U.S. Monetary Shocks and Global Stock Prices

Luc Laeven and Hui Tong

No 8090, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies how U.S. monetary policy affects global stock prices. We find that global stock prices respond strongly to changes in U.S. interest rate policy, 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 that are more integrated with the global financial market. These findings suggest that financial frictions play an important role in the transmission of monetary policy, and that U.S. monetary policy influences global capital allocation.

Keywords: Asset allocation; Asset prices; Financial constraints; Monetary policy; Monetary transmission (search for similar items in EconPapers)
JEL-codes: E44 F36 G14 G32 (search for similar items in EconPapers)
Date: 2010-11
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: US monetary shocks and global stock prices (2012)
Working Paper: U.S. Monetary Shocks and Global Stock Prices (2010)
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