The response of global equity indexes to U.S. monetary policy announcements

By Jon Wongswan. 2005

177 citations recorded by the source corpus.

Abstract This paper analyzes the impact of U.S. monetary policy announcement surprises on 15 foreign equity indexes in Asia, Europe, and Latin America. Using high-frequency data, I find a large and significant response of foreign equity indexes to U.S. monetary policy surprises at short time horizons. On average, a hypothetical unanticipated 25-basis-point cut in the federal funds target rate is associated with a ½– 2½% increase in foreign equity indexes. This paper also provides evidence that U.S. monetary policy surprises, and by extension changes in U.S. interest rates, affect foreign equity indexes through their discount rate component. This finding suggests that U.S. monetary policy may be a risk factor in global equity markets.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/316de930697fb48e3ef1224603e2f8c5f2b51c9e

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Georgios P. Georgiadis
2. C. Offermanns
3. Michael Hachula
4. P. Anaya
5. A. Chudik
6. M. Pesaran
7. A. Galesi
8. Pablo Burriel

In Finance

1. Georgios P. Georgiadis
2. C. Offermanns
3. Michael Hachula
4. P. Anaya
5. A. Chudik
6. A. Galesi
7. Pablo Burriel
8. M. Pesaran

Citations in the corpus

• FISCAL POLICY AND ASSET PRICES (2013, unknown): “2For the e¤ects of monetary policy on stock prices and/or stock returns, see, for instance, Rigobon and Sack (2003), Bernanke and Kuttner (2005), Bordo and Wheelock (2007), and Wongswan (2009).”
• Determinants of Global Spillovers from US Monetary Policy (2015, methodology): “…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.,…”
• Which News Moves the Euro Area Bond Market? (2006, unknown): “See Bentzen et al. (2004), Bomfim (2000) or Wongswan (2005) for the impact on stock markets, and Andersen and Bollerslev (1997, 1998) or Faust et al. (2002) for the impact on foreign exchange markets. r 2009 The Authors Journal Compilation r Verein für Socialpolitik and Blackwell Publishing Ltd.…”