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International Capital Market Frictions And Spillovers From Quantitative Easing

Margaux MacDonald ()

No 1346, Working Paper from Economics Department, Queen's University

Abstract: This paper analyzes the impact of large-scale, unconventional asset purchases by advanced country central banks on emerging market economies (EMEs) from 2008 to 2014. I show that there was substantial heterogeneity in the way these purchases affected EME currency, equity, and long-term sovereign bond markets. Drawing on the gravity-in-international-finance literature, I show that the degree of capital market frictions between EMEs and advanced countries is significant in explaining the observed heterogeneity in how these asset prices were affected. This result is robust to considerations of domestic monetary policy, exchange rate regime, and capital control policies in EMEs. Furthermore, I show that the size and direction of asset price movements in EMEs depended both on the type of assets purchased and on whether it was the U.S. Federal Reserve or other advanced country central banks engaging in the purchases.

Keywords: emerging markets; unconventional monetary policy; spillovers; capital market frictions (search for similar items in EconPapers)
JEL-codes: G15 F42 F3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2016-03
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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1346.pdf First version 2016 (application/pdf)

Related works:
Journal Article: International capital market frictions and spillovers from quantitative easing (2017) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1346

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