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Advanced Country Monetary Policy Spillovers to Emerging Markets

Paper Session

Sunday, Jan. 5, 2020 10:15 AM - 12:15 PM (PDT)

Marriott Marquis, Grand Ballroom 4
Hosted By: American Economic Association
  • Chair: Sebnem Kalemli-Ozcan, University of Maryland

Capital Flow Waves—Or Ripples? Extreme Capital Flow Movements In an Era of Easy Monetary Policy

Kristin Forbes
,
Massachusetts Institute of Technology
Frank Warnock
,
University of Virginia

Abstract

Has the occurrence of “extreme capital flow movements”—episodes of sudden stops, starts, flight and retrenchment—changed during the last decade of monetary stimulus and unconventional monetary policy? This paper answers this question by updating and building on the dataset and methodology introduced in Forbes and Warnock (2012) to calculate the occurrence of sharp capital flow movements by foreigners and domestics into and out of individual countries. The preliminary results suggest that the occurrence of these extreme capital flow movements has not increased since the Global Financial Crisis. The drivers of these episodes, however, appears to have changed, with a less prominent role for global variables, especially global risk aversion. What used to be large “waves” in international capital flows have more recently become “ripples”.

Monetary Policy Transmission and Capital Controls: Micro-Evidence from Colombia

Daniel Dias
,
Central Bank of Columbia
Helene Rey
,
London Business School

Abstract

An important question in international macroeconomics is to what extent decreasing capital mobility increases monetary policy autonomy. Using loan-level data from Colombia we analyze how the imposition of capital controls has affected the transmission of domestic and foreign monetary policy in a cross-section of banks heterogenous in their exposures to foreign capital flows.

The Shifting Drivers of Global Liquidity

Stefan Avdjiev
,
Bank for International Settlements
Leonardo Gambacorta
,
Bank for International Settlements
Linda Goldberg
,
Federal Reserve Bank of New York
Stefano Schiaffi
,
Bank of Italy

Abstract

The sensitivities of the main global liquidity components, international loan and bond flows, to global factors varied considerably over the past decade. The estimated sensitivity to US monetary policy rose substantially in the immediate aftermath of the Global Financial Crisis, peaked around the time of the 2013 Fed “taper tantrum”, and then reverted towards pre-crisis levels. Conversely, the responsiveness of international bank lending to global risk conditions declined steadily throughout the post-crisis period. We show that the main driver of the fluctuations in the estimated sensitivities to US monetary policy was the degree of convergence among advanced economy monetary policies. Meanwhile, the post-crisis fall in the sensitivity of international bank lending to global risk was mainly driven by increases in the lending shares of better-capitalized banking systems.

US Monetary Policy and International Risk Spillovers

Sebnem Kalemli-Ozcan
,
University of Maryland
Daniel A. Dias
,
Federal Reserve Board
Yi Huang
,
IHEAD
Helene Rey
,
London Business School
Miguel Sarmiento
,
Bank of Republic of Columbia and European Banking Center

Abstract

I investigate how advanced country policies spillover to emerging markets, detailing out the transmission mechanisms.
Discussant(s)
Pierre De Leo
,
University of Maryland
Pierre-Olivier Gourinchas
,
University of California-Berkeley
Matteo Maggiori
,
Harvard University
Ozge Akinci
,
Federal Reserve Bank of New York
JEL Classifications
  • F2 - International Factor Movements and International Business
  • E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit