The article focuses on the changes in US monetary policy since the beginning of the 21st century and reveals the impact of this policy on the national economies of other countries, especially emerging markets. The US monetary policy influenced the emerging markets both through the real and financial channels. Through the latter, the main impact was on the Treasury bills rates and on the exchange rates. At the same time, the influence on different countries varied in different periods. For example, interest rates in Thailand, Mexico and Pakistan before the global economic and financial crisis in general followed the cycle of US monetary policy. The “quantitative easing” policy, the statements and the follow-up actions to abolish it, have influenced cross-border capital flows to emerging markets. A number of countries, including Russia, experienced the impact of US monetary policy through the dynamics of oil prices. Emerging markets face restrictions on their monetary policy from the US monetary policy, but in practice they seek to circumvent them through exchange rate regulation, restrictions on crossborder capital flows and the pursuit of an independent monetary policy, not following the cycles of interest rate changes in the US.
The US monetary policy regime, interest differentials, and dollar exchange rate risk premia