Dealing with Quantitative Easing Spillovers in East Asia: The Role of Institutions and Macroprudential Policy

32 Pages Posted: 4 Jan 2017

See all articles by Ayako Saiki

Ayako Saiki

University of London - School of Oriental and African Studies (SOAS); De Nederlandsche Bank - Monetary and Economic Policy Department

Pornpinun Chantapacdepong

Bank of Thailand - Monetary Policy Group

Ulrich Volz

University of London - School of Oriental and African Studies (SOAS) - Economics; Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE)

Date Written: October 21, 2016

Abstract

This paper explores the impact of advanced countries’ quantitative easing on emerging market economies (EMEs) and how macroprudential policy and good governance play a role in preventing potential financial vulnerabilities. We used confidential locational bank statistics data from the Bank for International Settlements to examine whether quantitative easing has caused an appreciation of EMEs’ currencies and how it has done so, and whether this has in turn boosted foreign-currency borrowing, thus making EMEs vulnerable to balance sheet and maturity mismatch problems. While focusing our analysis on East Asian economies, we compare them with Latin American economies, which were also major recipients of quantitative easing capital inflows. We found that government effectiveness plays an important role in curbing excessive borrowing when the exchange rate is overvalued.

Keywords: quantitative easing, spillover effects, macroprudential policy, good governance, capital inflows, emerging market economies (EMEs), East Asia, Latin America

JEL Classification: E44, E58, F31, F32, F34

Suggested Citation

Saiki, Ayako and Chantapacdepong, Pornpinun and Volz, Ulrich, Dealing with Quantitative Easing Spillovers in East Asia: The Role of Institutions and Macroprudential Policy (October 21, 2016). ADBI Working Paper 604, Available at SSRN: https://ssrn.com/abstract=2892553 or http://dx.doi.org/10.2139/ssrn.2892553

Ayako Saiki (Contact Author)

University of London - School of Oriental and African Studies (SOAS)

10 Thornhaugh Street
Russell Square
London, WC1H 0XG
United Kingdom

De Nederlandsche Bank - Monetary and Economic Policy Department

POBox 98
Amsterdam, 1000AB
Netherlands

Pornpinun Chantapacdepong

Bank of Thailand - Monetary Policy Group ( email )

273 Samsen Road
Bangkhunphrom, Bangkok 10200
Thailand

Ulrich Volz

University of London - School of Oriental and African Studies (SOAS) - Economics

London, WC1E 7HU
United Kingdom

Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE) ( email )

Tulpenfeld 4
Bonn, 53113
Germany

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