Do Investor Differences Impact Monetary Policy Spillovers to Emerging Markets?

Ester Faia, Karen Lewis and Haonan Zhou

No 32986, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We re-examine monetary policy spillovers to Emerging Market Economies (EME) in the form of capital flow reversals, using sectoral-level securities holdings data for Euro Area investors. In response to a surprise monetary tightening, active investors such as investment funds re-balance their portfolios away from EME, while more passive, long term investors such as insurance funds and banks exhibit no significant reaction on average. For active investors, the reallocation out of EME appears stronger under synchronized monetary tightening between the Fed and the ECB. However, these investors may even inject more capital to EME securities when the monetary tightening surprises contain positive news about the Euro Area economy. Issuers' monetary-fiscal stability may explain the heterogeneous impact of these spillovers.

JEL-codes: E44 F32 F33 G15 (search for similar items in EconPapers)
Date: 2024-09
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mon and nep-opm
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