Date of Degree


Document Type


Degree Name





Tao Wang

Subject Categories

Economics | Finance and Financial Management


Emerging markets, Financial markets, QE Tapering, Quantitative easing, The Federal Reserve, Unconventional monetary policy


Due to the severity of the financial crisis of 2008, the Federal Reserve had attempted a variety of unconventional monetary policy to support the U.S. financial markets at the verge of collapse. The most well-known of the Fed's unconventional monetary policy is quantitative easing, in which it purchased a large amount of government securities from the markets in order to lower longer term interest rates and mortgage rates. The several rounds of quantitative easing had different impacts, intended as well as unintended, on U.S. financial markets and foreign markets. The purpose of this paper is to fully explore the effects, especially the unintended ones, the different rounds of quantitative easing have on financial markets.

The first chapter is a comprehensive study of the unconventional monetary policy taken by the Federal Reserve since the financial crisis, specifically on the purchases of different assets by the Fed to change medium and long-term rates. Included in this chapter are the three rounds of quantitative easing, and the two rounds of Operation Twist. A study as such is needed in order to examine if the Fed's purchases of these various long-term assets had any effect on the financial markets in the longer term perspective since the first announcement of such purchase in November 2008. While there exists a variety of literature on the effects of quantitative easing on Treasuries and mortgage backed securities, there is no single study comprising of all the large scale asset purchases by the Fed, covering their effects on all major financial assets. This first chapter is an attempt to fill this void in current literature on quantitative easing.

The second chapter utilizes an event-study approach to analyze the impact of announcements regarding the third round of quantitative easing on emerging market economies. Using a daily panel data of fifteen emerging economies, the period examined is from August 1, 2012 to May 30, 2014, which is one month before QE3 announcement one month after the fourth announcement of tapering by the Fed. Results show that markets have a larger response to tapering news than easing news, particularly from official Fed press releases. Additionally, these emerging market economies also react to conventional monetary policy of federal funds rate.