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Effects of US quantitative easing on emerging market economies

Saroj Bhattarai (), Arpita Chatterjee () and Woong Yong Park ()

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We estimate international spillover effects of US Quantitative Easing (QE) on emerging market economies. Using a Bayesian VAR on monthly US macroeconomic and financial data, we first identify the US QE shock with non-recursive identifying restrictions. We estimate strong and robust macroeconomic and financial impacts of the US QE shock on US output, consumer prices, long-term yields, and asset prices. The identified US QE shock is then used in a monthly Bayesian panel VAR for emerging market economies to infer the spillover effects on these countries. We find that an expansionary US QE shock has significant effects on financial variables in emerging market economies. It leads to an exchange rate appreciation, a reduction in long-term bond yields, a stock market boom, and an increase in capital inflows to these countries. These effects on financial variables are stronger for the “Fragile Five” countries compared to other emerging market economies. We however do not find significant effects of the US QE shock on output and consumer prices of emerging markets.

Keywords: US Quantitative Easing; Spillovers; Emerging Market Economies; Bayesian VAR; Panel VAR; Non-recursive Identification; Fragile Five Countries (search for similar items in EconPapers)
JEL-codes: C31 E44 E52 E58 F32 F41 F42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-opm
Date: 2015-12
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Related works:
Working Paper: Effects of US Quantitative Easing on Emerging Market Economies (2018) Downloads
Working Paper: Effects of US quantitative easing on emerging market economies (2015) Downloads
Working Paper: Effects of US Quantitative Easing on Emerging Market Economies (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2015-47

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