Impact of Fed Tapering Announcements on Emerging Markets

By Prachi Mishra, Kenji Moriyama, Papa M N'Diaye, Lam Nguyen

June 17, 2014

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Format: Chicago

Prachi Mishra, Kenji Moriyama, Papa M N'Diaye, and Lam Nguyen. Impact of Fed Tapering Announcements on Emerging Markets, (USA: International Monetary Fund, 2014) accessed November 12, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes market reactions to the 2013–14 Fed announcements relating to tapering of asset purchases and their relationship to macroeconomic fundamentals and country economic and financial structures. The study uses daily data on exchange rates, government bond yields, and stock prices for 21 emerging markets. It finds evidence of markets differentiating across countries around volatile episodes. Countries with stronger macroeconomic fundamentals, deeper financial markets, and a tighter macroprudential policy stance in the run-up to the tapering announcements experienced smaller currency depreciations and smaller increases in government bond yields. At the same time, there was less differentiation in the behavior of stock prices based on fundamentals.

Subject: Balance of payments, Bond yields, Capital flows, Exchange rates, Financial institutions, Financial integration, Financial markets, Foreign exchange, Stock markets

Keywords: Africa, Bank credit, Bond yields, Capital flows, Emerging markets, Exchange rate, Exchange rate depreciation, Exchange rates, Fed monetary policy, Fed policy announcements, Financial integration, Global, Government bond, Market participant, Market reaction, Monetary policy, New York Fed survey, Real GDP, Stock markets, Tapering, Vulnerability, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/109
Stock No:

WPIEA2014109
ISBN:

9781498361484
ISSN:

1018-5941

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