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Introduction Empirical Framework Results Extensions Conclusion
Effects of U.S. Quantitative Easing onEmerging Market Economies
Saroj Bhattarai1 Arpita Chatterjee2 Woong Yong Park3
1University of Texas at Austin2University of New South Wales
3University of Illinois at Urbana-Champaign
6th Joint BOC/ECB ConferenceJune 8-9, 2015
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Motivation
I After 2008, with the short-term interest rate at the ZLB, the FederalReserve engaged in QE policy
I Active empirical literature on the effects (if any) of QEI Literature largely focusses on domestic implications of QEI Much popular discussion on spillovers to emerging markets
I “Fragile Five” countries (Brazil, India, Indonesia, South Africa, andTurkey) thought to be particularly vulnerable
I Were “Fragile Five” countries affected differently from the rest?
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Motivation
I Literature largely focusses on “announcement effects”of QEI Effects around narrow 1/2-day windows following policy changesI Advantages: can establish causality/exogeneityI Disadvantages: high-frequency financial variables only; dynamic effects?
I Develop a framework suitable forI Inferring both real and financial implications of QEI Analyzing dynamic effectsI Studying both domestic effects and emerging market spillovers
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
MotivationUS variables
1234 5 6 78 90
1000
2000
3000
4000
Secu
rities
held
out
right
(Bil $
)
2008m1 2010m1 2012m1 2014m1Date
1.50
2.00
2.50
3.00
3.50
4.00
10y
ear T
reas
ury
yields
(%)
2008m1 2010m1 2012m1 2014m1Date
500
1000
1500
2000
S&P5
00 in
dex
2008m1 2010m1 2012m1 2014m1Date
Notes:[1] Sep 2008 Lehman Brothers
[2][4] Nov, Dec 2008 and Mar 2009, QE1[5] Nov 2010, QE2[6] Sep 2011, MEP
[7][8] Sep, Dec 2012, QE3[9] May 2013, Taper scare
9095
100
105
110
Nom
inal e
ffect
ive e
xcha
nge
rate
s
2008m1 2010m1 2012m1 2014m1Date
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
MotivationExchange rates against USD
1234 5 6 78 9
1.6
1.8
22.
22.
4Br
azilia
n Re
al
2008m1 2010m1 2012m1 2014m1Date
4045
5055
6065
India
n Ru
pee
2008m1 2010m1 2012m1 2014m1Date
89
1011
12In
done
sian
Rupia
h (in
thou
sand
s)
2008m1 2010m1 2012m1 2014m1Date
78
910
11So
uth
Afric
an R
and
2008m1 2010m1 2012m1 2014m1Date
1.2
1.4
1.6
1.8
22.
2Tu
rkish
Lira
2008m1 2010m1 2012m1 2014m1Date
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Our Approach
I Identified monthly BVAR with US dataI Balance sheet variable as a policy instrument from 2008 to mid-2014I Macro variables: output and consumer pricesI Financial variables: govt bond and equity pricesI Zero non-recursive restrictions to identify a US QE shock
I Given the identified US QE shock, assess effects on emerging marketsI Focus first on the “Fragile Five” countries and then extend to othersI Financial variables: exchange rates, bond and equity prices, capital flowsI Macro variables: output, consumer prices, trade flows
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Related Literature
I Announcement effectsI Gagnon et al (2010); Krishnamurthy and Vissing-Jorgensen (2011)
I VAR based identificationI Gambacorta et al (2014); Baumeister and Benati (2011); Wright (2011)
I International effects of US QE policiesI Neely (2010); Chen et al (2011); Glick and Leduc (2011); Bauer andNeely (2013)
