How Does U.S. Monetary Policy Influence Economic Conditions in Emerging Markets?

Author/Editor:

Vivek B. Arora ; Martin D. Cerisola

Publication Date:

August 1, 2000

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper quantifies the economic impact of changes in U.S. monetary policy on emerging market countries. We explore empirically how country risk, as proxied by sovereign bond spreads, is influenced by U.S. monetary policy, country-specific fundamentals, and conditions in global capital markets. In addition, we simulate the direct effects of a tightening in U.S. monetary policy on economic conditions in developing countries. While country-specific fundamentals are important in explaining fluctuations in country risk, the stance and predictability of U.S. monetary policy are also important for stabilizing capital flows and capital market conditions and fostering economic growth in developing countries.

Series:

Working Paper No. 2000/148

Subject:

English

Publication Date:

August 1, 2000

ISBN/ISSN:

9781451856811/1018-5941

Stock No:

WPIEA1482000

Pages:

28

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