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

16 Pages Posted: 7 Oct 2014

See all articles by Joao B. Barroso

Joao B. Barroso

Government of the Federative Republic of Brazil - Central Bank of Brazil

Emanuel Kohlscheen

Bank for International Settlements (BIS)

Eduardo J. A. Lima

Government of the Federative Republic of Brazil - Central Bank of Brazil

Date Written: August 2014

Abstract

This note considers the international transmission of monetary policy conditions to emerging market economies (EMEs) with a focus on Brazil’s experience. The main points are as follows: (i) growing foreign participation in Brazil’s domestic Treasury markets has increased the sensitivity of the long end of the yield curve to global factors; (ii) the role of foreign factors in the term spread of most EMEs is growing in importance, but domestic factors still account for most of the variation; (iii) unconventional monetary policy in advanced economies (AEs) impacts asset prices and economic activity in EMEs, with capital inflows an important transmission channel; (iv) the prospect of tapering amplified asset price volatility, and interventions with swap instruments – backed by international reserves – are an effective way to cope with hedging demand; and (v) macroprudential instruments, including capital flow regulation and liquidity buffers, are effective in reducing financial instability associated with global factors.

Full publication: The Transmission of Unconventional Monetary Policy to the Emerging Markets

Keywords: International transmission, yield curve, unconventional monetary policy, tapering, intervention, macroprudential policy

JEL Classification: E50, E58, F36, F42

Suggested Citation

Barroso, Joao B. and Kohlscheen, Emanuel and Lima, Eduardo J. A., What Have Central Banks in EMEs Learned About the International Transmission of Monetary Policy in Recent Years? (August 2014). BIS Paper No. 78f, Available at SSRN: https://ssrn.com/abstract=2498705

Joao B. Barroso (Contact Author)

Government of the Federative Republic of Brazil - Central Bank of Brazil ( email )

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia, Distr. Federal 70074-900
Brazil

Emanuel Kohlscheen

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Eduardo J. A. Lima

Government of the Federative Republic of Brazil - Central Bank of Brazil ( email )

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia, Distr. Federal 70074-900
Brazil

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
62
Abstract Views
675
Rank
659,660
PlumX Metrics