I Effects on emerging markets/Fragile FiveI Eichengreen and Gupta (2013); Dahlhaus and Vasishtha (2014);Aizenman et al (2014)
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
VAR Framework
I Asset side component of the Fed’s balance sheet as policy instrumentI Securities held outright by the FedI Measure of size and not composition of assetsI Approach similar to Gambacorta et al (2014)
I A “reaction function” similar to conventional monetary policyI The Fed responds systematically to the state of the economyI Isolate the non-systematic component (shock)I Fed observes current long-term Treasury yields while setting policy
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
VAR Framework
I Consider a VAR model
A0yt = A+(L)yt + εt
I Use (non-recursive) short-run restrictions for identificationI Sims and Zha (2006a,b) and Leeper, Sims, and Zha (1996)
I Identify structural shock εQE ,t with restrictions on A0I Bayesian inference with a Minnesota-type prior
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
US QE Shock Identification
I A0 matrix (similar to Sims and Zha (2006b))
Industrial PCE Securities 10-year S&P500production deflator held-outright Treasury yields index
Prod1 XProd2 X XI X X X X XF X X a1 a2MS a3 a4
I “X”: the corresponding coeffi cient of A0 is not restricted at allI Blanks: the corresponding coeffi cient of A0 is restricted to zeroI Liquidity Priors: Corr (a1, a2) = 0.8 and Corr (a3, a4) = −0.8
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE Shock
I Extract the US QE shock and assess dynamic effects on emergingmarket economies with country specific BVARs
I Bayesian inference with a Minnesota-type prior
I Effectively assume a “block exclusion” structure
zt = B1zt−1 + · · ·+ Bpzt−p + D0εQE ,t + · · ·+ DqεQE ,t−q + ut
I SpecificationI Baseline: 4 variable (IP, CPI, 3 month interest rate and USD exchangerate) VAR with the US QE shock as an exogenous variable
I VAR controls for domestic dynamics and shocksI After baseline estimation, one additional variable at a time
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
US QE ShockIRFs of US variables
Periods after impact0 10 20
Per
cent
age
0.5
0
0.5
1IP
Periods after impact0 10 20
Per
cent
age
0
0.05
0.1
0.15
0.2PCE deflator
Periods after impact0 10 20
Per
cent
age
0
2
4
6
8Securities
Periods after impact0 10 20P
erce
ntag
e (a
nnua
lized
)
0.2
0.15
0.1
0.05
010year yields
Periods after impact0 10 20
Per
cent
age
2
0
2
4S&P500
Median responses68% error bands
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
US QE ShockShock series and changes in securities held outright
1 2 3 4 5 6 7 8 9
.2.1
0.1
.2.3
.05
0.0
5.1
.15
2008m1 2010m1 2012m1 2014m1Date
QE shocks (rescaled, left axis)Reducedform shocks to log(securities) (left axis)Growth rates in securities held outright (right axis)
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
US QE ShockVariance decomposition of US variables
I What is the contribution of the US QE shock?I Mean and [16%, 84%] quantile
Industrial PCE Securities 10-year S&P500production deflator held-outright Treasury yields index
Impact 0.00 0.00 0.55 0.31 0.03[0.00, 0.00] [0.00, 0.00] [0.33, 0.78] [0.1, 0.51] [0.00, 0.06]
3 month 0.01 0.03 0.51 0.17 0.06[0.00, 0.01] [0.00, 0.05] [0.29, 0.74] [0.02, 0.33] [0.01, 0.12]
6 month 0.04 0.07 0.50 0.17 0.12[0.00, 0.08] [0.02, 0.13] [0.28, 0.72] [0.01, 0.33] [0.02, 0.21]
12 month 0.15 0.15 0.38 0.18 0.18[0.04, 0.26] [0.05, 0.26] [0.19, 0.57] [0.02, 0.36] [0.04, 0.33]
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockUSD exchange rate: Fragile five
