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Mr. Itai Agur, Mr. Damien Capelle, Mr. Giovanni Dell'Ariccia, and Mr. Damiano Sandri
This paper reviews the theoretical arguments in favor and against MF and presents an empirical assessment of the risks that it may pose for inflation.
Mr. Itai Agur, Mr. Damien Capelle, Mr. Giovanni Dell'Ariccia, and Mr. Damiano Sandri

. Monetary Growth and Inflation Figure 2. Change in Inflation after a 1 and 100 Percent Increase in the Monetary Base Figure 3. Factors Influencing the Association between the Monetary Base and Inflation Figure 4. UMP Programs and Direct Government Financing during COVID-19 Figure 5. Inflation Forecasts around UMP Announcements Figure 6. UMP Announcements versus Observed Changes in the Monetary Base TABLES Table 1. Conceptual Differences between Quantitative Easing and Monetary Finance BOXES Box 1. The Road to Hyperinflation: Monetary Finance Under Fiscal

Mr. Itai Agur, Mr. Damien Capelle, Mr. Giovanni Dell'Ariccia, and Mr. Damiano Sandri

they are much more likely to trigger sharp price responses. 4. UMP Announcements and Inflation Expectations During COVID-19 This chapter uses an alternative approach to assess the inflationary risks posed by MF by examining the extent to which UMP announcements by central banks during the COVID-19 pandemic affected inflation expectations. In advanced economies, central banks mostly embarked on large scale asset purchases in secondary markets within the framework of traditional QE programs. However, in EMDEs, UMP programs included also large components of

International Monetary Fund. Asia and Pacific Dept

minus the short-term interest rate) increases in response to a surge in global financial market volatility. Since the GVAR framework takes into account interlinkages between countries, we can also see the spillback effects on AMs from financial shocks (see the top left chart of Figure 2 ). Finally, the magnitude of impulse responses is generally higher when one uses the 2012 financial weights as opposed to the 2009 exposures, reflecting the impact of increased cross-country financial flows during periods of UMP program implementation in advanced economies. Figure

International Monetary Fund
This paper provides case studies of 13 of the largest non-UMP countries. The case studies begin with an overview of recent macro-economic developments as well as capital flow patterns during the crisis up to the first U.S. tapering announcement in May 2013. Country experiences with capital inflows are judged along five dimensions: (i) the size of capital inflows, (ii) policies used to manage inflows, (iii) external stability, measured by exchange rate overvaluation and current account deficits relative to fundamentals,2 (iv) asset price and credit market reactions, and (v) financial sector stability. Case studies mostly draw on published IMF Staff Reports for each country, as well as the 2013 Pilot External Stability Report (IMF 2013d).
International Monetary Fund

the overall impacts of announcements and purchases for UMP programs using the baseline specification. For each program, the overall impact was calculated as the sum of the cumulative impact on bond or equity fund flows from any announcements and actual purchases whose coefficients are significant at the ten percent level. 14 The EPFR data are converted into equivalent balance of payments flows in dollars using the ratios between EPFR flows and balance of payments data reported in Table 2 . In addition to dollars, the sum of lows is reported as a ratio of 2012 GDP

Mr. Shaun K. Roache and Mrs. Marina V Rousset
We examine the effects of unconventional monetary policy (UMP) events in the United States on asset price risk using risk-neutral density functions estimated from options prices. Based on an event study including a key exchange rate, an equity index, and five commodities, we find that “tail risk” diminishes in the immediate aftermath of UMP events, particularly downside left tail risk. We also find that QE1 and QE3 had stronger effects than QE2. We conclude that UMP events that serve to ease policies can help to bolster market confidence in times of high uncertainty.
Mr. Jiaqian Chen, Mr. Tommaso Mancini Griffoli, and Ms. Ratna Sahay

. First, to gauge whether the effects of U.S. monetary policy shocks on the rest of the world differ according to the policy instruments used to provide more or less accommodation. And second, within the phase of unconventional policy, to see whether tapering shocks differ from shocks associated with the expansion of UMP programs. To address this question, we estimate a panel regression using data for 21 emerging market economies. 8 The regression seeks to identify the effects of U.S. monetary policy surprises on asset prices and capital flows in EMs. The regression

Mr. Shaun K. Roache and Mrs. Marina V Rousset

case study of the first event in our sample, which was an important milestone in the UMP program. This event took place on November 25, 2008 at 8:15 am EST, with the Federal Reserve and the Department of the Treasury unveiling their plan to create the Term Asset-Backed Securities Loan Facility (TALF) and purchase direct obligations and mortgage-backed securities of housing-related GSEs. Between the day before ( t -1) and the day after ( t +1) the event, futures prices were mixed and at-the-money implied volatility broadly declined (see Table 3 ). The 5 th

Mr. Jiaqian Chen, Mr. Tommaso Mancini Griffoli, and Ms. Ratna Sahay
The impact of monetary policy in large advanced countries on emerging market economies—dubbed spillovers—is hotly debated in global and national policy circles. When the U.S. resorted to unconventional monetary policy, spillovers on asset prices and capital flows were significant, though remained smaller in countries with better fundamentals. This was not because monetary policy shocks changed (in size, sign or impact on stance). In fact, the traditional signaling channel of monetary policy continued to play the leading role in transmitting shocks, relative to other channels, affecting longer-term bond yields. Instead, we find that larger spillovers stem more from structural factors, such as the use of new instruments (asset purchases). We obtain these results by developing a new methodology to extract, separate, and interpret U.S. monetary policy shocks.