Tapering Talk : The Impact of Expectations of Reduced Federal Reserve Security Purchases on Emerging Markets
In May 2013, Federal Reserve officials first began to talk of the possibility of tapering their security purchases. This tapering talk had a sharp negative impact on emerging markets. Different countries, however, were affected very differently. Th...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2014
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| Online Access: | http://documents.worldbank.org/curated/en/2014/01/18832605/tapering-talk-impact-expectations-reduced-federal-reserve-security-purchases-emerging-markets http://hdl.handle.net/10986/16826 |
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okr-10986-16826 |
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oai_dc |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
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English en_US |
| topic |
ASSET PRICES ASSETS BANK LENDING BASIS POINTS BOND SPREAD BOND SPREADS BOND YIELDS BUDGET DEFICIT BUDGET DEFICITS BUSINESS ENVIRONMENT CAPITAL ACCOUNT CAPITAL ACCOUNT OPENNESS CAPITAL ACCOUNT TRANSACTIONS CAPITAL CONTROL CAPITAL CONTROLS CAPITAL FLOWS CAPITAL MARKET CDS CENTRAL BANK CHECKS CLOSED CAPITAL ACCOUNT COMPETITIVENESS CONSUMER PRICE INDEX CONTROL VARIABLE CORRELATION COEFFICIENTS CREDIT DEFAULT CREDIT DEFAULT SWAP CREDIT DEFAULT SWAPS CURRENCY CURRENCY DEPRECIATION CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT TRANSACTIONS CURRENT ACCOUNTS CURRENT DEFICIT DE FACTO EXCHANGE RATE REGIME DEBTS DEPENDENT VARIABLE DEPRECIATIONS DEVELOPMENT ECONOMICS DEVELOPMENT POLICY ECONOMIC GROWTH ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC POLICY EMERGING COUNTRIES EMERGING MARKET EMERGING MARKETS EQUITIES EQUITY PRICE EQUITY PRICES EXCHANGE ARRANGEMENTS EXCHANGE DEPRECIATION EXCHANGE MARKET EXCHANGE RATE DATA EXCHANGE RATE DEPRECIATION EXCHANGE RATE REGIME EXCHANGE RATES EXCHANGE RESTRICTIONS EXPLANATORY VARIABLES EXTERNAL DEBT EXTERNAL FINANCE EXTERNAL FINANCING EXTERNAL PRESSURES FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL INFLOWS FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL SECTOR FINANCIAL SHOCKS FINANCIAL SYSTEMS FISCAL DEFICIT FISCAL POLICY FOREIGN ASSETS FOREIGN CAPITAL FOREIGN INVESTORS FOREIGN RESERVES GDP GLOBAL FINANCIAL STABILITY GOVERNANCE INDICATOR GOVERNANCE INDICATORS GOVERNMENT BOND GOVERNMENT BOND MARKETS GROWTH RATE GROWTH RATES IMPORTS INFLATION INFLATION INDEX INFLATION RATE INTEREST RATE INTEREST RATE SPREADS INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL STATISTICS LIABILITY LIQUID MARKET LIQUIDITY LOAN LOCAL CURRENCY LOCAL MARKET LOCAL MARKETS M2 MACROECONOMIC CONDITIONS MARKET CONDITIONS MARKET PRESSURE MARKET SIZE MARKET STOCK MARKET STRUCTURE MARKET YIELDS MONETARY FUND MONETARY POLICY MORTGAGE MORTGAGE MARKET MULTIPLE EXCHANGE RATES NOMINAL DEPRECIATION NOMINAL EXCHANGE RATE OPEN CAPITAL ACCOUNT PERCEIVED VULNERABILITY POLICY ANALYSIS POLICY RESEARCH PORTFOLIO PORTFOLIO LIABILITIES PORTFOLIO LIABILITY PORTFOLIOS PRIVATE CAPITAL PRIVATE CAPITAL INFLOWS PRIVATE FINANCING PRIVATE INFLOWS PUBLIC DEBT RATE OF DEPRECIATION RATE OF GROWTH REAL APPRECIATION REAL EFFECTIVE EXCHANGE RATES REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATE APPRECIATION REAL EXCHANGE RATES REAL GDP REGRESSION ANALYSIS RESERVE BANK RESERVES ROBUSTNESS CHECKS SECURITIES SHORT TERM DEBT SOVEREIGN BOND SOVEREIGN BONDS SPECULATIVE ATTACKS STANDARD DEVIATION STANDARD DEVIATIONS STOCK EXCHANGE STOCK INDEX STOCK INDICES STOCK MARKET STOCK MARKET CAPITALIZATION STOCK MARKET DECLINE STOCK MARKET DECLINES STOCK MARKET INDEX STOCK MARKET INDICES STOCK MARKETS STOCK PRICE STOCK PRICES STOCKS TOTAL EXTERNAL DEBT TOTAL RESERVES TREASURIES UPWARD PRESSURE WEALTH WEIGHTS WORLD DEVELOPMENT INDICATORS |