0 5 10
Per
cent
age
4
2
0
2
4Brazil
0 5 10
Per
cent
age
2
1.5
1
0.5
0
0.5
1India
0 5 10
Per
cent
age
5
4
3
2
1
0Indonesia
0 5 10
Per
cent
age
6
4
2
0
2
4South Africa
0 5 10
Per
cent
age
5
4
3
2
1
0Turkey
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockLong-term interest rate: Fragile five
0 5 10
Per
cent
age
poin
ts
1.5
1
0.5
0
0.5Brazil
0 5 10
Per
cent
age
poin
ts0.4
0.3
0.2
0.1
0
0.1India
0 5 10
Per
cent
age
poin
ts
0.6
0.4
0.2
0
0.2Indonesia
0 5 10
Per
cent
age
poin
ts
0.6
0.4
0.2
0
0.2South Africa
0 5 10
Per
cent
age
poin
ts
0.6
0.4
0.2
0
0.2Turkey
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockStock price: Fragile five
0 5 10
Per
cent
age
6
4
2
0
2
4
6Brazil
0 5 10P
erce
ntag
e4
2
0
2
4
6
8India
0 5 10
Per
cent
age
5
0
5
10
15Indonesia
0 5 10
Per
cent
age
10
5
0
5
10South Africa
0 5 10
Per
cent
age
2
0
2
4
6
8
10Turkey
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockEquity flows: Fragile five
0 5 10
Per
cent
age
10
0
10
20
Brazil
0 5 10
Per
cent
age
10
0
10
20
India
0 5 10
Per
cent
age
10
0
10
20
Indonesia
0 5 10
Per
cent
age
10
0
10
20
South Africa
0 5 10
Per
cent
age
10
0
10
20
Turkey
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockNet exports (US): Fragile five
0 5 10
Per
cent
age
poin
ts
0.03
0.02
0.01
0
0.01
0.02
0.03Brazil
0 5 10
Per
cent
age
poin
ts0.08
0.06
0.04
0.02
0
0.02India
0 5 10
Per
cent
age
poin
ts
0.08
0.06
0.04
0.02
0
0.02Indonesia
0 5 10
Per
cent
age
poin
ts
0.05
0
0.05
0.1South Africa
0 5 10
Per
cent
age
poin
ts
0.06
0.04
0.02
0
0.02Turkey
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockOutput: Fragile five
0 5 10
Per
cent
age
2
1
0
1
2Brazil
0 5 10
Per
cent
age
1
0.5
0
0.5
1
1.5India
0 5 10
Per
cent
age
1.5
1
0.5
0
0.5
1Indonesia
0 5 10
Per
cent
age
1
0
1
2
3South Africa
0 5 10
Per
cent
age
2
1
0
1
2
3Turkey
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockCPI: Fragile five
0 5 10
Per
cent
age
1
0.5
0
0.5
1
1.5Brazil
0 5 10
Per
cent
age
0.6
0.4
0.2
0
0.2
0.4
0.6India
0 5 10
Per
cent
age
1.5
1
0.5
0
0.5Indonesia
0 5 10
Per
cent
age
1.5
1
0.5
0
0.5South Africa
0 5 10
Per
cent
age
1
0.5
0
0.5
1Turkey
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE Shock
I Now consider other emerging market economiesI Were the “Fragile Five”different?
I Qualitative or quantitative differences?
I Extended sample: Chile, Colombia, Malaysia, Mexico, Peru, SouthKorea, Taiwan, and Thailand
I Same specification for the country specific BVARs
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockUSD exchange rate: Other countries
0 5 10
Per
cent
age
3
2
1
0
1
2Chile
0 5 10
Per
cent
age
6
4
2
0
2Colombia
0 5 10
Per
cent
age
1.5
1
0.5
0
0.5
1Malaysia
0 5 10
Per
cent
age
4
3
2
1
0
1
2Mexico
0 5 10
Per
cent
age
1.5
1
0.5
0
0.5Peru
0 5 10
Per
cent
age
2
1
0
1
2
3South Korea
0 5 10
Per
cent
age
1.5
1
0.5
0
0.5Taiwan
0 5 10
Per
cent
age
1.5
1
0.5
0
0.5Thailand
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockLong-term interest rate: Other countries
0 5 10
Per
cent
age
poin
ts
0.2
0.1
0
0.1
0.2Chile
0 5 10
Per
cent
age
poin
ts
0.5
0
0.5
1Colombia
0 5 10
Per
cent
age
poin
ts
0.25
0.2
0.15
0.1
0.05
0
0.05Malaysia
0 5 10
Per
cent
age
poin
ts
1
0.5
0
0.5Mexico
0 5 10
Per
cent
age
poin
ts
0.4
0.2
0
0.2
0.4Peru
0 5 10
Per
cent
age
poin
ts
0.4
0.3
0.2
0.1
0South Korea
0 5 10
Per
cent
age
poin
ts
0.15
0.1
0.05
0
0.05
0.1Taiwan
0 5 10
Per
cent
age
poin
ts
0.3
0.2
0.1
0
0.1Thailand
