U.S. Monetary Shocks and Global Stock Prices

Luc Laeven and Hui Tong

No 2010/278, IMF Working Papers from International Monetary Fund

Abstract: This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, with stock prices increasing (decreasing) following unexpected monetary loosening (tightening). This impact is more pronounced for sectors that depend on external financing, and for countries that are more integrated with the global financial market. These findings suggest that financial frictions play an important role in the transmission of monetary policy, and that U.S. monetary policy influences global capital allocation.

Keywords: WP; stock price; stock return; monetary policy shock; firm size; beta coefficient; futures contract (search for similar items in EconPapers)
Pages: 28
Date: 2010-12-01
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: US monetary shocks and global stock prices (2012)
Working Paper: U.S. Monetary Shocks and Global Stock Prices (2010)
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