One Central Bank to Rule Them All*

By F. Brusa, Pavel Savor, Mungo Wilson. Review of Finance, 2019

112 citations recorded by the source corpus.

While global stock markets enjoy high returns on days surrounding Federal Open Market Committee (FOMC) meetings, there is no comparable result for other central banks either internationally or, more surprisingly, domestically. Neither announcement surprises nor currency moves drive these findings, which hold even for stocks with a domestic focus. The difference in announcement premia is not explained by economy size, exposure to multinationals, or policy activism. We conclude that the Fed exerts a unique impact on global equities. Consistent with this hypothesis, uncertainty drops across global markets following FOMC announcements but not those of other central banks. Furthermore, the Fed is generally the leader among central banks in setting monetary policy.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/8ec6fc23990531e52d7fcfbeb6b5f2370d7173df

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The Economics of the Fed Put (2020, background): “Brusa et al. (2016) find no evidence of abnormally high average stock returns around monetary policy announcements made by the European Central Bank, the Bank of England, or the Bank of Japan.”