The Role of Institutions and Macroprudential Policy in Managing Spillovers from Quantitative Easing Policies

Belke, Ansgar; Volz, Ulrich

Abstract

This chapter 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 use 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 find that government effectiveness plays an important role in curbing excessive borrowing when the exchange rate is overvalued.

Citation

Belke, A., & Volz, U. (2019). The Role of Institutions and Macroprudential Policy in Managing Spillovers from Quantitative Easing Policies. In P. Chantapacdepong, M. Helble, & N. Yoshino (Eds.), Macroeconomic Shocks and Unconventional Monetary Policy. Impacts on Emerging Markets (263-293). Oxford University Press. https://doi.org/10.1093/oso/9780198838104.003.0012

• Publication Date: Aug 1, 2019
• Deposit Date: Apr 20, 2020
• Publisher: Oxford University Press
• Pages: 263-293
• Book Title: Macroeconomic Shocks and Unconventional Monetary Policy. Impacts on Emerging Markets
• ISBN: 9780198838104
• DOI: https://doi.org/10.1093/oso/9780198838104.003.0012
• Related Public URLs: https://www.oxfordscholarship.com/view/10.1093/oso/9780198838104.001.0001/oso-9780198838104-chapter-12