Did the Unconventional Monetary Policy of the U.S. Hurt Emerging Markets?

Matthew Canzoneri, Robert Cumby (), Behzad Diba () and Yunsang Kim ()
Additional contact information
Robert Cumby: Georgetown University
Behzad Diba: Georgetown University
Yunsang Kim: Georgetown University

Open Economies Review, 2021, vol. 32, issue 2, No 1, 257 pages

Abstract: Abstract Policymakers in emerging markets complained that the unconventional US monetary policy response to the Great Recession hurt their economies. US policymakers responded that the policy was geared toward conditions in the US, and that a strong US economy benefited everyone. Here we evaluate these claims in a two country model of the US and an emerging market country, bombarded by shocks to the net worth of US banks. Our model allows us to calculate a “passive equilibrium” in which US monetary policy does not respond to the shock in any way. Then, we calculate a “self oriented” equilibrium in which quantitative easing is set optimally to maximize US welfare, and a “cooperative” equilibrium in which quantitative easing and the monetary policy in the emerging market country are set to maximize joint welfare. Comparing welfare in these equilibria, we find that the self oriented US monetary policy benefits both countries, and that cooperation brings little further improvements in welfare.

Keywords: Unconventional monetary policy; Emerging markets (search for similar items in EconPapers)
JEL-codes: E58 F42 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://link.springer.com/10.1007/s11079-021-09616-8 Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:openec:v:32:y:2021:i:2:d:10.1007_s11079-021-09616-8

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-021-09616-8

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().