Global Financial Transmission of Monetary Policy Shocks

By Michael Ehrmann, Marcel Fratzscher. Social Science Research Network, 2009

305 citations recorded by the source corpus.

The paper analyses the transmission of US monetary policy shocks to global equity markets and the macroeconomic determinants of the underlying transmission process. We show that there is a substantial cross‐country heterogeneity in reactions across 50 equity markets worldwide, with returns falling on average around 2.7% in response to a 100 basis point tightening of US monetary policy, but ranging from a zero response in some to a reaction of 5% or more in other markets. As to the determinants of the strength of transmission to individual countries, we test the relevance of their macroeconomic policies and the role of real and financial integration. We find that in particular the degree of global integration of countries – and not a country's bilateral integration with the United States – is a key determinant for the transmission process.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/d7f8c4e589a90e8e71b0d51e1868fd45f7d34800

Citations in the corpus

• International channels of the Fed’s unconventional monetary policy (2013, unknown): “Our paper is also related to the literature on the effects of (conventional) U.S. monetary policy surprises on international asset prices (Andersen et al., 2003; Faust et al., 2007; Ehrmann and Fratzscher, 2009; Ammer et al., 2010).”
• Determinants of Global Spillovers from US Monetary Policy (2015, unknown): “…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…”
• Stock Market Reaction to Fed Funds Rate Surprises: State Dependence and the Financial Crisis (2013, unknown): “In line with Basistha and Kurov (2008) and Ehrmann and Fratzscher (2009) among others, we utilise both scheduled (165) and unscheduled (24) FOMC meetings.4 On the day of the FOMC decision, the FFR shock, utiΔ , is measured by the change in the implied rate of the current-month FFR futures contract,…”
• Economic policy uncertainty in the US: Does it matter for the Euro area? (2013, unknown): “…documenting the existence of spillovers include Kim (2001), who quanti ed the role of US macroeconomic shocks in triggering business cycles at an international level, and Favero and Giavazzi (2008) and Ehrmann and Fratzscher (2009), who look at spillover e ects regarding nancial markets.”