Federal Reserve Bank of Dallas
Globalization Institute Working Papers
Effects of US quantitative easing on emerging market economies
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.
Cite this item
Saroj Bhattarai & Arpita Chatterjee & Woong Yong Park, Effects of US quantitative easing on emerging market economies, Federal Reserve Bank of Dallas, Globalization Institute Working Papers 255, 01 Nov 2015.
- C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
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