Information Shocks in the U.S. and Asset Mispricing in Emerging Economies

Antonia Lopez Villavicencio and Marc Pourroy

No 2023-19, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: We explore whether U.S. monetary policy shocks can lead to create booms and busts of asset prices in emerging economies. Using impulse response function obtained from local projections, we show that the Fed's announcements of a tighter monetary policy lead to strong under-valuations of equity markets in EMEs. However, the information content in a tightening announcement lead to over-valuation in EME's asset prices. We attribute these differences to perceptions of signalling a better-than-expected economic outlook. Finally, we show that real integration influences more than financial integration the propagation of communication shocks.

Keywords: emerging markets; asset mispricing; monetary policy; information channel; local projections (search for similar items in EconPapers)
JEL-codes: E52 E58 F41 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2023
New Economics Papers: this item is included in nep-cba and nep-mon
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Working Paper: Information Shocks in the U.S. and Asset Mispricing in Emerging Economies (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:drm:wpaper:2023-19

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