Spillovers from U.S. Unconventional Monetary Policy and its Normalization to Emerging Markets: A Capital Flow Perspective

32 Pages Posted: 30 Mar 2016

See all articles by Sangwon Suh

Sangwon Suh

Chung-Ang University - Department of Economics

Byungsoo Koo

Bank of Korea

Date Written: March 22, 2016

Abstract

Policy makers employed unconventional monetary policy (UMP) tools to respond to the recent global financial crisis in the U.S. and other advanced economies, and the UMP is about to be normalized. In this paper, we try to quantitiatively assess the effects of the UMP and its normalization on capital flows to emerging market economies. We find that the UMP significantly affected capital flows on average. The effects of the normalization are closely related with the effects of the UMP. Importantly, the larger the capital inflows due to the UMP, the larger the capital outflows due to the normalization. Moreover, policy makers need to be careful of a potential risk of unexpected capital outflows (exceeding the expected ones) during an uncertain period whose size tends to be proportional to the size of the previous capital inflows.

Keywords: Capital flows, Unconventional monetary policy, Emerging markets, Cross-border borrowings

JEL Classification: F37, F42, G15, G18

Suggested Citation

Suh, Sangwon and Koo, Byungsoo, Spillovers from U.S. Unconventional Monetary Policy and its Normalization to Emerging Markets: A Capital Flow Perspective (March 22, 2016). Bank of Korea WP 2016-4, Available at SSRN: https://ssrn.com/abstract=2752814 or http://dx.doi.org/10.2139/ssrn.2752814

Sangwon Suh

Chung-Ang University - Department of Economics ( email )

Seoul
Korea

Byungsoo Koo (Contact Author)

Bank of Korea ( email )

39, Namdaemun-ro, Jung-gu
Seoul, 04531
Korea, Republic of (South Korea)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
183
Abstract Views
988
Rank
297,507
PlumX Metrics