Monetary policy responses of Asian countries to spillovers from US monetary policy

Pham, Trinh Thi Tuyet; Phuc, Nguyen Tran

doi:10.1111/apel.12254

Cited by 13 publications

(23 citation statements)

References 46 publications

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“…We observed that interest rate in Nigeria is likely to be driven by own innovations and shocks within, given our findings of no evidence of significant spillover effects of monetary policy in US to interest rate. This is in line with some of the findings from the previous studies (see Pham and Phuc, 2019),but it is mainly with respect to the mean equation of the estimated model as far as this present study is concerned. However, our empirical finding from the variance equation suggests that there is a volatility spillover effect of monetary policy in US to interest rates in Nigeria at least in the short run situation.…”

Section: Conclusion and Policy Recommendationssupporting

confidence: 94%

“…Table 4 show that there no evidence of significant spillovers effect of CMP on interest rate in Nigeria. This which finds support in Pham and Phuc (2019) is an indication that interest rate in Nigeria is driven mainly by own innovation as captured by the coefficient on the lagged term (ψ 11 ) of interest rate. We however, observed evidence of positive and significant shock spillover effects of CMP on interest rate (φ 12 ).…”

Section: Empirical Analysesmentioning

confidence: 85%

“…Quite a number of the aforementioned studies have used the case of US and/or Eurozone to empirically demonstrate that the effects of monetary policy actions in these economies tend to spillover to other countries. For details on the findings of previous studies (see Pham and Phuc, 2019). Even though the majority of the studies mainly focused on the response of real economic activities in the home country to shocks due to spillover of effects of monetary policy shocks from the oversea economies, but Potjaalio (2017) as well as Ammer et al (2016)are some of the few exceptions to have considered the effect of the spillover on interest rate and other macroeconomic fundamentals.…”

Section: Empirical Literaturementioning

confidence: 99%

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Spillover effect of United States Monetary Policy on Nigeria’s Financial and Macro Fundamentals

Ekeocha¹,

Udeaja²

2020

CBN-JAS

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This paper examines spillover effects of U.S monetary policy on macroeconomic fundamentals in Nigeria from January 1985 to December 2018. The study period is partitioned to account for conventional monetary policy (CMP) period, January 1985 to August 2007 and unconventional monetary policy (UMP) period, September 2007 to December 2018. Guided by relevant pre-tests, we find BEKK-VARMA-CCCMGARCH as the most appropriate model. The study finds significant spillover effects of U.S CMP and UMP on interest rate, exchange rate and inflation rate in Nigeria. We, however, observe that while CMP may be a significant accelerator of shocks persistence on interest rates and exchange rates, the extent to which the UMP accelerate shocks in inflation rate tends to vary for different measures of quantitative easing. Thus, in addition to past own shocks and past own conditional variance of these macro fundamentals, understanding their dynamics cannot be in isolation of their vulnerability to external shocks and volatility due to spillover effects of monetary actions in other economies. In formulating monetary policy, it is therefore, imperative for the Central Bank of Nigeria to monitor the monetary policy process of the US to hedge against shocks spillovers.

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Section: Conclusion and Policy Recommendationssupporting

confidence: 94%

Section: Empirical Analysesmentioning

confidence: 85%

Section: Empirical Literaturementioning

confidence: 99%

See 1 more Smart Citation

Spillover effect of United States Monetary Policy on Nigeria’s Financial and Macro Fundamentals

Ekeocha¹,

Udeaja²

2020

CBN-JAS

View full text Add to dashboard Cite

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“…The responses of central banks in these regions show that central banks are gradually losing their independence to decide their monetary policy stances. Pham and Nguyen (2019) evaluate the spillover effect of UMP from the US on the monetary policies in Asian countries by a Bayesian vector autoregressive model. To address such an issue, this research considers how policy rates in Asian countries respond to the shock to the Fed policy rate.…”

Section: Literature Reviewmentioning

confidence: 99%

The Spillover Effects of the US Unconventional Monetary Policy: New Evidence from Asian Developing Countries

Tran

Pham

2020

JRFM

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This paper aims to trace the monthly responses of equity prices, long-term interest rates, and exchange rates in Asian developing markets to the US unconventional monetary policy (UMP). The main research question is to explore whether UMP shocks exist in those markets. We also consider the differences in the mean responses of those asset prices between traditional and non-traditional monetary policy phases. To address such concerns, we employ a panel vector autoregression with exogenous variables (Panel VARX) model and estimate the model by the least-squares dummy variable (LSDV) estimator in three different periods spanning from 2004M2 to 2018M4. The first finding is that UMP shocks from the US are associated with a surge in equity prices, a decline in long-term interest rates, and an appreciation of currencies in Asian developing markets. In contrast, the conventional monetary policy shocks from the US seem to exert adverse effects on these recipient countries. These empirical results suggest that the policymakers in Asian developing countries should cautiously take into account the spillover effects from the US unconventional monetary policy once it is executed.

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“…However, rigorous empirical analysis is essential to draw a firm conclusion in this regard. The spillover of foreign interest rates to advanced and emerging economies has been well-researched, most recently by Iacoviello and Navarro (2019) and Pham and Nguyen (2019). Iacoviello and Navarro (2019) find that the U.S. interest rates are transmitted through the channels of the exchange rate, trade and finance, but that these transmissions are largely heterogeneous between advanced and emerging economies.…”

Section: Impact Of Foreign Interest Ratementioning

confidence: 99%

Deficits, Debt and Interest Rates in Sri Lanka: Does the Spillover of Foreign Interest Rates Matter?

Mondal

Maitra²

2022

Margin: The Journal of Applied Economic Research

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Fiscal policy’s impact on the interest rate has a controversial background. To reconcile theoretical uncertainties, researchers and policymakers often relied on empirical exploration. This article appraises the impact of external debt, domestic debt, the budget deficit, and foreign interest rates on interest rate variations in Sri Lanka, for the period when interest rates were deregulated. It applies the bounds testing procedure to the cointegration and error correction models within an autoregressive distributive lag framework. A set of relevant variables like the exchange rate, trade openness and money supply is controlled to corroborate whether such impacts are robust. It is found that the budget deficit elevates interest rates both in the long and short runs; external debt raises interest rates only in the long run; and domestic debt lowers interest rates both in the long and short runs. The spillover of foreign interest rates has a positive impact on Sri Lanka’s interest rate. As interest rates respond to domestic fiscal policy, they can induce fiscal discipline by affecting the cost of borrowing. On the other hand, the significant impact of foreign interest rates on Sri Lanka’s interest rate is a critical issue, as domestic macroeconomic policy has to face challenges to achieve its goal. JEL Classification: E62, E43, E52, H60

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Monetary policy responses of Asian countries to spillovers from US monetary policy

Cited by 13 publications

References 46 publications

Spillover effect of United States Monetary Policy on Nigeria’s Financial and Macro Fundamentals

Spillover effect of United States Monetary Policy on Nigeria’s Financial and Macro Fundamentals

The Spillover Effects of the US Unconventional Monetary Policy: New Evidence from Asian Developing Countries

Deficits, Debt and Interest Rates in Sri Lanka: Does the Spillover of Foreign Interest Rates Matter?

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