Quantitative Easing and Carry Trade

Table of Contents

Summary of the Article
Reasoning for the Articles Selection
The Articles Relevance to the Foreign Exchange Market
Conclusion
Reference

Miyakoshi, T., Li, K. W., Shimada, J., & Tsukuda, Y. (2020). The impact of quantitative easing and carry trade on the real estate market in Hong Kong. International Review of Economics & Finance, 69, 958-976. Web.

Evaluating trends of the foreign exchange market is a challenging task, which can be addressed through the consideration of this fields principal aspects. Thus, for example, the analysis of such phenomena as quantitative easing (QE) and carry trade as applied to real estate will be beneficial to tackle the problem. Therefore, this paper aims to present the summary of the selected article on the topic, explain its importance in this regard, and demonstrate this sources relevance to the area.

Summary of the Article

The research published by Miyakoshi et al. (2020) focuses on the effects of policies conducted by Japan, the European Union (EU), and the United States (US) on real estate prices in Hong Kong. According to the scholars, the specified countries adopted QE instruments, which implied purchasing the governments bonds and assets of the real estate investment trust (REIT) market, thereby affecting the financial sector of the city. These operations consequently resulted in the creation of new channels of the impact of other actors in the matter on this location through the described policy.

This aspect has not been properly studied after the implementation of the course, and the attempts to address this gap are the aim of this article. By analyzing the available statistics regarding the involved countries monetary base and the shifts in lending rates in Hong Kong, the authors concluded on the interrelation of these events. They allowed classifying the change as a carry trade scenario through the use of econometric formulas demonstrating the mentioned factors codependency. In this way, the findings indicated the two emerged channels of influence. They are Japans QE policy resulting in persistently rising office prices through REIT initiatives and the subsequent participation of the EU and the US in the process. Thus, the results of this study confirmed the assumption of other countries contributions to real estate alongside the money market.

Reasoning for the Articles Selection

The selection of the study for the purposes of this paper is conditional upon its connection to major economic processes, which, in turn, are accompanied by shifts in smaller entities. This concept seems appealing from the perspective of predicting the activity of the largest players in the global arena. Moreover, it is interesting for the specialists who want to understand the significance of a combination of financial circumstances when analyzing the field in contrast to the sole assessment of external actions.

The Articles Relevance to the Foreign Exchange Market

The article on QE and carry trade is relevant to the examination of the foreign exchange market as a whole. Its importance is explained by the fact that it provides comprehensive information regarding the side effects of participating countries on one locations other fields, such as real estate in Hong Kong in this case. It is clear that the domestic economy is directly affected by external forces; therefore, it is reasonable to evaluate them in order to reveal the latters role in the formers progress (Miyakoshi et al., 2020). Hence, these data could serve as the grounds for policymakers around the world intending to make an impact on less developed countries.

Conclusion

Upon considering all the facts, it is possible to conclude on the usefulness of the selected study for making predictions in the foreign exchange market. The findings of this article indicate the need to pay particular attention to policy spillovers together with the analysis of major external phenomena. Thus, the practical implementation of the knowledge regarding the underlying economic mechanisms of monetary decisions will contribute to the awareness of their positive or negative influence.