The Transmission of Unconventional Monetary Policy to the Emerging Markets

Abstract

Papers in this volume were prepared for a meeting of senior officials from central banks held at the Bank for International Settlements on 6-7 March 2014.

Highly accommodative monetary policies in the major advanced economies and the questions about the exit from such policies have created major challenges for policymakers in emerging market economies (EMEs). Quite a few of EMEs that experienced rapid capital inflows and strong currency appreciation pressures during 2010-12 saw a sharp reversal in episodes of market volatility from May 2013 to February 2014.

This meeting of Deputy Governors focussed on three main questions: (i) How can external monetary conditions become a source of risks to monetary and financial stability in EMEs? (ii) How should central banks respond to such shocks? (iii) And, can there be a greater international role for emerging market currencies? A key conclusion from the discussion is that asset prices and interest rates have become more correlated globally during the period of unprecedented monetary easing by advanced economies. One major worry was the risk of an abrupt reversal of capital inflows to EMEs. Central banks face difficult policy dilemmas in preserving financial stability while pursuing their monetary policy goals. It is hard for EME monetary authorities to counter a prolonged period of very low long-term interest rates and increased risk-taking in global financial markets.

While the full publication can be downloaded using the above link, individual contributions are available separately:

BIS background papers

The Transmission of Unconventional Monetary Policy to the Emerging Markets - an Overview

International Monetary Policy Transmission

How Might EME Central Banks Respond to the Influence of Global Monetary Factors?

Internationalisation of Emerging Market Currencies

Contributed papers

International Financial Spillovers: Policy Responses and Coordination

What Have Central Banks in EMEs Learned About the International Transmission of Monetary Policy in Recent Years?

Monetary Policy Independence in Chile

International Monetary Policy Spillovers and Responses

An Empirical Analysis of the Relationship between US and Colombian Long-Term Sovereign Bond Yields

Evolution of the Czech National Bank's Holdings of Foreign Exchange Reserves

What Have We Learned About the International Transmission of Monetary Policy in Recent Years? Perspectives from Hong Kong Sar

Short-Rate Expectations and Term Premia: Experiences from Hungary and Other Emerging Market Economies

The Transmission Mechanism and Policy Responses to Global Monetary Developments: The Indonesian Experience

The International Transmission of Monetary Policy: Korea's Experience

Spillovers from Global Monetary Conditions: Recent Experience and Policy Responses in Malaysia

Global Policy Spillovers and Peru's Monetary Policy: Inflation Targeting, Foreign Exchange Intervention and Reserve Requirements

What Have Emerging Market Central Banks Learned About the International Transmission of Monetary Policy in Recent Years? The Philippine Case

Changing Patterns in the Dependence of Long-Term Rates between Poland and Major Financial Centres

Monetary Policy in Russia: Recent Challenges and Changes

What Have Central Banks from EMEs Learned About the International Transmission of Monetary Policy in Recent Years?

What Have Central Banks from Emerging Market Economies Learned About the International Transmission of Monetary Policy in Recent Years?

The International Transmission of Monetary Policy - Lessons Learned in South Africa

The International Transmission of Monetary Policy in Recent Years: Thailand's Perspectives

Cross-Border Portfolio Flows and the Role of Macroprudential Policies: Experiences from Turkey

JEL Classification: E52, F31, F42, G12, G15