U.S. unconventional monetary policy and transmission to emerging market economies

We investigate the effects of U.S. unconventional monetary policies on sovereign yields, foreign exchange rates, and stock prices in emerging market economies (EMEs), and we analyze how these effects depend on country-specific characteristics. We find that, although EME asset prices, mainly those of...

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Bibliographic Details
Published in:Journal of international money and finance 2015-07, Vol.55, p.27-59
Main Authors: Bowman, David, Londono, Juan M., Sapriza, Horacio
Format: Article
Language:English
Subjects:
Economic conditions
Emerging markets
Exchange rates
Federal Reserve
Federal Reserve monetary policy
Foreign exchange rates
Government bonds
Large-scale asset purchase program
Market economies
Market economy
Monetary policy
Public sector
Quantitative easing
Stock prices
Studies
U.S.A
Unconventional monetary policy
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Summary:We investigate the effects of U.S. unconventional monetary policies on sovereign yields, foreign exchange rates, and stock prices in emerging market economies (EMEs), and we analyze how these effects depend on country-specific characteristics. We find that, although EME asset prices, mainly those of sovereign bonds, responded strongly to U.S. unconventional monetary policy announcements, these responses were not outsized with respect to a model that takes into account each country's currency regime and vulnerability to U.S. financial conditions. •We investigate the effects of U.S. unconventional monetary policies on asset prices in emerging market economies.•U.S. monetary policy shocks have a significant effect on sovereign yields in most emerging market economies.•Country-specific characteristics drive the response of asset prices in the emerging market economies to changes in U.S. financial conditions.•The response of sovereign yields in emerging market economies to U.S. unconventional monetary policies are not outsized.
ISSN:0261-5606
1873-0639
DOI:10.1016/j.jimonfin.2015.02.016