U.S. Monetary Policy and the Global Financial Cycle

Miranda-Agrippino, Silvia; Rey, Hélène

doi:10.1093/restud/rdaa019

Cited by 558 publications

(185 citation statements)

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“…There is clear evidence in the literature that global stock prices respond to a global financial cycle (Miranda-Agrippino and Rey, 2020). Some movements of the global financial cycle are due to changes in U.S. monetary policy, while others are market driven.…”

Section: The Global Financial Cyclementioning

confidence: 99%

“…Our paper also contributes to broader literature on international spillovers of U.S. monetary policy by documenting and quantifying the importance of real linkages. Miranda-Agrippino and Rey (2020), among many others, provide evidence which shows that U.S. monetary policy shocks induce comovements in international asset returns. Most analysis of the spillover channels focuses on bank lending and, more generally, global bank activity -see, among others, Cetorelli and Goldberg Much less attention has been devoted to cross-border monetary policy spillovers through real channels, such as input-output linkages.…”

Section: Introductionmentioning

confidence: 96%

“…The 2-year Treasury rate and broad U.S. dollar index are obtained from the Board of Governors of the Federal Reserve (series H.15 and H.10, respectively). We take the monthly log difference of the VIX and broad U.S. dollar index and the monthly first difference of the 2-year Treasury rate before including them in the regressions below.The VIX and dollar index are common variables used to capture the global financial cycle (e.g.,Bruno and Shin, 2015a;Miranda-Agrippino and Rey, 2020), while changes in the 2-year Treasury rate captures the overall change in monetary policy stance as well as the cost of funding. 16Given potential contemporaneous monetary policy shocks across countries, we check the robustness of our results by including ECB and Bank of England monetary policy shocks constructed byCieslak and Schrimpf (2019).…”

mentioning

confidence: 99%

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Stock Market Spillovers via the Global Production Network: Transmission of U.S. Monetary Policy

Giovanni

Hale

2020

SSRN Journal

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We quantify the role of global production linkages in explaining spillovers of U.S. monetary policy shocks to stock returns of 54 sectors in 26 countries. We first present a conceptual framework based on a standard open-economy production network model that delivers a spillover pattern consistent with a spatial autoregression (SAR) process. We then use the SAR model to decompose the overall impact of U.S. monetary policy on stock returns into a direct and a network effect. We find that up to 80% of the total impact of U.S. monetary policy shocks on average country-sector stock returns are due to the network effect of global production linkages. We further show that U.S. monetary policy shocks have a direct impact predominantly on U.S. sectors and then propagate to the rest of the world through the global production network. Our results are robust to controlling for correlates of the global financial cycle, foreign monetary policy shocks, and to changes in variable definitions and empirical specifications.

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Section: The Global Financial Cyclementioning

confidence: 99%

Section: Introductionmentioning

confidence: 96%

mentioning

confidence: 99%

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Stock Market Spillovers via the Global Production Network: Transmission of U.S. Monetary Policy

Giovanni

Hale

2020

SSRN Journal

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“…There is also a stream of research that focuses on the global financial cycle (Aldasoro et al, 2020;Boz & Tesar, 2019; Miranda-Agrippino & Rey, 2020a) some of them investigating the impact that mostly US monetary policy has on economies (Dées & Gales, 2019;Miranda-Agrippino & Rey, 2020b).…”

Section: Problem Statementmentioning

confidence: 99%

The Impact of Global Tensions on the Economic and Financial Cycle in Romania

Muraru¹

2020

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In this paper I investigated the impact of global financial tensions (approximated by the common factor in the evolution of market volatility indexes in the US and the Euro area-VIX, VSTOXX, VFTSE) on the Romanian financial and economic cycle. As measures for the financial cycle I used multiple indicators following the literature on the subject (credit variables, bond yields, house prices and GDP) and I investigated the impact of global tensions on each of the selected variables and also on an aggregate measure of the financial and economic cyclical position, which I built by applying factor analysis. The influence of global tensions was studied by use of wavelet coherence, concordance indicators and historical decomposition. The results showed important correlations of global tensions with the selected variables and also with the cyclical position indicator. Moreover, the concordance indicator (computed by the use of Bry-Boschan algorithm for quarterly series on the band-pass filtered series) showed that indicators were in the same cyclical position with the global financial evolutions most of the time (the indicator varying between 54 percent and 70 percent of the time), therefore the local cyclical position (built out of the considered indicators) coincided with the cycle of global tensions in 60 percent of cases. Historical decomposition was performed in Bayesian VARs estimated for each of the variables and the global tensions indicator. The results showed a great impact, dominant at times, of global shocks on the evolution of the selected variables and on the cyclical position indicator.

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“…Recent work has also highlighted the importance of global factors that can propagate changes in one country's monetary conditions to the rest of the world, especially when capital markets are highly integrated. Rey (2015) and Miranda-Agrippino and Rey (2017) show that changes in interest rates in "core" countries can trigger a global financial cycle that, regardless of the exchange rate regime, may generate positive global spillovers. Bruno and Shin (2015) find evidence of monetary policy spillovers on cross-border capital flows.…”

Section: The Channelsmentioning

confidence: 99%

Foreign Effects of Higher U.S. Interest Rates

Blanchard

Collins

Pellet

et al. 2018

Int. finance discuss. pap.

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This paper analyzes the spillovers of higher U.S. interest rates on economic activity in a large panel of 50 advanced and emerging economies. We allow the response of GDP in each country to vary according to its exchange rate regime, trade openness, and a vulnerability index that includes current account, foreign reserves, inflation, and external debt. We document large heterogeneity in the response of advanced and emerging economies to U.S. interest rate surprises. In response to a U.S. monetary tightening, GDP in foreign economies drops about as much as it does in the United States, with a larger decline in emerging economies than in advanced economies. In advanced economies, trade openness with the United States and the exchange rate regime account for a large portion of the contraction in activity. In emerging economies, the responses do not depend on the exchange rate regime or trade openness, but are larger when vulnerability is high.

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U.S. Monetary Policy and the Global Financial Cycle

Cited by 558 publications

References 48 publications

Stock Market Spillovers via the Global Production Network: Transmission of U.S. Monetary Policy

Stock Market Spillovers via the Global Production Network: Transmission of U.S. Monetary Policy

The Impact of Global Tensions on the Economic and Financial Cycle in Romania

Foreign Effects of Higher U.S. Interest Rates

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