Spillover effect of U.S. quantitative easing from the emerging markets perspective

The US quantitative easing (QE) was undoubtedly one of the most notable monetary policies operated over the last decades. Since its beginning, the QE quickly arose growing concerns all around the world with respect to adverse externalities that it might have caused in a number of foreign economies. The originality of this thesis is focus precisely on the spillover effects of QE on emerging market economies (EMEs). It aims to find evidences of not only QE spillover effects, but also differentiation across countries if any. To do so, we conducted an event study on both EMEs and developed country equity indices at key FOMC’s meetings between 2008 and mid-2015. Unlike the existing literature, our time period of analysis also covers the effective tapering and US interest rate hike talks. As our findings tend to support the existing literature, it can be summarised into the three following points. First, we find evidences supporting the theory that early Fed announcements helped to stabilise and strengthen the global financial market, while later statements provoked higher volatilities in emerging markets. Second, we show that EMEs with stronger fundamentals were more resilient to counter the effect of both the tapering talks and the actual tapering. Third, we find that the use of forward policy guidance may have greatly helped to mitigate the impact on EMEs of the tapering process and more importantly, the rate hike talks. One must however bear in mind the relatively weak explanatory power and the underlying limits that our event study implies. ; Master [120] en Ingénieur de gestion, Université catholique de Louvain, 2015