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Monetary Surprises and Global Financial Flows: A Case Study of Latin America

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  • Eric Fischer

Abstract

This article examines the effect of Federal Reserve announcements on global financial flows to Latin America since the Global Financial Crisis. The Federal Reserve announcements are classified using daily measures of expectations from a shadow rate term structure model as easing (unexpected), tightening (unexpected), easing (expected), and tightening (expected). This classification is then used for an event study on daily global financial flows classified by asset class (debt, equity), currency (all currencies, hard currency, local currency), and region (Latin America, Brazil, and Mexico). The results suggest easing (unexpected) and tightening (unexpected) announcements cause debt outflows but have no effect on equity flows to Latin America. Local currency debt flows to Latin America are more sensitive than the hard currency debt flows and Brazil is the country in Latin America that responds most to these announcements. JEL Classification: F32, G14, G15, N26

Suggested Citation

  • Eric Fischer, 2020. "Monetary Surprises and Global Financial Flows: A Case Study of Latin America," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 19(2), pages 189-225, August.
    • Handle: RePEc:sae:emffin:v:19:y:2020:i:2:p:189-225
    DOI: 10.1177/0972652719890750
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    1. Christensen, Jens H.E. & Fischer, Eric & Shultz, Patrick J., 2021. "Bond flows and liquidity: Do foreigners matter?," Journal of International Money and Finance, Elsevier, vol. 117(C).
    2. Solís, Pavel, 2023. "Do central bank words matter in emerging markets? Evidence from Mexico," Journal of Macroeconomics, Elsevier, vol. 78(C).

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    More about this item

    Keywords

    International financial flows; unconventional monetary policy; Latin America; portfolio flows; financial stability; emerging markets;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • N26 - Economic History - - Financial Markets and Institutions - - - Latin America; Caribbean

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