Unconventional Monetary Policy Shocks and the Spillovers to Emerging Markets

Peter Tillmann

Working Papers from Hong Kong Institute for Monetary Research

Abstract: Unconventional monetary policy such as Quantitative Easing (QE) is often considered to have considerable spillover effects on emerging market economies (EME). Aims at quantifying these effects so far mostly use high-frequency data around announcement dates, panels or VAR models. This paper proposes an alternative way to estimate the effects of QE on emerging markets that allows us to include macroeconomic, i.e. low-frequency, data together with announcement dates. A Qual VAR is estimated that integrates binary information of QE announcements with an otherwise standard VAR including US and emerging market variables. The model uncovers the Fed's latent, unobservable propensity for QE and generates impulse responses for EME variables to QE shocks. The results suggest that QE has strong effects on EME's financial conditions and plays a large role in explaining capital inflows, equity prices and exchange rates.

JEL-codes: E32 E44 F32 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2014-08
New Economics Papers: this item is included in nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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