[ Article ]
Seoul Journal of Economics - Vol. 34, No. 4, pp. 481-497
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 30 Nov 2021
Received 20 Nov 2021 Accepted 22 Nov 2021
DOI: https://doi.org/10.22904/sje.2021.34.4.001
Impact of Uncertainty Created by the US post-QE Monetary Policy on Emerging Economies
Jae-Young Kim ; Woong Yong Park
Jae-Young Kim, Professor, Department of Economics and Institute of Economic Research, Seoul National University, Kwanakro 1 Kwanak-gu Seoul, 08826, Korea, Tel: 82-2-880-6390, Fax: 82-2-886-4231 (jykim017@snu.ac.kr)
Woong Yong Park, Professor, Corresponding author, Department of Economics and Institute of Economic Research, Seoul National University, Kwanakro 1 Kwanak-gu Seoul, 08826, Korea, Tel: 82-2-880-2295 (woongyong.park@snu.ac.kr)
Funding Information ▼ Center for National Competitiveness of Economic Research of Seoul National University
JEL Classification: E44; E52; E58; F41

This research studies the impact of uncertainty generated by the US monetary policy in the post-quantitative easing period, particularly regarding the timing and pace of policy rate normalization by the Federal Reserve. We are specifically interested in the effects on emerging market economies such as South Korea. By using a news-based uncertainty index to measure the extent of monetary policy uncertainty in the US, we find that unexpected increased uncertainty with respect to the US monetary policy has significant adverse impact on the KRW/USD exchange rate, stock prices, and capital inflow to South Korea, but does not significantly affect the macroeconomic variables of the country, such as output and consumer prices. Therefore, we expect that heightened uncertainty regarding US monetary policy normalization would, at most, have temporary disruptions in financial markets but does not have a large impact on emerging market economies.