Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets

Abstract This study investigates the international spillover effects of US unconventional monetary policy (UMP)—frequently called large-scale asset purchases or quantitative easing (QE)—on advanced and emerging market economies, using structural vector autoregressive models with high-frequency daily...

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Autores principales:	Zekeriya Yildirim, Mehmet Ivrendi
Formato:	article
Lenguaje:	EN
Publicado:	SpringerOpen 2021
Materias:	US unconventional monetary policy Quantitative easing Interest rate spreads Emerging markets Financial spillovers SVAR Public finance K4430-4675 Finance HG1-9999
Acceso en línea:	https://doaj.org/article/943d0329f4a64166b73e588e1ab438f2
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spelling	oai:doaj.org-article:943d0329f4a64166b73e588e1ab438f22021-11-08T10:57:11ZSpillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets10.1186/s40854-021-00299-12199-4730https://doaj.org/article/943d0329f4a64166b73e588e1ab438f22021-11-01T00:00:00Zhttps://doi.org/10.1186/s40854-021-00299-1https://doaj.org/toc/2199-4730Abstract This study investigates the international spillover effects of US unconventional monetary policy (UMP)—frequently called large-scale asset purchases or quantitative easing (QE)—on advanced and emerging market economies, using structural vector autoregressive models with high-frequency daily data. Blinder (Federal Reserve Bank of St. Louis Rev 92(6): 465–479, 2010) argued that the QE measures primarily aim to reduce US interest rate spreads, such as term and risk premiums. Considering this argument and recent empirical evidence, we use two spreads as indicators of US UMP: the mortgage and term spreads. Based on data from 20 emerging and 20 advanced countries, our empirical findings reveal that US unconventional monetary policies significantly affect financial conditions in emerging and advanced countries by altering the risk-taking behavior of investors. This result suggests that the risk-taking channel plays an important role in transmitting the effects of these policies to the rest of the world. The extent of these effects depends on the type of QE measures. QE measures such as purchases of private sector securities that lower the US mortgage spread exert stronger and more significant spillover effects on international financial markets than those that reduce the US term spread. Furthermore, the estimated financial spillovers vary substantially across countries and between and within the emerging and advanced countries that we examine in this study.Zekeriya YildirimMehmet IvrendiSpringerOpenarticleUS unconventional monetary policyQuantitative easingInterest rate spreadsEmerging marketsFinancial spilloversSVARPublic financeK4430-4675FinanceHG1-9999ENFinancial Innovation, Vol 7, Iss 1, Pp 1-38 (2021)
institution	DOAJ
collection	DOAJ
language	EN
topic	US unconventional monetary policy Quantitative easing Interest rate spreads Emerging markets Financial spillovers SVAR Public finance K4430-4675 Finance HG1-9999
spellingShingle	US unconventional monetary policy Quantitative easing Interest rate spreads Emerging markets Financial spillovers SVAR Public finance K4430-4675 Finance HG1-9999 Zekeriya Yildirim Mehmet Ivrendi Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets
description	Abstract This study investigates the international spillover effects of US unconventional monetary policy (UMP)—frequently called large-scale asset purchases or quantitative easing (QE)—on advanced and emerging market economies, using structural vector autoregressive models with high-frequency daily data. Blinder (Federal Reserve Bank of St. Louis Rev 92(6): 465–479, 2010) argued that the QE measures primarily aim to reduce US interest rate spreads, such as term and risk premiums. Considering this argument and recent empirical evidence, we use two spreads as indicators of US UMP: the mortgage and term spreads. Based on data from 20 emerging and 20 advanced countries, our empirical findings reveal that US unconventional monetary policies significantly affect financial conditions in emerging and advanced countries by altering the risk-taking behavior of investors. This result suggests that the risk-taking channel plays an important role in transmitting the effects of these policies to the rest of the world. The extent of these effects depends on the type of QE measures. QE measures such as purchases of private sector securities that lower the US mortgage spread exert stronger and more significant spillover effects on international financial markets than those that reduce the US term spread. Furthermore, the estimated financial spillovers vary substantially across countries and between and within the emerging and advanced countries that we examine in this study.
format	article
author	Zekeriya Yildirim Mehmet Ivrendi
author_facet	Zekeriya Yildirim Mehmet Ivrendi
author_sort	Zekeriya Yildirim
title	Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets
title_short	Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets
title_full	Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets
title_fullStr	Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets
title_full_unstemmed	Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets
title_sort	spillovers of us unconventional monetary policy: quantitative easing, spreads, and international financial markets
publisher	SpringerOpen
publishDate	2021
url	https://doaj.org/article/943d0329f4a64166b73e588e1ab438f2
work_keys_str_mv	AT zekeriyayildirim spilloversofusunconventionalmonetarypolicyquantitativeeasingspreadsandinternationalfinancialmarkets AT mehmetivrendi spilloversofusunconventionalmonetarypolicyquantitativeeasingspreadsandinternationalfinancialmarkets
_version_	1718442447982297088

Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets

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