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Estimating the impacts of U.S. LSAPs on emerging market economies’ local currency bond markets
This paper examines whether large-scale asset purchases (LSAPs) by the Federal Reserve influenced capital flows out of the United States and into emerging market economies (EMEs) and also analyzes the degree of pass-through from long-term U.S. government bond yields to long-term EME bond yields. Using panel data from a broad array of EMEs, our empirical estimates suggest that a 10-basis-point reduction in long-term U.S. Treasury yields results in a 0.4-percentage-point increase in the foreign ownership share of emerging market debt. This, in turn, is estimated to reduce government bond yields ...