International Transmission of U.S. Monetary Policy Surprises

Kyunghun Kim ()
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Kyunghun Kim: Korea Institute for International Economic Policy

No 16-5, Working Papers from Korea Institute for International Economic Policy

Abstract: This paper examines the international transmission of the US monetary policy surprises. The US monetary policy surprises are defined by the gap between the actual fed fund rate and its forecast estimated a quarter ahead. The US monetary policy surprises are used as external shocks to investigate the spillover effects of policy uncertainty on other economies and address the endogeneity problem. The US is the base country where the monetary policy uncertainty shocks take place. I construct the each country's international linkages such as the equity market and debt market linkages vis-à-vis the epicenter, US to investigate how the shocks are transmitted to other countries through those linkages. The empirical result shows that the equity market integration is associated with the business cycle divergence and the debt market integration is associated with the business cycle co-movement when the US policy uncertainty index is low. However, the equity market integration is associated with the business cycle comovement and the debt market integration plays insignificant role in transmitting the monetary policy surprises when the US policy uncertainty index is high.

Keywords: Business Cycle Co-Movement; Spillover; Monetary Policy; Global Financial Market; Capital Control (search for similar items in EconPapers)
JEL-codes: E52 F33 F42 F44 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2016-07-29
New Economics Papers: this item is included in nep-mac, nep-mon and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:ris:kiepwp:2016_005

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