U.S. Unconventional Monetary Policy and Transmission to Emerging Market Economies

Abstract

We investigate the effects of U.S. unconventional monetary policies on sovereign yields, foreign exchange rates, and stock prices in emerging market economies (EMEs), and we analyze how these effects depend on country-specifc characteristics. We find that, although EME asset prices, mainly those of sovereign bonds, responded strongly to unconventional monetary policy announcements, these responses were not outsized with respect to a model that takes into account each country's time-varying vulnerability to U.S. interest rates affected by monetary policy shocks.

Keywords: Unconventional monetary policy, emerging markets, large-scale asset purchase programs, quantitative easing, Federal Reserve

JEL Classification: E58, F42, G15