Effects of Emerging Market Asset Purchase Program Announcements on Financial Markets During the COVID-19 Pandemic

22 Pages Posted: 26 Jan 2021

See all articles by Can Sever

Can Sever

International Monetary Fund (IMF)

Rohit Goel

International Monetary Fund (IMF)

Dimitrios Drakopoulos

International Monetary Fund (IMF)

Evan Papageorgiou

International Monetary Fund (IMF)

Date Written: December 1, 2020

Abstract

The COVID-19 pandemic led many emerging market central banks to adopt, for the first time, unconventional policies in the form of asset purchase programs. In this study, we analyze the effects of these announcements on domestic financial markets using both event studies and local projections methodology. We find that these asset purchase announcements lowered bond yields, did not lead to a depreciation of domestic currencies, and did not have much effect on equities. While the immediate effect of asset purchases appears positive, further consideration of the risks and longer-term effects of unconventional monetary policies is needed. We highlight the trade-offs involved with the implementation of these measures, and discuss their risks. This working paper adds to the debate on how asset purchase programs should be a regular part of the emerging market policy toolkit.

JEL Classification: E51, E58, F30, G14, G15, G10, E43, E42

Suggested Citation

Sever, Can and Goel, Rohit and Drakopoulos, Dimitrios and Papageorgiou, Evan, Effects of Emerging Market Asset Purchase Program Announcements on Financial Markets During the COVID-19 Pandemic (December 1, 2020). IMF Working Paper No. 2020/292, Available at SSRN: https://ssrn.com/abstract=3772498

Can Sever (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Rohit Goel

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dimitrios Drakopoulos

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Evan Papageorgiou

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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

Paper statistics

Downloads
66
Abstract Views
193
rank
402,893
PlumX Metrics