Monetary Policy Spillovers – The Impact of Advanced Central Banks’ Decisions on Emerging Financial Markets

Abstract

The thesis delves into the impact of advanced central banks' monetary policies on emerging government bond markets, the so-called 'monetary policy spillovers.' Over the past decade, there has been a reported correlation between interest rates on advanced and emerging financial markets. Following the Global Financial Crisis, substantial international capital flows occurred, particularly to government bond markets of emerging countries, influenced by the aggressive monetary easing of the major central banks. The research aims to address the puzzling question of the extent to which large central banks impact emerging financial markets. It outlines a research agenda to examine the size of monetary policy spillovers in the case of the Federal Reserve, the European Central Bank, and the Bank of Japan. Beyond the magnitude of the spillover effect, regional differences and factors influencing recipient countries' sensitivity to international shocks are also examined. In summary, the thesis contributes to the international finance literature by shedding light on the relationship between advanced central banks’ monetary policy decisions and the dynamics of emerging government bond markets.