Economic liberalization and external shocks: The hypothesis of convergence for the Mexican states, 1994-2015

This work analyzes whether monetary policy in advanced economies has differentiated effects on portfolio flows towards emerging economies coming from the US, the Euro Area and the UK. The results show the following: First, portfolio flows' response to US monetary policy events is vastly homogeneous across regions, whilst the reaction to Euro Area or UK polices are more diverse. Second, US policies have a bigger effect on portfolio flows from each of the selected advanced economies. Third, the magnitude of investors' responses is stronger towards Emerging Europe and Latin America than to Emerging Asia. These results could be useful for policymakers in emerging economies as a benchmark to anticipate differentiated effects in portfolio flows caused by monetary policy in advanced economies.