Portfolio investment and U.S. monetary policy announcements: An event study analysis using high-frequency data from Mexico

Main Article Content

Article Sidebar

Published Sep 8, 2021
Marco Hernandez-Vega


We study how unconventional monetary policy announcements affected the entry of foreign investment in debt and equity in Mexico, placing special focus on announcements related to the third QE program and the taper tantrum episode. A novel dataset on daily debt and equity flows, that maps Balance of Payments data quite well, allows this paper to provide a better insight into movements of capital. The results suggest that both equity and debt flows reacted immediately to unexpected U.S. monetary policy announcements, particularly if these are considered as bad news by investors. In turn, results using weekly data support the idea that investors interested in fixed income instruments move more prudently than those interested in equity which react quickly.

How to Cite

Hernandez-Vega, M. (2021). Portfolio investment and U.S. monetary policy announcements: An event study analysis using high-frequency data from Mexico. Journal of Research in Emerging Markets, 3(4), 1–22. https://doi.org/10.30585/jrems.v3i4.682
Abstract 1201 | PDF Downloads 1058

Article Details


Monetary Policy Announcements, Unconventional Monetary Policies, Capital Flows, Foreign Portfolio Investment, Mexican Equity and Bond Market



Abreu Goodger, G. B., Acosta Arellano, M. R., Alvarez Toca, C. , Cortina Morfin, J. J., et al. (2014). Mercado de valores gubernamentales en Mexico. Banco de Mexico.

Arnold, B. C., Balakrishnan, N., & Nagaraja, H. N. (1992). Wiley Series in Probability and Statistics. ISBN 9780471451730. URL https://books.google.com.mx/books?id=1bDCQgAACAAJ.

Bowman, D., Londono, J. M., & Sapriza, H. (2015). US unconventional monetary policy and transmission to emerging market economies. Journal of International Money and Finance, 55, 27-59.

Chen, J., Mancini-Griffoli, T., & Sahay, R. (2014). Spillovers from United States Monetary Policy on Emerging Markets: Different This Time? IMF Working Papers, 2014(240).

Dahlhaus, T., & Vasishtha, G. (2014). The impact of US monetary policy normalization on capital flows to emerging-market economies (No. 2014-53). Bank of Canada working paper.

Fratzscher, M. (2012). Capital flows, push versus pull factors and the global financial crisis. Journal of International Economics, 88 (2), 341–356.

Fratzscher, M., Lo Duca, M., & Straub, R. (2012). A global monetary tsunami? On the spillovers of US Quantitative Easing. On the Spillovers of US Quantitative Easing (October 19, 2012).

Fratzscher, M., Lo Duca, M., & Straub, R. (2018). On the international spillovers of US quantitative easing. The Economic Journal, 128(608), 330-377.

Gürkaynak, R. S., & Wright, J. H. (2013). Identification and inference using event studies. The Manchester School, 81, 48-65.

Gürkaynak, R. S., Sack, B. P., & Swanson, E. T. (2004). Do actions speak louder than words? The response of asset prices to monetary policy actions and statements. The Response of Asset Prices to Monetary Policy Actions and Statements (November 2004).

Gürkaynak, R. S., Sack, B. P., & Swanson, E. T. (2007). Market-based measures of monetary policy expectations. Journal of Business & Economic Statistics, 25(2), 201-212.

Gürkaynak, R. S., Sack, B., & Wright, J. H. (2007). The US Treasury yield curve: 1961 to the present. Journal of monetary Economics, 54(8), 2291-2304.

Hernández-Murillo, R., & Shell, H. (2014). The rising complexity of the FOMC statement. Economic Synopses, (23).

Jotikasthira, C., Lundblad, C., & Ramadorai, T. (2012). Asset fire sales and purchases and the international transmission of funding shocks. Journal of Finance, 67(6), 2015-2050.

Lim, J. J., Mohapatra, S., & Stocker, M. (2014). Tinker, taper, QE, bye? The effect of quantitative easing on financial flows to developing countries. World Bank Policy Research Working Paper, (6820).

Lo Duca, M. (2012). Modelling the time varying determinants of portfolio flows to emerging markets. Working Paper Series 1468, European Central Bank, September 2012.

Park, K. Y. & Um, J. Y. (2016). Spillover Effects of United States’ Unconventional Monetary Policy on Korean Bond Markets: Evidence from High-Frequency Data. The Developing Economies, 54 (1), 27–58.

Stock, J., & Watson, M.W. (2003). Introduction to Econometrics. Prentice Hall, New York.

Weesie, J. (2000). Seemlingly unrelated estimation and the cluster-adjusted sandwich estimator. Stata Technical Bulletin, 9(52).