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Spillovers of U.S. monetary policy uncertainty on inflation targeting emerging economies

Nahiyan Faisal Azad () and Apostolos Serletis

Emerging Markets Review, 2022, vol. 51, issue PA

Abstract: We investigate for spillovers from monetary policy uncertainty in the United States to the policy rates of seven inflation targeting emerging economies — Brazil, Chile, Colombia, Indonesia, Mexico, Poland, and South Africa. We use monthly data, with the start of the sample period being dictated by the start of the inflation targeting regime, and a multivariate GARCH-in-Mean vector autoregression (VAR), controlling for the traditional Taylor rule type variables. We also use a multivariate structural VAR and a different measure of U.S. monetary policy uncertainty, achieving identification by a combination of short-run and long-run restrictions. Our evidence shows that U.S. monetary policy uncertainty, irrespective of how it is measured, has negative effects on the macroeconomic and financial fundamentals of emerging economies.

Keywords: Emerging markets; Monetary policy uncertainty; GARCH-in-Mean VAR (search for similar items in EconPapers)
JEL-codes: C32 E43 E52 E58 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1016/j.ememar.2021.100875

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