Uncertainty About Federal Reserve Policy and Its Transmission to Emerging Economies: Evidence from Twitter

Abstract

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Monetary policy spillovers in emerging economies

“…Our results are consistent with the findings of Tillman () that uncertainty about future U.S. monetary policy leads to a depreciation of local currencies in emerging economies. They are also consistent with Gupta et al (, p. 3) who show that a surprise monetary tightening in the United States, “estimated by an increase in 2‐year Treasury yield on the day of the FOMC announcement, results in exchange rate depreciation, decline in equity prices, and increase in bond yields in emerging economies.” In this regard, when the domestic currency depreciates, there is a tendency for borrowers (both banks and nonfinancial firms) in emerging market financial systems to borrow less in U.S. dollars.…”