Information Shocks in the U.S. and Asset Mispricing in Emerging Economies
Antonia Lopez Villavicencio () and
Marc Pourroy
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Antonia Lopez Villavicencio: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique
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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)
Date: 2023
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Working Paper: Information Shocks in the U.S. and Asset Mispricing in Emerging Economies (2023) 
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