and stock prices for 21 emerging markets. It 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. At the same time, there was less differentiation in the behavior of stock prices based on fundamentals.

Keywords: WP; exchange rate; bank credit; government bond; monetary policy; real GDP; emerging markets; tapering; Fed policy announcements; vulnerability; market reaction; Fed monetary policy; exchange rate depreciation; New York Fed survey; market participant; Bond yields; Exchange rates; Capital flows; Financial integration; Stock markets; Global; Africa (search for similar items in EconPapers)
Pages: 34
Date: 2014-06-17
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Citations: View citations in EconPapers (95)

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