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Author: Mr.Luc Laeven Publisher: International Monetary Fund ISBN: 1455210854 Category : Business & Economics Languages : en Pages : 30
Book Description
This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, with stock prices increasing (decreasing) following unexpected monetary loosening (tightening). This impact is more pronounced for sectors that depend on external financing, and for countries that are more integrated with the global financial market. These findings suggest that financial frictions play an important role in the transmission of monetary policy, and that U.S. monetary policy influences global capital allocation.
Author: Mr.Luc Laeven Publisher: International Monetary Fund ISBN: 1455210854 Category : Business & Economics Languages : en Pages : 30
Book Description
This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, with stock prices increasing (decreasing) following unexpected monetary loosening (tightening). This impact is more pronounced for sectors that depend on external financing, and for countries that are more integrated with the global financial market. These findings suggest that financial frictions play an important role in the transmission of monetary policy, and that U.S. monetary policy influences global capital allocation.
Author: Paul De Grauwe Publisher: CEPS ISBN: 929079819X Category : Monetary policy Languages : en Pages : 22
Book Description
The question of whether central banks should target stock prices so as to prevent bubbles and crashes from occurring has been hotly debated. This paper analyses this question using a behavioural macroeconomic model. This model generates bubbles and crashes. It analyses how 'leaning against the wind' strategies, which aim to reduce the volatility of stock prices, can help in reducing volatility of output and inflation. We find that such policies can be effective in reducing macroeconomic volatility, thereby improving the trade-off between output and inflation variability. The strength of this result, however, depends on the degree of credibility of the inflation-targeting regime. In the absence of such credibility, policies aiming at stabilising stock prices do not stabilise output and inflation.
Author: Hilde C. Bjørnland Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
We estimate the interdependence between US monetary policy and the S&P 500 using structural VAR methodology. A solution is proposed to the simultaneity problem of identifying monetary and stock price shocks by using a combination of short-run and long-run restrictions that maintains the qualitative properties of a monetary policy shock found in the established literature (CEE 1999). We find great interdependence between interest rate setting and stock prices. Stock prices immediately fall by 1.5 per cent due to a monetary policy shock that raises the federal funds rate by ten basis points. A stock price shock increasing stock prices by one per cent leads to an increase in the interest rate of five basis points. Stock price shocks are orthogonal to the information set in the VAR model and can be interpreted as non-fundamental shocks. We attribute a major part of the surge in stock prices at the end of the 1990s to these non-fundamental shocks.
Author: Jordi Galí Publisher: University of Chicago Press ISBN: 0226278875 Category : Business & Economics Languages : en Pages : 663
Book Description
United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.
Author: Julian Di Giovanni Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
We quantify the role of global production linkages in explaining spillovers of U.S. monetary policy shocks to stock returns across countries and sectors using a newly constructed dataset. Our estimation strategy is based on a standard open-economy production network model that delivers a spillover pattern consistent with a spatial autoregression (SAR) process. We use the SAR model to decompose the overall impact of U.S. monetary policy on global stock returns into a direct and a network effect. We find that nearly 70% of the total impact of U.S. monetary policy shocks on country-sector stock returns are due to the network effect of global production linkages. Our results are robust to changes in the definitions of stock returns and monetary policy shocks, to controlling for correlates of the global financial cycle, foreign monetary policy shocks, and to alternative empirical specifications.
Author: Miguel Villanueva Publisher: ISBN: Category : Languages : en Pages : 37
Book Description
Conventional wisdom is that unconventional monetary policy a.k.a. Quantitative Easing (QE) pursued by the Federal Reserve has helped sustain and even boost U.S. stock market prices in the aftermath of the Global Financial Crisis. By design, QE has supported long-term Treasury bond prices and put downward pressure on long term rates; however the link to stock prices is more complicated because other factors operate as well, e.g., the performance of stock markets in the rest of the world, US dollar performance, virtually zero fed funds rate via conventional monetary policy (independent of policies such as QE), and changes in the interaction between economic activity and credit conditions - as measured for instance by the high yield spread along the lines of the financial accelerator theory. This paper presents evidence that these other factors explain most of the variation in stock returns before and after the financial crisis with stable coefficients and that the different rounds of QE explain significantly some of the remaining variation in stock prices. A vector autoregression provides further evidence of the effects of QE on stock returns and its relative importance vis-à-vis other variables via a Pesaran-Shin generalized impulse-response analysis (invariant to the causality ordering). The evidence in this paper is consistent with the boost in stock prices after the Fed actually started tapering in January 2014 because the “fundamentals” were supportive of the stock market. Furthermore, if the positive effects of QE on the stock market are less strong than commonly believed, the negative effects from a gradual shrinking of the Fed's balance sheet may not be as bad as commonly feared.
Author: Mr.Luc Laeven
Author: Mr.Luc Laeven
Author: Paul De Grauwe
Author: Hilde C. Bjørnland
Author: Saroj Bhattarai
Author: 
Author: Wensheng Kang
Author: Ali Ozdagli
Author: Jordi Galí
Author: Julian Di Giovanni
Author: Miguel Villanueva