Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
8942358 | Journal of International Financial Markets, Institutions and Money | 2018 | 63 Pages |
Abstract
The empirical literature has long established that U.S. interest rates are an important driver of international portfolio flows, with lower rates “pushing” foreign capital to EMs. On this basis, it is often argued that Fed tightening is likely to weigh on EM portfolio flows in coming years. This paper offers a different interpretation of the literature and provides empirical evidence that it is mainly the surprise element of monetary policy that affects EM portfolio inflows. A shift in market expectations towards easier future U.S. monetary policy leads to greater EM portfolio inflows, while an upward shift in interest rate expectations reduces such flows.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Robin Koepke,