Unconventional monetary policy announcements and information shocks in the U.S.

We study unconventional policy shocks and information shocks associated with central bank announcements in the U.S. While unconventional policy shocks capture the direct influence of announced monetary policy actions, information shocks are associated with central bank information conveyed with the announcement. To disentangle these two types of shocks, we impose sign restrictions on high frequency changes in interest rates and stock prices around announcements. We find that information shocks lead to persistent declines in the 10-year government bond yield, whereas the actual unconventional policy shock induces only small interest rate responses. We also find that expansionary output effects of unconventional monetary policy are to some extent counteracted by the information shock.     

Nonlinear monetary policy reaction functions in large emerging economies: the case of Brazil and China

This article estimates monetary policy rules for two key emerging market economies: Brazil and China. It analyses whether the monetary authority reacts to changes in economic activity, financial markets, monetary conditions, the foreign exchange market and the commodity price. We assess the importance of nonlinearity using a smooth transition regression (STR) model. Using quarterly data over the time period 1990:1 to 2008:4, we find that considerations about the output gap and the real effective exchange rate (in the case of Brazil), and the inflation rate (for China) explain the nonlinear adjustment of the central bank rate. Moreover, the results suggest that central banks pursue a target range for the threshold variable rather than a specific point target. In the case of China, the McCallum rule shows that the GDP growth, the interest rate and the commodity price drive the response of the growth rate of the relevant monetary aggregate.     

Volatility transmission to the fine wine market

The goal of this paper is to explore volatility transmission from various markets to the fine wine market. Knowledge of these channels for transmitting volatility to the wine market allows practitioners to anticipate the future volatility and the consequences of a shock on the wine market, to develop their investment strategy and diversify their risk. We especially analyse the impact of U.S. markets (i.e. art, commodities, credit, financial and real estate) during the 2007–2017 period. We shed additional light on how the volatility of the fine wine market varies during an extended period including a financial crisis. Our results indicate that, in the short-term, volatility is transmitted with a negative effect through the financial and commodity markets and with a positive effect through the art, residential real estate, and credit default markets. In the long-term, the wine market is impacted by all other markets. We show that correlations are time-varying.     

The transmission of euro area monetary policy to financially euroized countries

This paper provides a comprehensive analysis of the interest rate pass-through of euro area monetary policy to retail rates outside the euro area, contributing to the literature on the consequences of unofficial financial euroization and on the transmission channels of monetary policy spillovers. The results suggest that in the long run, more than the one-third of all euro retail rates in euroized countries of central, eastern, and south-eastern Europe is linked to the euro area shadow rate. Compared with euro area monetary policy, the share of cointegration of the domestic monetary policy rate is on average lower, suggesting that domestic central banks in euroized countries with independent monetary policy can only partially control the “euro part” of the interest rate channel. Furthermore, euro area monetary policy shocks are fast and persistently transmitted into euro retail rates outside the euro area, which constitutes an additional channel of international shock transmission.     

Estimating monetary policy reaction functions for emerging market economies: The case of Brazil

The paper investigates monetary policy in Brazil following a shift to a floating exchange rate alongside inflation targeting adoption. The benchmark reaction function reveals that the Central Bank behaves according to the Taylor principle by raising the overnight Selic policy interest rate more than the amount by which expected inflation exceeds the target. The investigation also considers a data-rich environment via an excess policy response containing information from a panel of 45 economic time series. The excess policy response carries a positive and significant coefficient in the reaction function including only an inflation gap variable.     

Impacts of China's crash on Asia-Pacific financial integration: Volatility interdependence,information transmission and market co-movement

This paper examines the price and volatility dynamics between China and major stock markets in the Asia-Pacific, investigating the effects of the Chinese stock market crash (2015–2016) for the first time. Employing the Bayesian VAR and BEKK GARCH, we observe that price and volatility spillover behaviours are different during the stable and stress periods. Particularly, price spillovers from China to other regional markets are more significant during a bullish period, showing that ‘good news’ emanating from China has strong impacts on its neighbours during better market condition. In the turbulent period, we observe strong shock spillover effects and enhanced volatility spillovers from China to most Asia-Pacific stock markets. This is because China, as an important trading partner and strategic financial centre shows to exert significant influence on the Asia-Pacific region through various economic channels. We also find that the Asia-Pacific stock markets spill over their shocks to China during the crisis, indicating that China is becoming more integrated with the regional financial markets.