Taper Tantrums: QE, its Aftermath and Emerging Market Capital Flows / Anusha Chari, Karlye Dilts Stedman, Christian Lundblad.

Format:

Book

Author/Creator:

Chari, Anusha.

Contributor:

National Bureau of Economic Research.

Dilts Stedman, Karlye.

Lundblad, Christian.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23474.

NBER working paper series no. w23474

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Taper Tantrums

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

This paper provides a novel perspective on the impact of U.S. unconventional monetary policy (UMP) on emerging market capital flows and asset prices. Using high-frequency Treasury futures data to identify U.S. monetary policy shocks, we find, through the lens of an affine term structure model, that these shocks represent revisions to both the expected path of short-term interest rates and required risk compensation. The risk compensation component is especially important during the UMP periods. Further, we find that these high-frequency policy shocks do exhibit sizable effects on U.S. holdings of emerging market assets and their valuations. We also document that the relative effects of U.S. monetary policy shocks are larger for emerging asset returns relative to physical capital flows, and they are largest for emerging equity markets relative to fixed income markets. Last, these effects are largest when the Federal Reserve is engaged in "tapering" its large-scale asset purchase program.

Notes:

Print version record

June 2017.