The global spillovers of unconventional monetary policies on tail risks

Irma Alonso Alvarez, Pedro Serrano and Antoni Vaello-Sebastià

Finance Research Letters, 2024, vol. 59, issue C

Abstract: This article analyzes the risk spillovers of UMPs of four major central banks on the expectations of a market crash in foreign equity markets. The empirical findings show that forward guidance measures exhibit a significant cross-border impact on tail risks. Other expansionary UMPs are innocuous on inducing risk spillovers to other economies. A classification of reversal UMPs into contractionary and tapering provides opposite conclusions: contractionary UMPs shocks exhibit a strong and negative cross-border impact on the tail risks of other economic areas, contrary to tapering announcements. Both the Fed and ECB unconventional policies induce significant risk spillovers with similar magnitudes.

Keywords: Unconventional monetary policy; Spillovers; Risk-neutral density; Tail risk; Event study (search for similar items in EconPapers)
JEL-codes: E44 E58 G01 G10 G14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:59:y:2024:i:c:s1544612323011923

DOI: 10.1016/j.frl.2023.104820

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