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

No 1606, Working Papers from Banco de España

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 find that QE announcements in 2008/2009 and the “tapering talk” in 2013 generated sizable sovereign yield and exchange rate fluctuations. We further find some excess response of Latam 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 capitalisation explains some of the observed cross-country heterogeneity of spillovers from US monetary policy announcements. Under this model, a greater impact from the normalisation of US monetary policy can be expected in Latin America 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)
Pages: 38 pages
Date: 2016-03
New Economics Papers: this item is included in nep-cba, nep-lam, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Chapter: The Effects of US Unconventional Monetary Policies in Latin America (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1606

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