Financial crisis,US unconventional monetary policy and international spillovers |
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| Institution: | 1. International Monetary Fund, 700 19th Street, N.W., Washington, DC 20431, USA;2. Bank for International Settlements, Centralbahnplatz 2, Basel 4051, Switzerland;3. Representative Office for Asia and the Pacific, Bank for International Settlements, 78th Floor, Two IFC, 8 Finance Street, Central, Hong Kong, China;1. University of Southern California, University Park, Los Angeles, CA 90089-0043, USA;2. Robert M. La Follette School of Public Affairs, University of Wisconsin, 1225 Observatory Drive, Madison, WI 53706, USA;3. Department of Economics, University of Wisconsin, 1180 Observatory Drive, Madison, WI 53706, USA;4. Department of Economics, Portland State University, 1721 SW Broadway, Portland, OR 97201, USA |
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| Abstract: | We study the impact of US quantitative easing (QE) on both the emerging and advanced economies, estimating a global vector error-correction model (GVECM). We focus on the effects of reductions in the US term and corporate spreads. The estimated effects of QE are sizeable and vary across economies. First, we find the QE impact from reducing the US corporate spread to be more important than that from lowering the US term spread, consistent with Blinder's (2012) argument. Second, counterfactual exercises suggest that successive US QE measures might have prevented episodes of prolonged recession and deflation in the advanced economies. Third, the estimated effects on the emerging economies are diverse but generally larger than those found for the United States and other advanced economies. The estimates suggest that US monetary policy spillovers contributed to the overheating in Brazil, China and some other emerging economies in 2010 and 2011, but supported their respective recoveries in 2009 and 2012. These heterogeneous effects point to unevenly distributed benefits and costs of cross-border monetary policy spillovers. |
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