Risk, Monetary Policy and Asset Prices in a Global World

Geert Bekaert, Marie Hoerova and Nancy Xu

No 18229, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study how monetary policy and risk shocks affect asset prices in the US, the euro area, and Japan since the turn of the century. We differentiate between “traditional†monetary policy and communication events, each decomposed into “pure†and information shocks. Communication shocks from the US spill over to risk in the euro area and vice versa. Both monetary policy and communication shocks spill over to stocks, with euro area information spillovers being particularly strong. US spillovers are consistent with global CAPM intuition whereas euro area spillovers are larger. Importantly, we document a strong global component of risk shocks which is not driven by monetary policy.

JEL-codes: E32 E44 E52 G12 G20 (search for similar items in EconPapers)
Date: 2023-06
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Working Paper: Risk, monetary policy and asset prices in a global world (2023)
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