Spillovers from U.S. Monetary Policy Normalization on Brazil and Mexico's Sovereign Bond Yields.

By:

Góes, Carlos

Contributor(s):

Material type: Text

TextSeries: IMF Working PapersPublication details: Washington, D.C. : International Monetary Fund, 2017.Description: 1 online resource (40 pages)Content type:

text

Media type:

computer

Carrier type:

online resource

ISBN:

9781475586732
1475586736

ISSN:

1018-5941

Subject(s):

Genre/Form:

Electronic books.

Additional physical formats: Print version:: Spillovers from U.S. Monetary Policy Normalization on Brazil and Mexico's Sovereign Bond Yields.DDC classification:

332.4981 23

LOC classification:

HG835

Online resources:

EBSCOhost

Contents:

Cover; Contents; Abstract; I. Introduction; II. Literature Review; III. Data Description and Model Specification; A. Data Description; B. Model Specification and Estimation; IV. Baseline Results; A. Impulse Responses of Local-Currency 10-Year Sovereign Bond Yields; B. Observed and Model-Based Yield Estimates around "Tapering Talk"; V. Counterfactual Analysis; VI. Analysis of Cointegration and Long-Run Equilibria; VII. Statistical Robustness; VIII. Discussion and Policy Implications; IX. Concluding Remarks; Appendices; I. Pre-Estimation Tests.

II. Cointegration Test for Near-Integrated VariablesIII. Time Series Plots; IV. Impulse Response Functions; References.

Abstract: This paper examines the transmission of changes in the U.S. monetary policy to localcurrency sovereign bond yields of Brazil and Mexico. Using vector error-correction models, we find that the U.S. 10-year bond yield was a key driver of long-term yields in these countries, and that Brazilian yields were more sensitive to U.S. shocks than Mexican yields during 2010-13. Remarkably, the propagation of shocks from U.S. long-term yields was amplified by changes in the policy rate in Brazil, but not in Mexico. Our counterfactual analysis suggests that yields in both countries temporarily overshot the values predicted by the model in the aftermath of the Fed's "tapering" announcement in May 2013. This study suggests that emerging markets will need to contend with potential spillovers from shifts in monetary policy expectations in the U.S., which often lead to higher government bond interest rates and bouts of volatility.

Holdings ( 1 )
Title notes ( 5 )

Holdings
Item type	Current library	Collection	Call number	Status	Date due	Barcode	Item holds
eBook	e-Library	EBSCO Business		Available

Total holds: 0

Print version record.

II. Cointegration Test for Near-Integrated VariablesIII. Time Series Plots; IV. Impulse Response Functions; References.

This paper examines the transmission of changes in the U.S. monetary policy to localcurrency sovereign bond yields of Brazil and Mexico. Using vector error-correction models, we find that the U.S. 10-year bond yield was a key driver of long-term yields in these countries, and that Brazilian yields were more sensitive to U.S. shocks than Mexican yields during 2010-13. Remarkably, the propagation of shocks from U.S. long-term yields was amplified by changes in the policy rate in Brazil, but not in Mexico. Our counterfactual analysis suggests that yields in both countries temporarily overshot the values predicted by the model in the aftermath of the Fed's "tapering" announcement in May 2013. This study suggests that emerging markets will need to contend with potential spillovers from shifts in monetary policy expectations in the U.S., which often lead to higher government bond interest rates and bouts of volatility.

Added to collection customer.56279.3 - Master record variable field(s) change: 072