EFFECTS OF US QUANTITATIVE EASING ON LATIN AMERICAN ECONOMIES

Abstract

Most emerging economies have been affected to some degree by the Fed’s quantitative easing (QE) policies. This paper assesses the impact of these measures in terms of key macroeconomic variables for four inflation-targeting small open economies in Latin America. We identify a QE policy shock in a structural vector autoregressive with block exogeneity and a mixture of zero and sign restrictions. Overall, we find that these QE policies have significant effects on financial variables such as the exchange rate, and these effects are larger with respect to those in output and prices. Furthermore, the effects vary across countries, and these are more significant in Chile and Mexico than in Peru and Colombia.