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockStock price: Other countries
0 5 10
Per
cent
age
4
2
0
2
4
6Chile
0 5 10
Per
cent
age
10
5
0
5
10Colombia
0 5 10
Per
cent
age
4
2
0
2
4
6Malaysia
0 5 10
Per
cent
age
4
2
0
2
4
6
8Mexico
0 5 10
Per
cent
age
5
0
5
10
15Peru
0 5 10
Per
cent
age
4
3
2
1
0
1
2South Korea
0 5 10
Per
cent
age
1
0
1
2
3
4
5Taiwan
0 5 10
Per
cent
age
6
4
2
0
2
4
6Thailand
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Spillover Effects of QE ShockEquity flows: Other countries
0 5 10
Per
cent
age
20
10
0
10
20Chile
0 5 10
Per
cent
age
20
10
0
10
20Colombia
0 5 10
Per
cent
age
5
0
5
10
15Malaysia
0 5 10
Per
cent
age
10
5
0
5
10
15Mexico
0 5 10
Per
cent
age
5
0
5
10
15Peru
0 5 10
Per
cent
age
6
4
2
0
2
4South Korea
0 5 10
Per
cent
age
5
0
5
10Taiwan
0 5 10
Per
cent
age
10
5
0
5Thailand
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Comparison of Spillover EffectsMedians of the two groups
I Fragile five countries respond more
0 2 4 6 8 10
Per
cent
age
2.5
2
1.5
1
0.5
0Exchange rates against USD
Fragile fiveOther countries
0 2 4 6 8 10
Per
cent
age
1
0
1
2
3
4Stock market indices
0 2 4 6 8 10
Per
cent
age
poin
ts
0.25
0.2
0.15
0.1
0.05
0Longterm yields
0 2 4 6 8 10
Per
cent
age
2
0
2
4
6Cumulative equity flows
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Pooled Spillover EffectsPanel VAR
I Estimate the average effect of the US QE shock with a panel BVARI Allow for dynamic heterogeneityI Random coeffi cient approach that partially pools the cross-sectionI Bayesian inference with a Minnesota-type prior
I Consider for country i ,
zi ,t = Bi ,1zi ,t−1 + · · ·+ Bi ,pzi ,t−p +Di ,0εQE ,t + · · ·+Di ,qεQE ,t−q + ui ,t
with ui ,t ∼ N (0,Σi ) , where
Bi ,j = Bj + vBi,jDi ,k = Dk + vDi,k
with vBi,j ∼ N(0,ΩBi,j
)and vDi,k ∼ N
(0,ΩDi,k
)Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Pooled Spillover EffectsPanel VAR
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Extensions/Robustness
I Recursive short-run restrictions in US VAR?I Extended 7 variable US VAR
I Additional corporate yields and asset prices
I Alternate measures of output, prices, and long-term Treasury yields inbaseline US VAR
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
RobustnessRecursive identification-1
I Inference on long-term yields different
Periods after impact0 10 20
Perc
enta
ge
0.2
0
0.2
0.4
0.6
0.8IP
Periods after impact0 10 20
Perc
enta
ge
0
0.05
0.1
0.15
0.2PCE
Periods after impact0 10 20
Perc
enta
ge
0
2
4
6
8Securities
Periods after impact0 10 20
Perc
enta
ge
0
0.02
0.04
0.06
0.08
0.1
0.12
0.1410year yields
Periods after impact0 10 20
Perc
enta
ge
0
1
2
3
4
5S&P500
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
RobustnessRecursive identification-2
I Inference on long-term yields different
Periods after impact0 10 20
Perc
enta
ge
0.2
0
0.2
0.4
0.6
0.8IP
Periods after impact0 10 20
Perc
enta
ge
0
0.05
0.1
0.15
0.2PCE
Periods after impact0 10 20
Perc
enta
ge
0
0.02
0.04
0.06
0.08
0.110year yields
Periods after impact0 10 20
Perc
enta
ge
0
2
4
6
8Securities
Periods after impact0 10 20
Perc
enta
ge
0
1
2
3
4
5S&P500
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
RobustnessExtended US QE Shock Identification
I Extended 7-variable VAR A0 matrix
Ind PCE Securities 10-year Private S&P500 Additionalprod deflator held Treas yields yields index asset price
Prod1 XProd2 X XI X X X X X XI X X X X X X XF X X a1 a2F X X X X XMS a3 a4
I Private sector yields (BofA Merrill Lynch US corporate 10-15 year index; 30 yearconventional mortgage rate)
