 US monetary shocks and global stock pricesLuc Laeven and Hui Tong Journal of Financial Intermediation, 2012, vol. 21, issue 3, 530-547 Abstract: This paper studies how US monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in US interest rates, 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 whose domestic monetary policy is more aligned with that of the United States. Using investment data, we present results consistent with this effect operating primarily through changes in risk premiums as opposed to changes in expected returns. These findings suggest that US monetary shocks affect firms’ stock prices by influencing local interest rates, and offer new evidence that financial frictions play an important role in the transmission of monetary policy to the real economy. Keywords: Monetary policy; Asset prices; Monetary transmission; Financial constraints (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:21:y:2012:i:3:p:530-547 DOI: 10.1016/j.jfi.2012.02.002 Access Statistics for this article Journal of Financial Intermediation is currently edited by Elu von Thadden More articles in Journal of Financial Intermediation from Elsevier |
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