Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/163103 
Year of Publication: 
2016
Series/Report no.: 
ADBI Working Paper No. 604
Publisher: 
Asian Development Bank Institute (ADBI), Tokyo
Abstract: 
This paper explores the impact of advanced countries' quantitative easing on emerging market economies (EMEs) and how macroprudential policy and good governance play a role in preventing potential financial vulnerabilities. We used confidential locational bank statistics data from the Bank for International Settlements to examine whether quantitative easing has caused an appreciation of EMEs' currencies and how it has done so, and whether this has in turn boosted foreign-currency borrowing, thus making EMEs vulnerable to balance sheet and maturity mismatch problems. While focusing our analysis on East Asian economies, we compare them with Latin American economies, which were also major recipients of quantitative easing capital inflows. We found that government effectiveness plays an important role in curbing excessive borrowing when the exchange rate is overvalued.
Subjects: 
Quantitative easing
spillover effects
macroprudential policy
good governance
capital inflows
emerging market economies (EMEs)
East Asia
Latin America
JEL: 
E44
E58
F31
F32
F34
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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