QE liquidity boosts investment into EMEs, paper finds

Economists propose new mechanism for QE spillovers to emerging market economies

Federal Reserve

Quantitative easing (QE) by the US Federal Reserve leads to higher capital inflows into emerging market economies (EMEs), a working paper from the National Bureau of Economic Research (NBER) says.

Researchers Annie Soyean Lee and Charles Engel also find that an increase in liquidity leads to an overall increase in savings in advanced economies and investment into emerging ones.

The results echo earlier studies, but the authors propose a novel mechanism for how QE drives spillovers to EMEs.


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