| spellingShingle |
ASSET PRICES ASSETS BANK LENDING BASIS POINTS BOND SPREAD BOND SPREADS BOND YIELDS BUDGET DEFICIT BUDGET DEFICITS BUSINESS ENVIRONMENT CAPITAL ACCOUNT CAPITAL ACCOUNT OPENNESS CAPITAL ACCOUNT TRANSACTIONS CAPITAL CONTROL CAPITAL CONTROLS CAPITAL FLOWS CAPITAL MARKET CDS CENTRAL BANK CHECKS CLOSED CAPITAL ACCOUNT COMPETITIVENESS CONSUMER PRICE INDEX CONTROL VARIABLE CORRELATION COEFFICIENTS CREDIT DEFAULT CREDIT DEFAULT SWAP CREDIT DEFAULT SWAPS CURRENCY CURRENCY DEPRECIATION CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT TRANSACTIONS CURRENT ACCOUNTS CURRENT DEFICIT DE FACTO EXCHANGE RATE REGIME DEBTS DEPENDENT VARIABLE DEPRECIATIONS DEVELOPMENT ECONOMICS DEVELOPMENT POLICY ECONOMIC GROWTH ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC POLICY EMERGING COUNTRIES EMERGING MARKET EMERGING MARKETS EQUITIES EQUITY PRICE EQUITY PRICES EXCHANGE ARRANGEMENTS EXCHANGE DEPRECIATION EXCHANGE MARKET EXCHANGE RATE DATA EXCHANGE RATE DEPRECIATION EXCHANGE RATE REGIME EXCHANGE RATES EXCHANGE RESTRICTIONS EXPLANATORY VARIABLES EXTERNAL DEBT EXTERNAL FINANCE EXTERNAL FINANCING EXTERNAL PRESSURES FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL INFLOWS FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL SECTOR FINANCIAL SHOCKS FINANCIAL SYSTEMS FISCAL DEFICIT FISCAL POLICY FOREIGN ASSETS FOREIGN CAPITAL FOREIGN INVESTORS FOREIGN RESERVES GDP GLOBAL FINANCIAL STABILITY GOVERNANCE INDICATOR GOVERNANCE INDICATORS GOVERNMENT BOND GOVERNMENT BOND MARKETS GROWTH RATE GROWTH RATES IMPORTS INFLATION INFLATION INDEX INFLATION RATE INTEREST RATE INTEREST RATE SPREADS INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL STATISTICS LIABILITY LIQUID MARKET LIQUIDITY LOAN LOCAL CURRENCY LOCAL MARKET LOCAL MARKETS M2 MACROECONOMIC CONDITIONS MARKET CONDITIONS MARKET PRESSURE MARKET SIZE MARKET STOCK MARKET STRUCTURE MARKET YIELDS MONETARY FUND MONETARY POLICY MORTGAGE MORTGAGE MARKET MULTIPLE EXCHANGE RATES NOMINAL DEPRECIATION NOMINAL EXCHANGE RATE OPEN CAPITAL ACCOUNT PERCEIVED VULNERABILITY POLICY ANALYSIS POLICY RESEARCH PORTFOLIO PORTFOLIO LIABILITIES PORTFOLIO LIABILITY PORTFOLIOS PRIVATE CAPITAL PRIVATE CAPITAL INFLOWS PRIVATE FINANCING PRIVATE INFLOWS PUBLIC DEBT RATE OF DEPRECIATION RATE OF GROWTH REAL APPRECIATION REAL EFFECTIVE EXCHANGE RATES REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATE APPRECIATION REAL EXCHANGE RATES REAL GDP REGRESSION ANALYSIS RESERVE BANK RESERVES ROBUSTNESS CHECKS SECURITIES SHORT TERM DEBT SOVEREIGN BOND SOVEREIGN BONDS SPECULATIVE ATTACKS STANDARD DEVIATION STANDARD DEVIATIONS STOCK EXCHANGE STOCK INDEX STOCK INDICES STOCK MARKET STOCK MARKET CAPITALIZATION STOCK MARKET DECLINE STOCK MARKET DECLINES STOCK MARKET INDEX STOCK MARKET INDICES STOCK MARKETS STOCK PRICE STOCK PRICES STOCKS TOTAL EXTERNAL DEBT TOTAL RESERVES TREASURIES UPWARD PRESSURE WEALTH WEIGHTS WORLD DEVELOPMENT INDICATORS Eichengreen, Barry Gupta, Poonam Tapering Talk : The Impact of Expectations of Reduced Federal Reserve Security Purchases on Emerging Markets |
| relation |
Policy Research Working Paper;No. 6754 |
