The Effect of Fed�s Future Policy Expectations on Country Shares in Emerging Market Portfolio Flows

Zelal Aktas, Yasemin Erduman and Neslihan Kaya Eksi
Authors registered in the RePEc Author Service: Yasemin Barlas

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: We analyze how changes in market expectations about the Federal Reserve�s future monetary policy stance affect an emerging country�s share in total portfolio flows to emerging markets. We estimate a seemingly unrelated regression model for a panel of 19 emerging countries, using monthly data from January 2010 to October 2017. Our findings suggest that the effect of Fed�s policy expectations on the country share is asymmetric. The expectations of Fed�s monetary policy is found to reduce an emerging country�s share in total emerging market portfolio flows when expectations imply a policy tightening, while easing expectations do not have a significant effect on the share. A country with stronger financial conditions and safer business environment for international investors tend to downsize the negative effect of Fed�s policy tightening on its share in total portfolio flows, with respect to its counterparts.

Keywords: Fed expectations; Capital flows; Emerging markets; Panel regression (search for similar items in EconPapers)
JEL-codes: E43 F32 F41 G11 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1809

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