A growing literature stresses the importance of the “global financial cycle”,
a common global movement in asset prices and credit conditions, for emerging
market economies (EMEs). It is argued that one of the key drivers of this
global cycle is monetary policy in the U.S., which is transmitted through
international capital flows. In this paper, we add to this discussion and
investigate empirically whether U.S. unconventional monetary policy (UMP)
between 2008 and 2014 is related to financial conditions in EMEs, and, whether
it is transmitted through portfolio flows. We find that a U.S. UMP shock
significantly increases portfolio flows from the U.S. to EMEs for almost two
quarters. The rise in inflows is accompanied by a persistent increase in
several real and financial variables in EMEs. Moreover, we find that, on
average, EMEs reacted with an easing of their own monetary policy stance in
response to an expansionary U.S. shock
