quarterly data for the period between 2000Q1 and 2013Q2. Our focus on gross flows is motivated, in part, by their greater volatility in developing countries; this is especially pertinent in the context of seeking to understand how financial flows move in a post-crisis environment (Broner, Didier, Erce & Schmukler 2013; Janus & Riera-Crichton 2013). We pair these gross flows data with global and country-specific variables that are selected to capture transmission along standard channels, and complement these observable measures with an indicator corresponding to the different episodes of QE. Our baseline estimation also takes into account (time-invariant) country-specific unobservables, a time trend, and the discrete fall in capital flows following the financial crisis of 2008.

Our analysis indicates that financial inflows to developing economies operate along all three potential channels of transmission for QE. More importantly, we find evidence that episodes of QE were also accompanied by increases in inflows _over and above_ these observable channels. An average developing country experienced, during episodes of QE, increases in inflows of close to 5 percent, a magnitude comparable to a one standard deviation change along the traditional channels, such as changes in yield curve spreads (the portfolio channel) or the short-term interest rate (the liquidity channel). Overall, our estimates suggest that of the 62 percent of the increase in overall inflows to developing countries between 2009 and 2013 related to changing in global monetary conditions, at least 13 percent is attributable to this additional QE effect.

This unmeasured QE effect cannot be ascribed to the unprecedented nature of economic conditions during and after the financial crisis. We find relatively little evidence that the sensitivity of our observable measures for the different transmission channels changed during the QE period. Our results also point to heterogeneity in the response of different types of inflows during the period. When we decompose aggregate gross flows into their constituent components, we find that foreign direct investment (FDI) does not vary along either observable transmission channels or our QE indicator, whereas portfolio (and in particular bond) flows do, especially along global “push” factors associated with economic conditions in high-income countries.

We then use our results to perform a simulation that explores the effect of QE withdrawal on inflows to emerging markets, relative to a no change _status quo_ . This is a central concern for developing economies, which have struggled to cope with the surge in financial inflows that they have experienced over the past several years, and are fearful that the renormalization of highincome monetary policies will be accompanied by a disorderly sudden stop in capital inflows. In the baseline tapering scenario we consider, we find that inflows to developing countries decline by a cumulative amount of between 10 to 12 percent (approximately 0.6 percent of GDP).

Our work speaks to several literatures. The general nature of the questions we pose has been examined by a vast theoretical (Betts & Devereux 2000, 2004; Fukuda 1993; Obstfeld & Rogoff 1995; Turnovsky 1986) and empirical (Ammer, Vega & Wongswan 2010; Ehrmann & Fratzscher 2009; Jannsen & Klein 2011; Kazi, Wagan & Akbar 2013; Kim 2001; Xiao 2011) literature on 3