Magister Commercii - MCom / A possible effect of quantitative easing (QE) undertaken by the United States of America (USA)
Federal Reserve Bank (Fed) may have been an increase in capital flowing into emerging market
economies (EMEs). The 2008 global financial crisis created an environment in which traditional
monetary policies – cutting policy rates – became ineffective in stimulating growth. Faced with this
policy environment, several high-income countries including the USA resorted to unconventional
monetary policies notably QE, to grow their economies. While QE was effective in lowering interest
rates in high-income countries, some argued that investors switched to higher yielding assets, mostly
EME assets. Therefore, QE is perceived to have increased capital flows into EMEs.
Using a dynamic panel data model with fixed effects this mini-thesis investigates empirically
whether QE worked through unobservable channels to increase gross private capital inflows to
Brazil, Russia, India, China and South Africa (BRICS) in the period 2000-2015. The study finds
evidence in support of the view that QE increased capital inflows to EMEs. The results reveal that
gross private capital inflows to the BRICS increased during the QE intervention period and that the
increase was higher in the first period of QE than in subsequent QE periods. The empirical results
also reveal differences in the way types of capital flows responded to QE; portfolio flows, and in
particular equity flows were the most responsive to QE.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:uwc/oai:etd.uwc.ac.za:11394/6461 |
| Date | January 2018 |
| Creators | Msoni, Malindi |
| Contributors | Loots, Lieb J. |
| Publisher | The University of the Western Cape |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Rights | The University of the Western Cape |
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