| description |
In May 2013, Federal Reserve officials
first began to talk of the possibility of tapering their
security purchases. This tapering talk had a sharp negative
impact on emerging markets. Different countries, however,
were affected very differently. This paper uses data on
exchange rates, foreign reserves and equity prices between
April and August 2013 to analyze who was hit and why. It
finds that emerging markets that allowed the real exchange
rate to appreciate and the current account deficit to widen
during the prior period of quantitative easing saw the
sharpest impact. Better fundamentals (the budget deficit,
the public debt, the level of reserves, or the rate of
economic growth) did not provide insulation. A more
important determinant of the differential impact was the
size of the country's financial market: countries with
larger markets experienced more pressure on the exchange
rate, foreign reserves, and equity prices. This is
interpreted as showing that investors are better able to
rebalance their portfolios when the target country has a
relatively large and liquid financial market. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Eichengreen, Barry Gupta, Poonam |
| author_facet |
Eichengreen, Barry Gupta, Poonam |
| author_sort |
Eichengreen, Barry |
| title |
Tapering Talk : The Impact of Expectations of Reduced Federal Reserve Security Purchases on Emerging Markets |
| title_short |
Tapering Talk : The Impact of Expectations of Reduced Federal Reserve Security Purchases on Emerging Markets |
| title_full |
Tapering Talk : The Impact of Expectations of Reduced Federal Reserve Security Purchases on Emerging Markets |
| title_fullStr |
Tapering Talk : The Impact of Expectations of Reduced Federal Reserve Security Purchases on Emerging Markets |
| title_full_unstemmed |
Tapering Talk : The Impact of Expectations of Reduced Federal Reserve Security Purchases on Emerging Markets |
| title_sort |
tapering talk : the impact of expectations of reduced federal reserve security purchases on emerging markets |
| publisher |
World Bank, Washington, DC |
| publishDate |
2014 |
| url |
http://documents.worldbank.org/curated/en/2014/01/18832605/tapering-talk-impact-expectations-reduced-federal-reserve-security-purchases-emerging-markets http://hdl.handle.net/10986/16826 |
| _version_ |
1764435072539164672 |
| spelling |
okr-10986-168262021-04-23T14:03:33Z Tapering Talk : The Impact of Expectations of Reduced Federal Reserve Security Purchases on Emerging Markets Eichengreen, Barry Gupta, Poonam ASSET PRICES ASSETS BANK LENDING BASIS POINTS BOND SPREAD BOND SPREADS BOND YIELDS BUDGET DEFICIT BUDGET DEFICITS BUSINESS ENVIRONMENT CAPITAL ACCOUNT CAPITAL ACCOUNT OPENNESS CAPITAL ACCOUNT TRANSACTIONS CAPITAL CONTROL CAPITAL CONTROLS CAPITAL FLOWS CAPITAL MARKET CDS CENTRAL BANK CHECKS CLOSED CAPITAL ACCOUNT COMPETITIVENESS CONSUMER PRICE INDEX CONTROL VARIABLE CORRELATION COEFFICIENTS CREDIT DEFAULT CREDIT DEFAULT SWAP CREDIT DEFAULT SWAPS CURRENCY CURRENCY DEPRECIATION CURRENT ACCOUNT CURRENT ACCOUNT BALANCE CURRENT ACCOUNT DEFICIT CURRENT ACCOUNT DEFICITS CURRENT ACCOUNT TRANSACTIONS CURRENT ACCOUNTS CURRENT DEFICIT DE FACTO EXCHANGE RATE REGIME DEBTS DEPENDENT VARIABLE DEPRECIATIONS DEVELOPMENT ECONOMICS DEVELOPMENT POLICY ECONOMIC GROWTH ECONOMIC OUTLOOK ECONOMIC PERFORMANCE ECONOMIC POLICY EMERGING COUNTRIES EMERGING MARKET EMERGING MARKETS EQUITIES EQUITY PRICE EQUITY PRICES EXCHANGE ARRANGEMENTS