International monetary policy surprise spillovers

Craine, Roger; Martin, Vance L.

doi:10.1016/j.jinteco.2007.06.005

“…Craine and Martin (2008) extend Rigobon and Sack's (2004) identification-through-heteroskedasticity method to study spillovers of monetary shocks between the United States and Australia, with a special emphasis on accounting for nonmonetary shocks. The authors find that U.S. monetary policy shocks spill over to Australian interest rate and equity markets, but Australian shocks do not seem to affect U.S. financial markets.…”

Section: International Effects Of Monetary Shocksmentioning

confidence: 99%

The Evolution of Federal Reserve Policy and the Impact of Monetary Policy Surprises on Asset Prices

Fawley¹,

Neely²

2014

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Since the 1970s, monetary policy has been the primary macroeconomic stabilization instrument. In light of this fact, many researchers have studied how monetary policy affects asset prices, consumer prices, output, and employment to improve such policy. This large literature has used two main methods to study the effect of monetary shocks on macroeconomic variables: vector autoregressions (VARs) and studies of high-frequency monetary shocks on asset prices. 1 VARs offer the advantage of directly studying the effects of monetary policy shocks on key variables-prices, output, and employment-rather than indirectly studying them through their effects on asset prices (see Litterman and

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“…Second, this paper is also related to the literature on the spillovers from US monetary policy to global financial markets (see Craine and Martin, 2008;Ehrmann and Fratzscher, 2009;Wongswan, 2009;Neely, 2010;Hausman and Wongswan, 2011;Gurkaynak and Wright, 2011;Fratzscher et al, 2013;Moore et al, 2013;Rogers et al, 2014). These papers study the effects of US monetary policy shocks on other countries' equity and bond markets, capital flows and exchange rates, typically at high frequency.…”

Section: Introductionmentioning

confidence: 96%

Determinants of global spillovers from US monetary policy

Georgiadis

¹

2016

Journal of International Money and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThis paper assesses the global spillovers from identified US monetary policy shocks in a global VAR model. US monetary policy generates sizable output spillovers to the rest of the world, which are larger than the domestic effects in the US for many economies. The magnitude of spillovers depends on the receiving country's trade and financial integration, de jure financial openness, exchange rate regime, financial market development, labor market rigidities, industry structure, and participation in global value chains. The role of these country characteristics for the spillovers often differs across advanced and non-advanced economies and also involves non-linearities. Furthermore, economies which experience larger spillovers from conventional US monetary policy also displayed larger downward revisions of their growth forecasts in spring 2013 when the Federal Reserve upset markets by discussing tapering off quantitative easing. The results of this paper suggest that policymakers could mitigate their economies' vulnerability to US monetary policy by fostering trade integration as well as domestic financial market development, increasing the flexibility of exchange rates, and reducing frictions in labor markets. Other policies-such as inhibiting financial integration, industrialisation and participation in global value chains-might mitigate spillovers from US monetary policy, but are likely to reduce long-run growth. helped economies to raise their potential growth similarly, capital market integration and financial openness allows economies to reap collateral benefits from financial globalisation Clearly, a completely closed economy will not experience any spillovers whatsoever, but is likely to grow more slowly in the long run. In these cases, the trade-offs should be carefully considered before any measures are taken.

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“…Moreover, the parameter estimation is mostly sensitive to the size of the chosen event window. Rigobon and Sack (2004) and Craine and Martin (2008) propose another solution which they call "identification through heteroscedasticity". For this identification procedure, it has to be assumed that the variance of monetary policy surprises is larger on PE days than on the other days.…”

Section: A Latent Variable Approachmentioning

confidence: 99%

Asset market response to monetary policy news from SNB press releases

Hüning

¹

2017

The North American Journal of Economics and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu Terms of use: Documents in Asset market response to monetary policy news from SNB press releasesHendrik Hüning * AbstractThis paper analyses the effects of Swiss National Bank (SNB) communication on asset prices. It distinguishes between different monetary policy news contained in press releases following a monetary policy decision. Employing a latent variable approach and event-study methods, I find that medium-and long-term bond yields respond to changes in the communicated inflation and GDP forecasts as well as to the degree of pessimism expressed in press releases. Exchange rates mainly react to changes in the GDP forecast while stocks do not react to SNB communication on monetary policy announcement days. Additionally, short-term expectations about the future path of the policy rate are driven by the communicated inflation forecast. The results underline the role of qualitative news next to quantitative forecasts in influencing market expectations and asset prices.

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International monetary policy surprise spillovers

Cited by 77 publications

References 13 publications

The Evolution of Federal Reserve Policy and the Impact of Monetary Policy Surprises on Asset Prices

The Evolution of Federal Reserve Policy and the Impact of Monetary Policy Surprises on Asset Prices

Determinants of global spillovers from US monetary policy

Asset market response to monetary policy news from SNB press releases

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