Taper Tantrums: QE, Its Aftermath and Emerging Market Capital Flows

59 Pages Posted: 23 Mar 2017 Last revised: 11 Jul 2018

See all articles by Anusha Chari

Anusha Chari

University of North Carolina (UNC) at Chapel Hill - Department of Economics; National Bureau of Economic Research (NBER); University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Karlye Dilts Stedman

Federal Reserve Bank of Kansas City; University of North Carolina (UNC) at Chapel Hill, College of Arts and Sciences, Department of Economics

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School

Multiple version iconThere are 2 versions of this paper

Date Written: June 26, 2018

Abstract

This paper examines the spillover effects of U.S. unconventional monetary policy (UMP) on emerging market capital flows and asset prices. Affine term structure model estimates show that U.S. monetary policy shocks, identified with high-frequency Treasury futures data, represent revisions to expected short-term yields and term premia, especially during the UMP period. The policy shocks exhibit sizable effects on U.S. holdings of emerging-market assets. These effects disproportionately manifest through valuation changes versus physical flows, are more pronounced for equity relative to bond markets, and are asymmetric between the QE and tapering periods, with flows more important during the unwinding.

Keywords: Unconventional monetary policy, U.S. investors, international spillovers, emerging markets, high frequency identification, affine term structure models, asset prices, portfolio flows

JEL Classification: E52, E58, F21, F32, G15

Suggested Citation

Chari, Anusha and Dilts Stedman, Karlye and Lundblad, Christian T., Taper Tantrums: QE, Its Aftermath and Emerging Market Capital Flows (June 26, 2018). Available at SSRN: https://ssrn.com/abstract=2938080 or http://dx.doi.org/10.2139/ssrn.2938080

Anusha Chari (Contact Author)

University of North Carolina (UNC) at Chapel Hill - Department of Economics ( email )

Chapel Hill, NC 27599
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

McColl Building
Chapel Hill, NC 27599-3490
United States

Karlye Dilts Stedman

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

University of North Carolina (UNC) at Chapel Hill, College of Arts and Sciences, Department of Economics ( email )

Chapel Hill, NC 27599
United States

Christian T. Lundblad

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-8441 (Phone)

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