Unconventional monetary policy and international equity capital flows to emerging markets

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).

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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

Published 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.

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