Does monetary policy in advanced economies have differentiated effects on portfolio flows to emerging economies?

Authors

DOI:

https://doi.org/10.30585/jrems.v2i3.483

Keywords:

Emerging Markets, Foregin Portfolio Investment, Monetary Policy Announcements

Abstract

This work analyzes whether the monetary policy in advanced economies (the US, the euro area, and the UK) had differentiated effects on portfolio flows from these countries toward EMEs. The results show the following: First, US monetary policy had a bigger impact on bond and equity investment to EMEs than the euro area or UK monetary policy. Second, investors' response to US monetary policy was mostly homogeneous. Among EMEs regions, foreign portfolio investment to Emerging Europe and Latin America was more volatile that than to Emerging Asia, probably because other factors such as investors' preference (in the case of bond flows) or expectations of firms' profits (in the case of equity flows) could play an important role in investors' decisions. These results could be useful for policymakers from EMEs as a benchmark to anticipate differentiated effects in portfolio flows caused by advanced economies' monetary policy.

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Published

2020-05-12

How to Cite

Hernandez, M. (2020). Does monetary policy in advanced economies have differentiated effects on portfolio flows to emerging economies?. Journal of Research in Emerging Markets, 2(3), 25-70. https://doi.org/10.30585/jrems.v2i3.483