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Financial market implications of monetary policy coincidences: Evidence from the UK and Euro Area government-bond markets

Philip Arestis and Peter Phelps

Journal of International Financial Markets, Institutions and Money, 2017, vol. 49, issue C, 88-102

Abstract: Relatively little is known about the financial market impact of international monetary surprises arising on the same trading day. This paper estimates a suite of multi-security factor models, which captures international monetary surprise effects on UK and Euro Area government-bond markets over the period 1999–2014. In doing so, we shed light on the relative importance of coinciding, non-coinciding monetary surprises and non-monetary surprises across the yield curve. We find some support for the ‘enrich-thy-neighbour’ hypothesis of international monetary surprises, while our findings suggest that monetary policy cooperation during crises produces financial market effects that go above and beyond conventional policy.

Keywords: International; Monetary policy; Financial markets; Factor model (search for similar items in EconPapers)
JEL-codes: E4 E5 F3 G1 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:49:y:2017:i:c:p:88-102

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