EXCHANGE DEPRECIATION EXCHANGE MARKET EXCHANGE RATE DATA EXCHANGE RATE DEPRECIATION EXCHANGE RATE REGIME EXCHANGE RATES EXCHANGE RESTRICTIONS EXPLANATORY VARIABLES EXTERNAL DEBT EXTERNAL FINANCE EXTERNAL FINANCING EXTERNAL PRESSURES FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL INFLOWS FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL OPENNESS FINANCIAL SECTOR FINANCIAL SHOCKS FINANCIAL SYSTEMS FISCAL DEFICIT FISCAL POLICY FOREIGN ASSETS FOREIGN CAPITAL FOREIGN INVESTORS FOREIGN RESERVES GDP GLOBAL FINANCIAL STABILITY GOVERNANCE INDICATOR GOVERNANCE INDICATORS GOVERNMENT BOND GOVERNMENT BOND MARKETS GROWTH RATE GROWTH RATES IMPORTS INFLATION INFLATION INDEX INFLATION RATE INTEREST RATE INTEREST RATE SPREADS INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL STATISTICS LIABILITY LIQUID MARKET LIQUIDITY LOAN LOCAL CURRENCY LOCAL MARKET LOCAL MARKETS M2 MACROECONOMIC CONDITIONS MARKET CONDITIONS MARKET PRESSURE MARKET SIZE MARKET STOCK MARKET STRUCTURE MARKET YIELDS MONETARY FUND MONETARY POLICY MORTGAGE MORTGAGE MARKET MULTIPLE EXCHANGE RATES NOMINAL DEPRECIATION NOMINAL EXCHANGE RATE OPEN CAPITAL ACCOUNT PERCEIVED VULNERABILITY POLICY ANALYSIS POLICY RESEARCH PORTFOLIO PORTFOLIO LIABILITIES PORTFOLIO LIABILITY PORTFOLIOS PRIVATE CAPITAL PRIVATE CAPITAL INFLOWS PRIVATE FINANCING PRIVATE INFLOWS PUBLIC DEBT RATE OF DEPRECIATION RATE OF GROWTH REAL APPRECIATION REAL EFFECTIVE EXCHANGE RATES REAL EXCHANGE REAL EXCHANGE RATE REAL EXCHANGE RATE APPRECIATION REAL EXCHANGE RATES REAL GDP REGRESSION ANALYSIS RESERVE BANK RESERVES ROBUSTNESS CHECKS SECURITIES SHORT TERM DEBT SOVEREIGN BOND SOVEREIGN BONDS SPECULATIVE ATTACKS STANDARD DEVIATION STANDARD DEVIATIONS STOCK EXCHANGE STOCK INDEX STOCK INDICES STOCK MARKET STOCK MARKET CAPITALIZATION STOCK MARKET DECLINE STOCK MARKET DECLINES STOCK MARKET INDEX STOCK MARKET INDICES STOCK MARKETS STOCK PRICE STOCK PRICES STOCKS TOTAL EXTERNAL DEBT TOTAL RESERVES TREASURIES UPWARD PRESSURE WEALTH WEIGHTS WORLD DEVELOPMENT INDICATORS In May 2013, Federal Reserve officials first began to talk of the possibility of tapering their security purchases. This tapering talk had a sharp negative impact on emerging markets. Different countries, however, were affected very differently. This paper uses data on exchange rates, foreign reserves and equity prices between April and August 2013 to analyze who was hit and why. It finds that emerging markets that allowed the real exchange rate to appreciate and the current account deficit to widen during the prior period of quantitative easing saw the sharpest impact. Better fundamentals (the budget deficit, the public debt, the level of reserves, or the rate of economic growth) did not provide insulation. A more important determinant of the differential impact was the size of the country's financial market: countries with larger markets experienced more pressure on the exchange rate, foreign reserves, and equity prices. This is interpreted as showing that investors are better able to rebalance their portfolios when the target country has a relatively large and liquid financial market. 2014-02-03T20:51:44Z 2014-02-03T20:51:44Z 2014-01 http://documents.worldbank.org/curated/en/2014/01/18832605/tapering-talk-impact-expectations-reduced-federal-reserve-security-purchases-emerging-markets http://hdl.handle.net/10986/16826 English en_US Policy Research Working Paper;No. 6754 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |