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Unconventional monetary policy and international equity capital flows to emerging markets

Unconventional monetary policy and international equity capital flows to emerging markets
Unconventional monetary policy and international equity capital flows to emerging markets
This paper examines the relationship between monetary policies pursued by three major central banks (U.S. Federal Reserve, European Central Bank and Bank of Japan) and net equity capital flows to emerging markets (EMs) by global investment funds. We focus on two aspects of central bank policy: The growth of central bank assets and the surprise element of asset growth. We find, first, positive, economically large and statistically significant spillovers from the U.S. Federal Reserve asset growth to EM equity inflows following the adoption of unconventional monetary policies. Second, U.S. Federal Reserve and (to a lesser extent) European Central Bank asset growth surprises are negatively related to EM capital flows.
emerging markets, international capital flows, unconventional monetary policy
1354-7798
Andreou, Christoforos K.
7e3cbbe0-1d81-407d-aa00-acee91c04d9a
Dimic, Nebojsa
23e8ae26-d6f5-43c1-9df2-447ea37e9536
Piljak, Vanja
8045340b-63e7-402d-9d87-5bbc6d4f17e5
Savvides, Andreas
d05bf9a2-23e7-45de-ae2c-4a28e673c987
Andreou, Christoforos K.
7e3cbbe0-1d81-407d-aa00-acee91c04d9a
Dimic, Nebojsa
23e8ae26-d6f5-43c1-9df2-447ea37e9536
Piljak, Vanja
8045340b-63e7-402d-9d87-5bbc6d4f17e5
Savvides, Andreas
d05bf9a2-23e7-45de-ae2c-4a28e673c987

Andreou, Christoforos K., Dimic, Nebojsa, Piljak, Vanja and Savvides, Andreas (2021) Unconventional monetary policy and international equity capital flows to emerging markets. European Financial Management. (doi:10.1111/eufm.12312).

Record type: Article

Abstract

This paper examines the relationship between monetary policies pursued by three major central banks (U.S. Federal Reserve, European Central Bank and Bank of Japan) and net equity capital flows to emerging markets (EMs) by global investment funds. We focus on two aspects of central bank policy: The growth of central bank assets and the surprise element of asset growth. We find, first, positive, economically large and statistically significant spillovers from the U.S. Federal Reserve asset growth to EM equity inflows following the adoption of unconventional monetary policies. Second, U.S. Federal Reserve and (to a lesser extent) European Central Bank asset growth surprises are negatively related to EM capital flows.

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Accepted/In Press date: 29 April 2021
e-pub ahead of print date: 29 April 2021
Additional Information: Funding Information: We would like to thank the Editor (John Doukas), an anonymous referee, Luis Ceballos, and conference participants of the Southern Finance Association for very helpful comments and suggestions on previous versions of the paper. Vanja Piljak is thankful for financial support from the OP Group Research Foundation (grant 20180061), Evald and Hilda Nissi Foundation and the Foundation for the Advancement of Finnish Securities Markets. Publisher Copyright: © 2021 The Authors. European Financial Management published by John Wiley & Sons Ltd. Copyright: Copyright 2021 Elsevier B.V., All rights reserved.
Keywords: emerging markets, international capital flows, unconventional monetary policy

Identifiers

Local EPrints ID: 452169
URI: http://eprints.soton.ac.uk/id/eprint/452169
ISSN: 1354-7798
PURE UUID: 0191e44f-5314-4172-8751-3ffd2f9964ca
ORCID for Christoforos K. Andreou: ORCID iD orcid.org/0000-0002-5395-4807

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Date deposited: 26 Nov 2021 17:33
Last modified: 28 Apr 2022 02:33

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Contributors

Author: Nebojsa Dimic
Author: Vanja Piljak
Author: Andreas Savvides

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