Capital Flows During Quantitative Easing and Aftermath: Experiences of Asian Countries

Donghyun Park, Arief Ramayandi and Kwanho Shin

No 409, ADB Economics Working Paper Series from Asian Development Bank

Abstract: A potentially important side effect of quantitative easing(QE) by the United States (US) Federal Reserve System (the Fed) is the expansion of capital flows into developing countries. As a result, there is widespread concern that QE tapering may trigger financial instability in those countries. The central objective of our paper is to empirically investigate this important issue by (1)examining the effect of QE on capital flows into developing Asia, and (2) analyzing the different factors which influence the effect of QE tapering on financial instability in order to identify the most significant factors. We find that QE1 had a bigger impact on capital flows than QE2 and QE3, and credit expansion and capital inflows magnified the effect of QE tapering on financial instability. While there is no evidence that macroprudential policies directly reduced the effect of QE tapering, they can nevertheless be useful preemptive measures.

Keywords: Asia; capital flows; financial stability; global financial crisis; macroprudential measures; quantitative easing; tapering (search for similar items in EconPapers)
JEL-codes: F32 F44 G01 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-09-01
New Economics Papers: this item is included in nep-ifn, nep-mon, nep-opm and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://www.adb.org/publications/capital-flows-dur ... nces-asian-countries Full text (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0409

Access Statistics for this paper

More papers in ADB Economics Working Paper Series from Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines. Contact information at EDIRC.
Bibliographic data for series maintained by Orlee Velarde ().