EFFECTS OF QUANTITATIVE EASING ON ASIA: CAPITAL FLOWS AND FINANCIAL MARKETS

Dongchul Cho · Changyong Rhee

24 citations0/0 files storedThe Singapore Economic Review

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Global Financial Crisis and Policies Monetary Policy and Economic Impact Market Dynamics and Volatility

Abstract

This paper studies the effects of US quantitative easing (QE) on Asia by examining capital flows and financial markets. After the global financial crisis (GFC), Asian economies with more open and developed capital markets experienced greater swings in capital inflows. In particular, large capital flows manifest more in portfolio investment and other investment such as bank loans than in foreign direct investment. Empirical analysis shows QE, QE1 in particular, significantly contributed to the rebounding of capital inflows to the region after the onset of the crisis by lowering domestic yield rates as well as CDS premiums. Although the currency value responses differed across countries, it appears that economies with stable exchange rates roughly coincide with those in which house prices have been rising, suggesting that monetary easing of advanced countries have affected Asian countries through either appreciation of currency values or increases in the prices of housing.

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References

2012International Journal of Central Banking 2012The Financial Market Effects of the Federal Reserve's Large-Scale Asset Purchases 2012Flow and stock effects of large-scale treasury purchases: Evidence on the importance of local supply n.d.Unconventional Monetary Policy and the Great Recession: Estimating the Macroeconomic Effects of a Spread Compression at the Zero Lower Bound 2012Have We Underestimated the Likelihood and Severity of Zero Lower Bound Events?2011Did the Federal Reserve's MBS purchase program lower mortgage rates?2011The Effects of Quantitative Easing on Interest Rates 2010Limits to Arbitrage During the Crisis: Funding Liquidity Constraints and Covered Interest Parity

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