When the Fed sneezes - Spillovers from U.S. Monetary Policy to Emerging Markets
This paper aims to shed light on the role mean and volatility spillovers of U.S. monetary policy played for asset markets of several emerging market economies in a period from January 2000 to October 2014. We employ multi- variate GARCH models in which we distinguish between a conventional and a...
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| Published in: | MAGKS - Joint Discussion Paper Series in Economics (Band 30-2017) |
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| Main Author: | |
| Format: | Article |
| Language: | English |
| Published: |
Philipps-Universität Marburg
2017
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| Subjects: | |
| Online Access: | PDF Full Text |
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| Summary: | This paper aims to shed light on the role mean and volatility spillovers
of U.S. monetary policy played for asset markets of several emerging market
economies in a period from January 2000 to October 2014. We employ multi-
variate GARCH models in which we distinguish between a conventional and
an unconventional monetary policy phase to account for possible heterogene-
ity in spillover e�ects. Our results suggest that the anticipation of loose U.S.
monetary policy has diverse e�ects across monetary policy regimes. While
spillovers have little impact on equity returns, they put pressure on local
currencies. However, they increase conditional volatilities of both stock and
exchange rate returns considerably in most emerging economies within the
conventional monetary policy period. These e�ects can be stronger during
unconventional monetary policy times. In accordance with these �ndings, we
observe a tighter link between U.S. monetary policy and foreign asset mar-
kets during the unconventional monetary policy phase. Volatility impulse
responses show that conditional volatilities of foreign asset markets mainly
decrease in response to historical shocks. Particularly during unconventional
monetary policy times, U.S. shocks gain importance in explaining the change
in conditional volatilities especially for countries with less geographical dis-
tance to the United States. |
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| Physical Description: | 44 Pages |
| ISSN: | 1867-3678 |
| DOI: | 10.17192/es2024.0540 |