Economics at your fingertips  

Fed’s unconventional monetary policy and risk spillover in the US financial markets

Mehmet Balcilar, Zeynel Ozdemir (), Huseyin Ozdemir and Mark Wohar ()

The Quarterly Review of Economics and Finance, 2020, vol. 78, issue C, 42-52

Abstract: This study examines volatility spillover dynamics among the S&P 500 index, the US 10-year Treasury yield, the US dollar index futures, and the commodity price index. The focus of the study is to analyze the effects of the Fed’s unconventional monetary policy on the US financial markets. We use realized volatility measures based on daily data covering the period from December 29, 1996, to November 12, 2018. To address nonlinear and asymmetric spillover dynamics in low and high volatility states, we propose a new regime-dependent spillover index based on a smooth transition vector autoregressive (STVAR) model, extending the study of Diebold and Yilmaz (2008, 2012) to regime switching models. When applied to US financial data, we find strong evidence that the US financial market risk structure changes after the 2008 Global Financial Crisis and announcement of quantitative easing (QE) programmes through the portfolio balance channel. The risk spillover moves from purchased assets to non-purchased assets after the QE announcements.

Keywords: Unconventional monetary policy; US financial markets; Volatility spillover; STVAR model (search for similar items in EconPapers)
JEL-codes: C01 C51 C58 E58 G01 G11 G12 G14 Q43 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Fed’s Unconventional Monetary Policy and Risk Spillover in the US Financial Markets (2019) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.qref.2020.01.004

Access Statistics for this article

The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty

More articles in The Quarterly Review of Economics and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-08-05
Handle: RePEc:eee:quaeco:v:78:y:2020:i:c:p:42-52