Direct and Spillover Effects of Unconventional Monetary and Exchange Rate Policies

Gagnon, Joseph E.; Bayoumi, Tamim; Londoño, Juan M.; Saborowski, Christian; Sapriza, Horacio

doi:10.1007/s11079-017-9437-0

Cited by 30 publications

(29 citation statements)

References 12 publications

(2 reference statements)

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“…2 In these studies, the effects are normally considered under the assumption of the use of conventional tools of monetary policy (by the source country); although several recent studies look at the effects of unconventional tools of monetary stimulus that many central banks experimented with after the GFC. The US or the Euro area usually represent the source country due to their relatively influential position in the world economy (see, for example, Beckworth and Crowe 2013, Chen et al 2016, Edwards 2016, Potjagailo 2017, Gagnon et al 2017, Ma ckowiak 2007, Neely 2010, Rey 2016, Roger et al 2013, Punzi and Chantapacdepong 2017, Taylor 2013. Claus et al (2016) examine how shocks to US and Japanese monetary policy affect their own asset market and the spillover into each other's market for the period from January 1998 to June 2015.…”

Section: Previous Empirical Studiesmentioning

confidence: 99%

Monetary policy responses of Asian countries to spillovers from US monetary policy

Pham

Phuc

2019

Asian-Pac Economic Lit

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Regional integration in Asia has been considerably enhanced over the past 20 years or so. Whether integration helps Asian countries reduce their vulnerability to external shocks or is a channel for spreading external shocks remains an open question. This paper assesses the spillovers from US monetary policy shocks to Asian countries while taking into account country‐specific characteristics in explaining differences in timing and magnitude of responses across Asian countries. The results indicate that policy interest rates in Asian countries generally respond to innovations in the Fed rate in the same direction, but typically with a lag of one quarter. However, the size of the responses varies across Asian countries with respect to country‐specific characteristics. These results suggest that an independent monetary policy may not be feasible for an Asian developing country that adopts a pegged rate regime while being extensively integrated into the world economy. However, the hypothesis of the impossible trinity may not be relevant in the case of China.

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Section: Previous Empirical Studiesmentioning

confidence: 99%

Monetary policy responses of Asian countries to spillovers from US monetary policy

Pham

Phuc

2019

Asian-Pac Economic Lit

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“…Importantly, our U.S. monetary policy surprises are much better identified because we use intraday data to compute changes in short-term U.S. Treasury yields in narrow windows bracketing FOMC announcements. Also related is a study by Gagnon et al (2017), who analyze the direct effects and cross-border spillovers of asset purchase programs and exchange rate policies employed by the major central banks in response to the global financial crisis. With regard to the unconventional policy measures employed by the Federal Reserve during this period, they find that policy-prompted increases in U.S. bond yields are associated with increases in local currency foreign bond yields and equity prices, as well as with a depreciation of foreign currencies.…”

Section: Related Literaturementioning

confidence: 99%

U.S. Monetary Policy and International Bond Markets

Gilchrist

Yue

Zakrajšek

2019

J of Money Credit Banking

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This paper analyzes how U.S. monetary policy affects the pricing of dollar‐denominated sovereign debt. We document that yields on dollar‐denominated sovereign bonds are highly responsive to U.S. monetary policy surprises—during both the conventional and unconventional policy regimes—and that the passthrough of unconventional policy to foreign bond yields is, on balance, comparable to that of conventional policy. In addition, a conventional U.S. monetary easing (tightening) leads to a significant narrowing (widening) of credit spreads on sovereign bonds issued by countries with a speculative‐grade credit rating but has no effect on the corresponding weighted average of bilateral exchange rates for a basket of currencies from the same set of risky countries; this indicates that an unanticipated tightening of U.S. monetary policy widens credit spreads on risky sovereign debt directly through the financial channel, as opposed to indirectly through the exchange rate channel. During the unconventional policy regime, yields on both investment‐ and speculative‐grade sovereign bonds move one‐to‐one with policy‐induced fluctuations in yields on comparable U.S. Treasuries. We also examine whether the response of sovereign credit spreads to US monetary policy differs between policy easings and tightenings and find no evidence of such asymmetry.

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“…Furthermore, Miyakoshi et al (2017) showed that unconventional monetary practices implemented by the US, the Euro Area and Japan positively and significantly affected equity prices in developing Asian countries. Moreover, Gagnon et al (2017) provided evidence of higher equity quotes and lower currency values for foreign countries during periods of US extraordinary monetary policies. Fassas and Papadamou (2018) studied the risk-taking channel of monetary policy in the major European and U.S. equity markets.…”

Section: Literature Reviewmentioning

confidence: 99%

Spillover Effects of US QE and QE Tapering on African and Middle Eastern Stock Indices

Papadamou

Kyriazis

2019

JRFM

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In this paper, we study spillover effects on the stock markets of six African and nine Middle Eastern emerging economies before, during, and after the implementation of unconventional monetary policies by the United States Federal Reserve (US Fed). Weekly data covering the pre-quantitative easing (pre-QE) period, the three phases of QE, and the QE-tapering period were adopted. The methodologies employed here for detecting dual causality were as follows: classical, dynamic, and time-varying Granger causality tests. The results indicate that the Fed’s non-conventional actions weakened the Fed’s monetary policies’ impact on the stock indices of these emerging countries. Interestingly, there is evidence that two African and three Middle Eastern countries—all different according to each of the specifications used in the methodology—were affected by the tapering of unconventional US monetary practices.

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Direct and Spillover Effects of Unconventional Monetary and Exchange Rate Policies

Cited by 30 publications

References 12 publications

Monetary policy responses of Asian countries to spillovers from US monetary policy

Monetary policy responses of Asian countries to spillovers from US monetary policy

U.S. Monetary Policy and International Bond Markets

Spillover Effects of US QE and QE Tapering on African and Middle Eastern Stock Indices

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