Federal reserve's policy,global equity markets,and the local monetary policy stance |
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| Institution: | 1. Banque de France, 31 rue Croix des Petits Champs, 75001, Paris, France;2. Leda-SDFi, Université Paris-Dauphine, France\n;3. Aix-Marseille University (Aix-Marseille School of Economics), France;1. Banca d''Italia, Economics, Statistics and Research Department, Via Nazionale 91, 00184, Rome, Italy;2. Università degli Studi del Molise;1. Internal Economics Training Unit, Institute for Capacity Development, IMF, United States;2. Research Department, Bank of Korea, Republic of Korea;3. Economic Research Institute, Bank of Korea, Republic of Korea |
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| Abstract: | This paper examines the extent to which local monetary policy stance determines the strength of US monetary policy international transmission to global equities. Using a sample of 35 countries, we document that US monetary policy surprises exert significant inverse effects on global equity returns. Our results suggest that countries whose policy rates are brought into line with that of the US are less sensitive to US monetary policy shocks only when they have a high and intermediate level of cross-border financial linkages, and only when they have a low and intermediate level of exchange rate volatility. |
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| Keywords: | Equity markets US monetary policy shocks International transmission of monetary policy |
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