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The spillover effects of U.S. monetary policy on emerging market economies

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  • Peter Tillmann
  • Geun‐Young Kim
  • Hail Park

Abstract

The recent implementation of unconventional monetary policies in advanced economies and the preparations for an eventual return to normalization have renewed the interest in spillover effects of monetary policy on emerging market economies. This paper estimates a series of VAR‐X models for a set of 10 emerging economies, that is, VARs in which U.S. policy enters exogenously. The contribution of this paper is (a) to use an identified shock component of the U.S. (shadow) federal funds rate as a consistent policy instrument for conventional and unconventional policies, (b) to account for changes in the transmission of U.S. monetary policy over time, and (c) to quantify asymmetries in the transmission of tightening and easing shocks. The results point to substantially nonlinear and asymmetric spillover effects, which pose challenges to policymakers.

Suggested Citation

  • Peter Tillmann & Geun‐Young Kim & Hail Park, 2019. "The spillover effects of U.S. monetary policy on emerging market economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(3), pages 1313-1332, July.
    • Handle: RePEc:wly:ijfiec:v:24:y:2019:i:3:p:1313-1332
    DOI: 10.1002/ijfe.1720
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    Cited by:

    1. Balcilar, Mehmet & Ozdemir, Zeynel Abidin & Ozdemir, Huseyin & Wohar, Mark E., 2020. "Transmission of US and EU Economic Policy Uncertainty Shock to Asian Economies in Bad and Good Times," IZA Discussion Papers 13274, Institute of Labor Economics (IZA).
    2. Hakan Yilmazkuday, 2022. "COVID-19 and Exchange Rates: Spillover Effects of U.S. Monetary Policy," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 50(1), pages 67-84, June.
    3. Zehri, Chokri & Madjd-Sadjadi, Zagros & Saleh Iben Ammar, Latifa, 2024. "Asymmetric impacts of U.S. monetary policy on emerging markets: Contagion and macroeconomic determinants," The Journal of Economic Asymmetries, Elsevier, vol. 29(C).

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