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on International Finance |
| By: | Saroj Bhattarai (University of Texas at Austin); Arpita Chatterjee (UNSW Business School, UNSW); Woong Yong Park (University of Illinois at Urbana-Champaign) |
| Abstract: | 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. |
| Keywords: | US Quantitative Easing, Spillovers, Emerging Market Economies, Bayesian VAR, Panel VAR, Non-recursive Identification, Fragile Five Countries |
| JEL: | C31 E44 E52 E58 F32 F41 F42 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2015-26&r=ifn |
| By: | Marcel Fratzscher; Oliver Goede; Lukas Menkhoff; Lucio Sarno; Tobias Stöhr |
| Abstract: | This study examines foreign exchange intervention based on novel daily data covering 33 countries from 1995 to 2011. We find that intervention is widely used and a highly effective policy tool, with a success rate in excess of 80 percent under some criteria. The policy works very well in terms of smoothing the path of exchange rates, and in stabilizing the exchange rate in countries with narrow band regimes. Moving the level of the exchange rate in flexible regimes requires that some conditions are met, including the use of large volumes and that intervention is made public and supported via communication. |
| Keywords: | Foreign exchange intervention, exchange rate regimes, effectiveness measures, communication, capital controls |
| JEL: | F31 F33 E58 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1518&r=ifn |
| By: | Miranda-Agrippino, Silvia; Rey, Hélène |
| Abstract: | We find that one global factor explains an important part of the variance of a large cross section of returns of risky assets around the world. Using a model with heterogeneous investors, we interpret the global factor as reflecting aggregate realised variance and the time-varying degree of market-wide risk aversion. A medium-scale Bayesian VAR allows us to analyse the workings of the "Global Financial Cycle", i.e. the interaction between US monetary policy, real activity and global financial variables such as credit spreads, cross-border credit flows, bank leverage and the global factor in asset prices. We find evidence of large monetary policy spillovers from the US to the rest of the world. |
| Keywords: | Bayesian VAR; dynamic factor model; international financial flows; monetary policy |
| JEL: | E44 E58 F30 F33 |
| Date: | 2015–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10936&r=ifn |