Brent oil prices to Equation 1.<sup>22</sup> By including these additional control variables, we ensure that the effects of monetary policy in earlier regressions were not biased by the omission of these variables. The results with these additional variables however need to be interpreted with caution since FOMC announcements may affect not just Treasury yields but presumably also VIX and oil prices.<sup>23</sup>

**Table 10: The effect of the US Monetary policy on Emerging Economies Financial Variables—Adding changes in VIX and Oil prices**

|||Exchange rates|||Equity prices|||Bond yields||
|---|---|---|---|---|---|---|---|---|---|
||k=1|k=2|k=3|k=1|k=2|k=3|k=1|k=2|k=3|
|2yr Treasury yield|0.041***|0.043***|0.043***|-0.056***|-0.088***|-0.097***|0.069***|0.086***|0.089***|
||[5.96]|[6.02]|[6.98]|[-8.21]|[-9.52]|[-8.73]|[4.65]|[6.01]|[5.63]|
|VIX, % change|0.021***|0.029***|0.025**|-0.041***|-0.047***|-0.038***|0.016|0.035*|0.033*|
||[3.41]|[3.54]|[2.80]|[-3.58]|[-3.89]|[-3.57]|[1.36]|[2.02]|[1.93]|
|Brent, % change|-0.101***|-0.104***|-0.118***|0.292***|0.368***|0.368***|-0.050|0.006|0.007|
||[-4.79]|[-4.83]|[-5.41]|[4.51]|[6.13]|[7.70]|[-1.38]|[0.13]|[0.17]|
|Constant|0.036*|0.088***|0.082***|0.125***|0.101***|0.252***|-0.060|-0.060|-0.033|
||[2.07]|[3.87]|[3.69]|[4.54]|[3.97]|[10.36]|[-1.62]|[-1.35]|[-0.76]|
|Observations|1,300|1,300|1,300|1,194|1,200|1,197|1,049|1,052|1,053|
|R-squared|0.134|0.121|0.107|0.135|0.152|0.136|0.054|0.066|0.061|
|# of countries|20|20|20|19|19|19|17|17|17|

_Notes:_ Regressions include country fixed effects. Robust t statistics are in parentheses. *, **, *** indicate that the coefficients are significant at 10, 5, and 1 percent level. Dependent variables are percent change in exchange rate, equity prices, or bond yields, between the day of FOMC announcements and k days after that, as per Equation 1. The independent variable is percent change in 10-year Treasury yield between t and t-1, t being the day of the FOMC announcements. Brent and VIX are percentage changes between t-1 to t.

Results of the extended model are presented in Table 10. Increases in VIX result in a significant depreciation of emerging economies’ exchange rates; a drop in equity prices; and some increase in bond yields, albeit the impact on bond yields is not consistently significant. Similarly, an increase in oil prices results in a significant appreciation of the exchange rates, and an increase in equity prices, but does not impact bond yields in emerging markets. Importantly, coefficients of 2- year Treasury yields remain significant and have the same signs as in the baseline specification, indicating that the effect of monetary policy surprises is robust to the inclusion of these additional control variables.

> 22 As far as any other omitted variables are concerned, we could not think of any relevant global shocks in short window around FOMC meetings, to confound the correlation between US policy announcements and emerging economies’ financial variables during this period. Brexit was one event that had a seemingly large spillover on emerging economies, but it did not coincide with the FOMC announcements in the sample and is therefore not considered here separately. See Eichengreen, Gupta, and Ospino (2016) for the impact of Brexit on emerging economies’ exchange rates and equity prices.

> 23 Glick and Leduc (2011), for example, show that the US asset purchase announcements lowered the 10-year US Treasury yield and depreciated the dollar, but also resulted in a decline in commodity and oil prices. They interpreted these results as LSAP announcements signaling lower expected future economic growth in the US.

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