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Global spillover effects of US uncertainty

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  • Bhattarai, Saroj
  • Chatterjee, Arpita
  • Park, Woong Yong

Abstract

Spillover effects of US uncertainty shocks are studied in a panel VAR of fifteen emerging market economies (EMEs). A US uncertainty shock negatively affects EME stock prices and exchange rates, raises EME country spreads, and decreases capital inflows into them. It decreases EME output and consumer prices while increasing net exports. Negative effects on output and asset prices are weaker, but effects on external balance stronger, for Latin American EMEs. We attribute such heterogeneity to differential EME monetary policy response to US uncertainty shocks. Analysis of central bank minutes shows Latin American EMEs pay less attention to smoothing capital flows.

Suggested Citation

  • Bhattarai, Saroj & Chatterjee, Arpita & Park, Woong Yong, 2020. "Global spillover effects of US uncertainty," Journal of Monetary Economics, Elsevier, vol. 114(C), pages 71-89.
    • Handle: RePEc:eee:moneco:v:114:y:2020:i:c:p:71-89
    DOI: 10.1016/j.jmoneco.2019.05.008
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    More about this item

    Keywords

    US Uncertainty; Panel VAR; Emerging market economies; Monetary policy response; Emerging market monetary policy minutes;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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