I Additional asset prices (Effective exchange rate; Core Logic house price index)
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
RobustnessExtended VAR
Periods after impact0 10 20
Per
cent
age
0.2
0
0.2
0.4
0.6IP
Periods after impact0 10 20
Per
cent
age
0
0.05
0.1
0.15
0.2
0.25PCE deflator
Periods after impact0 10 20
Per
cent
age
0
2
4
6
8Securities
Periods after impact0 10 20
Per
cent
age
0.2
0.15
0.1
0.05
010year yields
Periods after impact0 10 20
Per
cent
age
0.15
0.1
0.05
0Mortgage 30year Yield
Periods after impact0 10 20
Per
cent
age
1
0
1
2
3
4S&P500
Periods after impact0 10 20
Per
cent
age
1
0.8
0.6
0.4
0.2
0NEER
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
RobustnessExtended VAR
Periods after impact0 10 20
Per
cent
age
0.1
0
0.1
0.2
0.3
0.4
0.5IP
Periods after impact0 10 20
Per
cent
age
0
0.05
0.1
0.15PCE deflator
Periods after impact0 10 20
Per
cent
age
0
2
4
6
8Securities
Periods after impact0 10 20
Per
cent
age
0.15
0.1
0.05
010year yields
Periods after impact0 10 20
Per
cent
age
0.2
0.15
0.1
0.05
0Corporate bond yields
Periods after impact0 10 20
Per
cent
age
0.5
0
0.5
1
1.5
2
2.5S&P500
Periods after impact0 10 20
Per
cent
age
0.6
0.4
0.2
0
0.2NEER
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
RobustnessExtended VAR
Periods after impact0 10 20
Per
cent
age
0.2
0
0.2
0.4
0.6IP
Periods after impact0 10 20
Per
cent
age
0
0.05
0.1
0.15
0.2PCE deflator
Periods after impact0 10 20
Per
cent
age
0
2
4
6Securities
Periods after impact0 10 20
Per
cent
age
0.2
0.15
0.1
0.05
010year yields
Periods after impact0 10 20
Per
cent
age
0.15
0.1
0.05
0Mortgage30
Periods after impact0 10 20
Per
cent
age
0
0.2
0.4
0.6
0.8
1House Price
Periods after impact0 10 20
Per
cent
age
0
1
2
3
4S&P500
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Summary of Domestic Effects of U.S. QE Shock
I Strong and consistent effect on both financial and real variablesI QE shock is estimated to
I Increase IP and PCE DeflatorI Lower long-term yieldsI Increase stock priceI Depreciate the USD
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Summary of Spillover Effects of U.S. QE Shock
I Relatively strong and mostly consistent effects on financial variablesI Appreciation against USDI Reduction in long term yieldI Stock market boomI Positive effect on equity flows
I Weak effects on macro variablesI Some evidence on reduction of net exports to the US (Fragile Five)I No significant effect on IP or CPI
I Fragile Five countries respond more strongly than others
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Theoretical Channels
I Our results might be consistent with “reaching for yield”or“risk-taking”channel of monetary policy transmission
I Borio and Zhu (2012), Bruno and Shin (2014)
I Extend open economy models to account for results hereI Some unconventional monetary policy channels in the literature
I Central bank expands credit intermediation: Gertler and Karadi (2011)I Increases (otherwise scarce) collateral: Williamson (2012)I Signalling under discretion: Bhattarai, Eggertsson, and Gafarov (2015)
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
Introduction Empirical Framework Results Extensions Conclusion
Future Work
I “Systematic”policy effect evaluationI Control for anticipation of QE policyI Spillovers to small-open developed countries (e.g. Canada, Australia,New Zealand, ...)?
Bhattarai, Chatterjee, and Park Effects of QE on Emerging Market Economies
