Abstract
After the economic crisis in 2007, the United States enter to the economic recession. Thus the central banks (Fed) purposed an unconventional policy and launch various programs in order to restore the weak economic. However, it also generated a spillover effects toward Emerging countries through capital flow. Therefore, the paper aims to provide a new empirical finding by examining the effect of quantitative easing (QE) policy of the United States on Thailand, Indonesian, and the Philippine, Singapore, and Malaysian financial markets (ASEAN-5). In this study, the ASEAN-5 financial markets, comprising the exchange rate market, the stock market, and the bond market are considered. To measure the effect of QE on those markets, we employed the Markov-switching VAR model to study the transmission mechanisms of QE shocks between periods of expansion in the QE program and QE tapering. Moreover, we restrict the structure of the model in order to identify the determinant of the structural change. This paper finds that ASEAN-5 financial markets receive the effect form QE. The treasury securities purchase program seems to generate a larger effect to the ASEAN-5 financial market than other programs. Moreover, the test of best MS-VAR specification, provide the result that MSH(2)-VAR(1) is the best specification model for the exchange rate market and the stock market, while MSIH(2)-VAR(1) is the best specification model for bond markets. This indicates that QE was not the factor leading the ASEAN-5 financial markets switch from one regime to another regime.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Albu, L.L., Lupu, R., Clin, A.C., Popovici, O.C.: The effect of ECB’s quantitative easing on credit default swap instruments in central and Eastern Europe. Proc. Econ. Financ. 8, 122–128 (2014)
Artis, M., Krolzig, H.M., Toro, J.: The European business cycle. Oxf. Econ. Pap. 56(1), 1–44 (2003)
Bowman, D., Cai, F., Davies, S., Kamin, S.: Quantitative easing and bank lending: evidence from Japan (Board of Governors of the Federal Reserve System Working Papers 1018) (2011)
Chen, Q., Filardo, A., He, D., Zhu, F.: International spillovers of central bank balance sheet policies (BIS Working Papers 66). Bank for International Settlements, Basel, Switzerland (2012)
Cho, D., Rhee, C.: Effects of quantitative easing on Asia: capital flows and financial markets (ADB Working Papers 350) (2013)
Christensen, J.H., Gillan, J.M.: Does quantitative easing affect market liquidity? ( FRBSF Working Papers 2013-26). Federal ReseeveBank of San Francisco, San Francisco (2013)
Chua, W.S., Endut, N., Khadri, N., Sim, W.H.: Bank Negara Malaysia Working Paper Series WP3/2013 (2013)
Ehrmann, M., Ellison, M., Valla, N.: Regime-dependent impulse response functions in a Markov-switching vector autoregression model. Econ. Lett. 78(3), 295–299 (2003)
Glick, R., Leduc, S.: The effects of unconventional and conventional US monetary policy on the dollar. Federal Reserve Bank of San Francisco (2013)
Girardin, E., Moussa, Z.: The effectiveness of quantitative easing in Japan: new evidence from a structural factor-augmented VAR (2008)
Fawley, B.W., Neely, C.J.: Four stories of quantitative easing. Federal Reserve Bank of St. Louis Review, 95 (2013)
Krishnamurthy, A., Vissing-Jorgensen, A.: The effects of quantitative easing on interest rates: channels and implications for policy (NBER Working Papers 17555). National Bureau of Economic Research, Cambridge (2011)
Krolzig, H.M.: Markov switching vector autoregressions: modelling, statistical inference and application to business cycle analysis. Springer, Berlin (1997)
Krolzig, H. M.: Constructing turning point chronologies with Markov-switching vector autoregressive models: the euro-zone business cycle. In: Eurostat Colloquium on Modern Tools for Business Cycle Analysis (2003)
Ledenyov, D.O., Ledenyov, V.O.: To the problem of turbulence in quantitative easing transmission channels and transactions network channels at quantitative easing policy implementation by central banks. (Working Paper 5656). University of Cornell (2013)
Moore, J., Nam, S., Suh, M., Tepper, A.: Estimating the impacts of US LSAP’s on emerging market economies’ local currency bond markets (No. 595). Staff Report, Federal Reserve Bank of New York (2013)
Morgan, P. J.: Impact of US quantitative easing policy on emerging Asia (ADBI working paper 321). Asian Development Bank Institute, Tokyo (2011)
Vargas, G.A., I., II.: Markov switching var model of speculative pressure: an application to the asian financial crisis. (Order No. 1483224, Singapore Management University (Singapore)). ProQuest Dissertations and Theses, 72 (2009)
Zammit, R.: Japanese quantitative easing: the effects and constraints of anti deflationary monetary expansions (2006)
Zhu, L., Yang, X.: The Study of American Quantitative Easing Monetary Policy’s Spillover Effects on China’s Inflation. Atlantis Press, Paris (2013)
Zivot, E., Wang, J.: Modeling Financial Time Series with S-PLUSv (Vol. 191). n.p. Springer (2007)
Acknowledgments
The authors are grateful to Puay Ungphakorn Centre of Excellence in Econometrics, Faculty of Economics, Chiang Mai University for the financial support.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2016 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Pastpipatkul, P., Yamaka, W., Sriboonchitta, S. (2016). Effect of Quantitative Easing on ASEAN-5 Financial Markets. In: Huynh, VN., Kreinovich, V., Sriboonchitta, S. (eds) Causal Inference in Econometrics. Studies in Computational Intelligence, vol 622. Springer, Cham. https://doi.org/10.1007/978-3-319-27284-9_35
Download citation
DOI: https://doi.org/10.1007/978-3-319-27284-9_35
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-27283-2
Online ISBN: 978-3-319-27284-9
eBook Packages: EngineeringEngineering (R0)