Karlye Dilts Stedman
CB #3305, Department of Economics
University of North Carolina at Chapel Hill
Chapel Hill NC 27599
NBER Working Papers and Publications
|June 2017||Taper Tantrums: QE, its Aftermath and Emerging Market Capital Flows|
with Anusha Chari, Christian Lundblad: w23474
This paper provides a novel perspective on the impact of U.S. unconventional monetary policy (UMP) on emerging market capital flows and asset prices. Using high-frequency Treasury futures data to identify U.S. monetary policy shocks, we find, through the lens of an affine term structure model, that these shocks represent revisions to both the expected path of short-term interest rates and required risk compensation. The risk compensation component is especially important during the UMP periods. Further, we find that these high-frequency policy shocks do exhibit sizable effects on U.S. holdings of emerging market assets and their valuations. We also document that the relative effects of U.S. monetary policy shocks are larger for emerging asset returns relative to physical capital flows, and...