02155cas a2200277 a 4500 AALejournalIMF017508 230101c9999 xx r poo 0 0eng d 5.00 USD 9781475586077 1018-5941 BD-DhAAL BD-DhAAL Goes, Carlos. Spillovers from U.S. Monetary Policy Normalization on Brazil and Mexico's Sovereign Bond Yields / Carlos Goes, Herman Kamil, Phil De Imus, Mercedes Garcia-Escribano. Washington, D.C. : International Monetary Fund, 2017. 1 online resource (39 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper examines the transmission of changes in the U.S. monetary policy to localcurrency sovereign bond yields of Brazil and Mexico. Using vector error-correction models, we find that the U.S. 10-year bond yield was a key driver of long-term yields in these countries, and that Brazilian yields were more sensitive to U.S. shocks than Mexican yields during 2010-13. Remarkably, the propagation of shocks from U.S. long-term yields was amplified by changes in the policy rate in Brazil, but not in Mexico. Our counterfactual analysis suggests that yields in both countries temporarily overshot the values predicted by the model in the aftermath of the Fed's 'tapering' announcement in May 2013. This study suggests that emerging markets will need to contend with potential spillovers from shifts in monetary policy expectations in the U.S., which often lead to higher government bond interest rates and bouts of volatility. Mode of access: Internet De Imus, Phil. Garcia-Escribano, Mercedes. Kamil, Herman. IMF Working Papers; Working Paper ; No. 2017/050 Full text available on IMF http://elibrary.imf.org/view/journals/001/2017/050/001.2017.issue-050-en.xml IMF e-Library