Should Emerging Markets Worry about U.S. Monetary Policy Announcements?
This paper analyzes the spillover effects of U.S. monetary policy announcements on emerging market economies since end-2008, the period coinciding with the use of unconventional policy measures. Monetary policy surprises are measured by changes in...
| Main Authors: | , , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/775321497019227117/Should-emerging-markets-worry-about-U-S-monetary-policy-announcements http://hdl.handle.net/10986/27300 |
| Summary: | This paper analyzes the spillover
effects of U.S. monetary policy announcements on emerging
market economies since end-2008, the period coinciding with
the use of unconventional policy measures. Monetary policy
surprises are measured by changes in two-year Treasury
yields in short windows of time around the Federal Reserve
Board’s policy announcements. The analysis finds that U.S.
monetary policy surprises have a significant impact on
emerging economies' exchange rates, equity prices, and
bond yields. The impact is larger for surprise tightening of
policy than for surprise easing. The impact is
disproportionately larger for large surprises, implying that
emerging markets are relatively insulated from anticipated
policy announcements. The spillover effects of policy
announcements of other advanced economies, such as the euro
area, Japan, and United Kingdom, are found to be much weaker
than those of the United States. |
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