Quantitative easing and related capital flows into Brazil: Measuring its effects and transmission channels through a rigorous counterfactual evaluation

João Barroso, Luiz Awazu Pereira da Silva () and Adriana Soares Sales

Journal of International Money and Finance, 2016, vol. 67, issue C, 102-122

Abstract: We show that unconventional monetary policy in the United States appears to influence capital inflows to Brazil and, through this channel, its overall economic outlook and financial stability. In particular, quantitative easing leads to capital inflows, exchange rate appreciation, stock market price increases, credit growth and expansion of domestic activity related to consumption. Such effects are significant when considering both parameter uncertainty and a new significance test for abnormal behavior. According to a new channel identification method proposed in the paper, capital inflow is the only domestic propagation channel that systematically accounts for the estimated effects across variables and samples. Results are robust across a wide range of policy counterfactuals, regime break assumptions, testing procedures and model specifications.

Keywords: Unconventional monetary policy; Global spillovers; Quantitative easing; Capital flows; Emerging markets (search for similar items in EconPapers)
JEL-codes: C54 E52 E58 E65 F42 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (21)

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Working Paper: Quantitative Easing and Related Capital Flows into Brazil: measuring its effects and transmission channels through a rigorous counterfactual evaluation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:67:y:2016:i:c:p:102-122

DOI: 10.1016/j.jimonfin.2015.06.013

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