Séminaire COURNOT – Antonia Lopez-Villavicencio (Univ. Paris Nanterre, EconomiX)

Détails de l'événement :

“Fed’s Policy Changes and Inflation in Emerging Markets: Lessons from the Taper Tantrum”

Résumé : We use the taper tantrum to measure the effects of a sudden depreciation of the exchange rate on inflation in emerging economies. We treat this expectation of monetary policy tightening in the USA as a natural experiment and an exogenous shock in emerging markets and use a difference-indifferences approach and assess the inflationary effects of a devaluation right before and immediately after the taper tantrum. Our results show that, before the tantrum, the impact of exchange rate changes on inflation is relatively low in both the treatment group (emerging economies) and the control group (advanced economies). However, the Fed’s announcement increased the gap between industrialized and emerging countries and impacted inflation regardless of the exchange rate regime or central bank practices. Nevertheless, inflation in emerging economies with a flexible exchange rate regime, inflation target, or a highly credible central bank is less exposed to exchange rate depreciations, even after the tantrum.