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The Effects of US Unconventional Monetary Policies in Latin America

Fructuoso Borrallo, Ignacio Hernando and Javier Valles
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Fructuoso Borrallo: Banco de España

Chapter 5 in International Spillovers of Monetary Policy, 2017, pp 111-154 from Centro de Estudios Monetarios Latinoamericanos, CEMLA

Abstract: This paper offers an empirical analysis of the way in which us unconventional monetary policy has affected Latin American countries. First, we estimate the effects of US monetary policy announcements on sovereign bond interest rates, exchange rates, and stock market indices for a set of emerging countries, including five Latin American economies. We found that QE announcements in 2008 and 2009, and the tapering talk in 2013 generated sizable sovereign yield and exchange rate fluctuations. We further find some excess response of Latin American asset prices that disappear once we take into account their country characteristics. In the second part of the paper we estimate a simple model that measures the influence of country-specific macroeconomic fundamentals on the transmission of US financial disturbances. An estimated model including the inflation rate, the CDS spread, the ratio of official reserves, and market capitalization explains some of the observed cross-country heterogeneity of spillovers from US monetary policy announcements. Under this model, a greater impact from the normalization of US monetary policy can be expected in Latin American relative to other emerging economies.

Keywords: unconventional monetary policy; spillovers; emerging economies; event study. (search for similar items in EconPapers)
JEL-codes: E52 F32 G11 (search for similar items in EconPapers)
Date: 2017
Note: Joint Research Program XX Meeting of the Central Bank Researchers Network
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Journal Article: The Effects of US Unconventional Monetary Policies in Latin America (2016) Downloads
Working Paper: The effects of us unconventional monetary policies in Latin America (2016) Downloads
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