EconPapers    
Economics at your fingertips  
 

International spillovers of quantitative easing

Marcin Kolasa () and Grzegorz Wesołowski

No 2172, Working Paper Series from European Central Bank

Abstract: This paper develops a two-country model with asset market segmentation to investigate the effects of quantitative easing implemented by the major central banks on a typical small open economy that follows independent monetary policy. The model is able to replicate the key empirical facts on emerging countries’ response to large scale asset purchases conducted abroad, including inflow of capital to local sovereign bond markets and an increase in international comovement of term premia. According to our simulations, quantitative easing abroad boosts domestic demand in the small economy, but undermines its international competitiveness and depresses aggregate output, at least in the short run. This is in contrast to conventional monetary easing in the large economy, which has positive spillovers to output in other countries. We also find that limiting these spillovers might require policies that affect directly international capital flows, like imposing capital controls or mimicking quantitative easing abroad by purchasing local long-term bonds. JEL Classification: E44, E52, F41

Keywords: bond market segmentation; international spillovers; quantitative easing; term premia (search for similar items in EconPapers)
Date: 2018-07
New Economics Papers: this item is included in nep-cba, nep-cse, nep-ifn, nep-mac, nep-mon and nep-opm
References: Add references at CitEc
Citations: View citations in EconPapers (13) Track citations by RSS feed

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2172.en.pdf (application/pdf)

Related works:
Journal Article: International spillovers of quantitative easing (2020) Downloads
Working Paper: International spillovers of quantitative easing (2019) Downloads
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:ecb:ecbwps:20182172

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().

 
Page updated 2023-01-25
Handle: RePEc:ecb:ecbwps:20182172