International Spillovers of Monetary Policy: US Federal Reserve’s Quantitative Easing and Bank of Japan’s Quantitative and Qualitative Easing
Kawai, Masahiro | January 2015
Abstract
This paper assesses the impact of unconventional United States (US) and Japanese monetary policies on emerging economies, and explores policy coordination issues to promote macroeconomic and financial stability in developed and emerging economies. The paper first considers a theoretical framework that allows us to analyze the impact of one country’s monetary policy on other economies. There are two important theoretical predictions. One is that the greater the positive impact of monetary policy easing on a country’s real output, the less its beggar-thy-neighbor impact on other countries. The other is that news on future changes in monetary policy can affect exchange rates and stock prices today as financial markets are inherently forward looking. The paper then examines the impact of the US Fed’s QE policy on emerging economies, including the introduction of QE, the expectation of its tapering, and the anticipation of an eventual hike in the interest rate. It also discusses the implications of “Abenomics,” particularly qualitative and quantitative easing (QQE) by the Bank of Japan (BOJ), for Asian emerging economies. It finds that the impact of BOJ QQE has been positive and, in contrast to US QE1, has not created negative consequences for emerging economies. The paper finally explores policy implications for both developed and emerging economies and suggests policies to be adopted at the country, regional and global levels, emphasizing the importance of communication among central banks and with the market and the need to strengthen global financial safety nets.
Citation
Kawai, Masahiro. 2015. International Spillovers of Monetary Policy: US Federal Reserve’s Quantitative Easing and Bank of Japan’s Quantitative and Qualitative Easing. © Asian Development Bank Institute. http://hdl.handle.net/11540/9630.Keywords
Financial Stability
Financial Management System
Financial Restructuring
Capital Market Development
Market Development
Economics
Erosion
International Economics
Macroeconomic
Macroeconomic Analysis
Performance Evaluation
Impact Evaluation
Foreign and Domestic Financing
Foreign Direct Investment
International Financial Market
Multilateral Financial Institutions
Economic Recession
Market
Crisis
Economic indicators
Growth models
Gross domestic product
Macroeconomics
Economic forecast
Business Financing
Investment Requirements
Labor policy
Manpower policy
Business recessions
Multilateral development banks
Regulatory reform
Capital
Exports
Economic development projects
Economic policy
Economic forecasting
Investment Requirements
Banks
International banks and banking
Capital movements
Central banks and banking
Bills of exchange
Swaps
Banks and banking
Financial crisis
Credit control
Credit allocation
Capital market
International liquidity
Liquidity
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Citable URI
http://hdl.handle.net/11540/9630Metadata
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